Purchasing a second property

Dec_3

If I am going to rent out my house and try to see if I can afford a second property. What are the pit falls? Are there any dangers I need to be looking out for? any replies welcome

Reaper

OK here's a couple to get started:

When you are working out what you can afford on your new property bear in mind the mortgage company is likely to add at least 1% to your mortgage interest rate on the rented property, plus an admin fee.

If you keep the rented out property for more than 3 years you will start to become liable to capital gains tax when you sell it (if it has gone up in value).

Another danger is leaving yourself over exposed if property prices were to fall. It would be disasterous if you could no longer afford the mortgage payments (eg can't find tenants) but both houses were in negative equity.

These are just the negatives, of course, but that's what you asked for.

Han_naH

And another one is "in-between tenants" - the period spent looking for replacement tenants. The mortgage still has to be paid...

You will need Landlord's insurance.

Expect phone calls from the tenants asking you to spend money on something or other.

And don't forget that if your first mortgage is a residential one, you are supposed to let the lender know you are going to rent it. Then you pay more, as the chap above said. :-/

Or you don't say anything, but be careful.... fall out with the tenant and they might tell them for you. Lender won't be happy that a third party had to tell them this info. They impose charges, early redemption fees and you have to quickly acquire a new mortgage. New mortgage application says "Have you ever been refused a mortgage or had one cancelled...?" >:(

D_P_Dance

You can finance the purchase of the second property by mortgaging the first. In this way you could, if the first property is worth more than the second, obtain 100% of the purchase price. If you opt for an interest only mortgage you can offset all the interest paid against income tax on profit.

However, is now a good time to buy, many btl landlords are jumping ship and in some places rents are falling.

Dec_3

Sorry for taking so long in replying. Many thanks for your comments. I think I will give it a miss. It sound like to much hassle. I think I will just sell and buy a new one. Thanks once again

Robert_Sterling_3

However, is now a good time to buy, many btl landlords are jumping ship and in some places rents are falling.

Rats are deserting a sinkingship and you think it is a good time for other rats to board the ship. ???

Dec_3

Your probebly right. It looks like a very bad idea right now

Dec_3

what does !!!!!! grano salis mean?