Rent out current house, buy new house

GTXLR

Hello all,

I'm usually quite good at finding information on financial situations, but I'm struggling with this one:

My wife and I are looking to sell our current house and move a few hours down south as she has just got a new job.

We bought our house 2 years ago (as a new build) £335,000 Our house has been on the market since Nov 2024 and we've had 1 viewing, which was on the DAY we listed it. We dropped the price to £325,000 at the end of Dec.

Fast forward to the end of jan2025 and we looked into doing a part exchange with a developer as we've had 0 interest. They sent 3 estate agents round to value the house and all 3 came back at £295,000-£310,000. They offered us £300,000.. a loss of £35,000!

We own around £105,000 equity in the house so we're not in negative, but still an unacceptable loss.

So we're now looking to possibly rent out our current property while we rent in the new location. Get a tenant in and buy a 2nd property in our chosen area.

The question is If I was to rent out our current and move. How much money would that give us to put on a 2nd mortgage in the new area? Is it simply if the bank would lend us £400,000 and we take £200,000 on the rented out property that would leave us £200,000 for the second?

I still need to do a bunch of maths on buy to let/let to buy/extra stamp duty on 2nd house ect. But that 2nd mortgage amount is the critical figure for us to see if it's even viable.

Going to phone up my current mortgage provider and talk it through with them.

If anyone has any thoughts or suggestions that would be really great.

Thanks for reading:)

Voyager2002

Don't forget that the rent you received would be taxable, and you are very limited in the expenses you can offset against that income.

caprikid1

The BTL Valuation would most likely come in quite poor maybe even £290,000 what they would lend would depend on the rent, but you might have to leave c£50,000 equity in.

That would give you £50,000 for the next property, remember the extra stamp duty.

Renting the first property out does not change the losses , but you could be spending £20,000 to no crystallise them. You are doing this for the wrong reason and it does not make sense.

Nothing you do now changes the fact you have lost money on the property, maybe you should reconsider another new build given you current experience with new build premuim. Cannot see why you would wish to be a landlord and spend all the extra stamp duty, most of the mortgage won't be tax friendly either so in two years time you have a trashed property and a bigger loss that you spent a fortune to delay.

kingstreet

Your current property is worth £325k at most and you have a £220k mortgage?

Typically, you can borrow upto 75% of the value for a BTL/LTB mortgage, subject to the rental income being sufficient. That's £243,750 or £23,750 after you repay your current mortgage. That doesn't appear sufficient for a deposit and second property SDLT.

Albermarle

They offered us £300,000.. a loss of £35,000!

Like new cars, as soon as you buy a new build house it will drop in value, as you are paying a premium for the 'newness' and having it laid out as you like it.

GTXLR

Voyager2002 said:

Don't forget that the rent you received would be taxable, and you are very limited in the expenses you can offset against that income.

I think it's £1000 tax free per person so £2000 for both of us. Then it would be taxed on any other earnings after that? Again I need to do more research to check viability.

caprikid1 said:

The BTL Valuation would most likely come in quite poor maybe even £290,000 what they would lend would depend on the rent, but you might have to leave c£50,000 equity in.

That would give you £50,000 for the next property, remember the extra stamp duty.

Renting the first property out does not change the losses , but you could be spending £20,000 to no crystallise them. You are doing this for the wrong reason and it does not make sense.

Nothing you do now changes the fact you have lost money on the property, maybe you should reconsider another new build given you current experience with new build premuim. Cannot see why you would wish to be a landlord and spend all the extra stamp duty, most of the mortgage won't be tax friendly either so in two years time you have a trashed property and a bigger loss that you spent a fortune to delay.

We would obviously leave enough or even all the equity in the property and possibly take a interest only mortgage out to keep costs down. The point is to keep the property as a potential earner rather than make a big loss on it and keep it rolling some extra cash in for us or wait for it to go back up in value then sell.

I'm not sure where the £20,000 has come from or what crystallise means. Remember: this is all theory at the moment and I've committed to nothing. I'm just exploring my options. If this is not viable or money savvy then I'm not going to do it. Feel like you've had a bad experience renting out a property before?

kingstreet said:

Your current property is worth £325k at most and you have a £220k mortgage?

Typically, you can borrow upto 75% of the value for a BTL/LTB mortgage, subject to the rental income being sufficient. That's £243,750 or £23,750 after you repay your current mortgage. That doesn't appear sufficient for a deposit and second property SDLT.

Sorry forgot to mention we have ~£55,000 in disposable savings, giving us £78,750 for stamp duty and deposit. Her work pays for the house move so we save a few expenses.

Albermarle said:

They offered us £300,000.. a loss of £35,000!

Like new cars, as soon as you buy a new build house it will drop in value, as you are paying a premium for the 'newness' and having it laid out as you like it.

True on the new build premium, but unlike cars house prices can fall/rise in the area where cars are a certain loss untill a certain point. 

A carbon copy of our house sold a few doors down for £337,000 last year and with 3 valuations pricing it at £335,000 in Nov 24 it was a shock it's now valued at £300,000 only 4 months later. 

Biggest issue is it's got the sqft of a 4/5 bed but has only 3 large bedrooms, most people would rather 4 smaller rooms, but I digress.


The question is how to work out how much mortgage I could get on a 2nd property, not why is my house worth less than I payed.

caprikid1

"Feel like you've had a bad experience renting out a property before?"

I have ran a  lettings business for some years and I know enough of the pitfalls to know that the chance of this being viable is unlikely.

In terms of where the £20,000 comes from.

1. £17,500 stamp duty (Assuming £300,000 property
2. £1000 Legal costs on mortgage etc 
3. £750 Letting Agent costs
4. Replacing items you wish to remove, curtains ? White goods etc ?

In 3 years time the house is now 5 years old , poor decoration , garden not maintained etc.

If it goes up in value, capital gains tax.

Voids etc 

caprikid1

" think it's £1000 tax free per person so £2000 for both of us. Then it would be taxed on any other earnings after that? Again I need to do more research to check viability."

Not sure that applies, £1000 tax free allowance is only where the income does not exceed £1000 you will not be in this situation so will pay it on the full amount.

theartfullodger

What makes you think you will make money renting it out?? And do you have the financial AND emotional reserves to cope with the tenant (or agent- ) from hell who doesn't pay you rent for say 7 months whilst you pay mortgage & legal fees to attempt (but may not succeed) in evicting them.  Most years I make money from BTL but not always..

GTXLR

Caprikid1, you're probably right. This is probably not viable or worth the hassle. But that's why I'm here trying to find out and explore/consider all my options so I can make an educated decision.

theartfullodger said:

What makes you think you will make money renting it out?? And do you have the financial AND emotional reserves to cope with the tenant (or agent- ) from hell who doesn't pay you rent for say 7 months whilst you pay mortgage & legal fees to attempt (but may not succeed) in evicting them.  Most years I make money from BTL but not always..

If renting out a property does not make money then why would anyone do it? Is there not a landlords insure you can get to protect you from this situation?

Again, I'm just exploring the viability of it all, I'm aware I still have a lot of figuring out to do. Just trying to see where I stand

Albermarle

GTXLR said:

Caprikid1, you're probably right. This is probably not viable or worth the hassle. But that's why I'm here trying to find out and explore/consider all my options so I can make an educated decision.

theartfullodger said:

What makes you think you will make money renting it out?? And do you have the financial AND emotional reserves to cope with the tenant (or agent- ) from hell who doesn't pay you rent for say 7 months whilst you pay mortgage & legal fees to attempt (but may not succeed) in evicting them.  Most years I make money from BTL but not always..

If renting out a property does not make money then why would anyone do it? Is there not a landlords insure you can get to protect you from this situation?

Again, I'm just exploring the viability of it all, I'm aware I still have a lot of figuring out to do. Just trying to see where I stand

In this and other MSE forums ( 'Saving and Investing' for example) the same questions as you have asked crop up regularly about ' should I rent out my house/should I buy a BTL etc'

The usual answer from 90 % of those who answer is ' Don't do it' .

The tax regime and other legislation around being a landlord has tightened considerably in recent years, making it more difficult to make a profit. Plus a lot of effort needed to comply with all the rules.
Having just one property makes the risks higher.
Many small landlords are selling up for these reasons.