Should I LET My House?

northie_1

Hi all,

This is my first post, so hello and seasons greetings to everyone...

I know this is a pretty vague question, and there are lots of possibilities, but I am just after a few opinions really.

I own a modern 2 bedroom semi in a cul-de-sac location approx 1 mile from the centre of a large town. The value of the house is probably £85-90k, and my outstanding mortgage is roughly £65k. My payments are currently £490, and I have 20ish years left on my term.

Recently I have spent a lot of time at my partners house and am musing over what to do with my house.

Does anyone have any ideas on how I work out whether to rent my house out, or sell and re-invest the equity?

Might be worth saying, houses of similar type are renting in my area for £450-500. And although house prices are falling further a field, they still seems to be rising by small amounts in my area. Also worth noting there has been quite a few developments locally giving an increase in local jobs.

All help is gratefully received..

Running_Horse

I guess long term it depends on where you see your relationship going. Would it be handy to free up some capital to start afresh with your partner? Or are you thinking it would be useful to have a bolthole in the event of things not working out? Answering those questions may give a better indication of what to do, than the simple maths of BTL.

northie_1

If I take the option of moving in with my partner, I probably wouldn't consider moving back to my previous home.

I have seen cheaper options for a single bloke...

I am not in any desperate need to free any capital, the released income would put me in a far better position right now.

I am really thinking along the lines of the benefits of buy to let as a long term investment, or taking my equity and investing elsewhere. At this point I have no idea if it is economically viable to rent my my house.

Tassotti

Rental coverage not enough!!!

Sell tax free and invest elsewhere is my advice

Tass

Generali

Tassotti wrote: »

Rental coverage not enough!!!

Sell tax free and invest elsewhere is my advice

Tass

It looks pretty tight. What do you do if there's a void or the boiler blows up?

I wouldn't do it.

IveSeenTheLight

Tassotti wrote: »

Rental coverage not enough!!!

Sell tax free and invest elsewhere is my advice

Tass

Generali wrote:

It looks pretty tight. What do you do if there's a void or the boiler blows up?

I wouldn't do it.

The above two quotes are very useful if purely looking at the property as a Buy to Let investment, however, you should carefully look at your relationship and ask yourself if you would still like to have this property to fall back on if the move in with the girlfriend does not work out. Many relationships are fine and when people start living together they find out a lot more about each other.

I would suggest that
1) If you are looking at this as an investment then it is probably not the best with your figures.
2) If you are looking to keep the property as a back up and plan to rent out to reduce your outgoings (someone to cover mortgage, council tax), then it is not necessarily a bad thing, even if you have to make the odd payment (period of flat unrented, maintenance etc)

Its really down to how confident you are of your relationship commitment.

Good luck

Tassotti

Good point by Iveseenthelight.

If you sell, and the relationship goes down the swanny, you will be homeless.

If you do rent, you need to get 'Permission to Let' confirmation from your lender.

It may be tight, and you may have to fork out for repairs/maintenance, but I would assume your outgoings will be less if you move in with the better half.

Mind you, if she's anything like the gold-diggers I attract, you will be b.uggered.

macaque_2

northie_1 wrote: »

Hi all,

This is my first post, so hello and seasons greetings to everyone...

I know this is a pretty vague question, and there are lots of possibilities, but I am just after a few opinions really.

I own a modern 2 bedroom semi in a cul-de-sac location approx 1 mile from the centre of a large town. The value of the house is probably £85-90k, and my outstanding mortgage is roughly £65k. My payments are currently £490, and I have 20ish years left on my term.

Recently I have spent a lot of time at my partners house and am musing over what to do with my house.

Does anyone have any ideas on how I work out whether to rent my house out, or sell and re-invest the equity?

Might be worth saying, houses of similar type are renting in my area for £450-500. And although house prices are falling further a field, they still seems to be rising by small amounts in my area. Also worth noting there has been quite a few developments locally giving an increase in local jobs.

All help is gratefully received..

My impression is that you are looking for people to agree with your instincts to keep the house. As others have pointed out, it does make sense to keep a bolt hole in the event that your relationship fails to last.

If your question is a business question (as your original post suggests) I believe you would be taking a dangerous gamble by keeping it. The income on this property is very poor against current borrowing costs (6% nominal yield will lose 1-2% after costs and voids). All you will be doing is subsidising the tenant. As far as capital value goes, you need to take off your rosy spectacles. It is funny how everyone believes that their particular property will be immune to the effects of a bear market. There are exceptions in bear markets (where the buyers are not bothered about price) but these apply to exceptional properties in prime locations.

The price of your home can go down as well as up and, if things go badly, you could lose all of your equity (and more) over the next 5-10 years. If it is your home, this is an inconvenience. If it is a business however this is a disaster.

northie_1

I appreciate all your comments...

I am not too phased by the relationship side of things. If things went bad I have a very understanding mum with a spare room, and I had already looked at prices on renting and part owning a small house.

The mortgage I pay now is not the mortgage that I would be paying. I am currently outside of my original deal period and could probably get the mortgage closer to £400 p/m if I were to take out a new 25 year term (capital and interest). Or even less if I went interest only, I think on my last statement the interest was roughly £300 p/m.

As I said I do not know much about this, but I was primarily looking at long term investment.

I had already begun to suspect that I would be better off taking my money and investing it instead.

northie_1

The price of your home can go down as well as up and, if things go badly, you could lose all of your equity (and more) over the next 5-10 years. If it is your home, this is an inconvenience. If it is a business however this is a disaster.

I personally thought house prices would only go up over the long term (10-25 years). I am not naive enough to think that there will be a repeat of the radical price hikes seen in the last couple of years. If the capital could be paid off my mortgage with minimal input from me, then that is where I would gain.

Debt_Free_Chick

northie_1 wrote: »

The mortgage I pay now is not the mortgage that I would be paying. I am currently outside of my original deal period and could probably get the mortgage closer to £400 p/m if I were to take out a new 25 year term (capital and interest). Or even less if I went interest only, I think on my last statement the interest was roughly £300 p/m.

You need a "Landlord's budget" - this will include more than just the mortgage repayments. Other items to add are ...


Landlord's insurance (at least, buildings insurance - but there are other options to cover you for certain "landlord/tenant" risks)

Wear and tear - the amount you would reasonably spend, each year, to restore any wear & tear from the last letting e.g. a lick of paint, cleaning carpets/curtains etc. Even if you don't do this between every single letting, you'll need to do it at some point so your LL budget needs to include it.

Emergency maintenance - e.g. plumbing, drainage, electrics and/or white goods failure or repair. Remember that insurance doesn't cover everything, so if the washing machine (for example) needed to be replaced as it had reached the end of its natural life, then you'll need to find the cost of replacing it.

Voids - budget for having one or two months when the property is empty, in between tenants.

Cost of credit checks, references and agreements for each tenancy.

Once you have your budget, then you have a clearer picture of whether letting it is likely to be profitable or not - ignoring any increase in value. You would get the increase in value anyway, even if you left it empty - and avoid making a loss if you let it.

HTH