1st time Landlord advice please!!

Tassotti

Oh dear..You made a major mistake buying a new build at that price.

I am one of the original property bulls, but think that if you wait 5 years the price will be less and you lose more..

May be time to cut your losses and run...

Harsh I know

Tass

moneysavinmonkey

Cheddar... you are in a real difficult situation, not sure if this has been pointed out to your already so if you have it in hand then feel free to ignore me...

In all likelihood you are in Negative Equity already or at the least teetering on the edge - i think you have said earlier that your fixed rate mortgage is due to end in the next 12 months or so. Nobody is predicting a recovery of the housing/credit markets by then

You need to start planning now what you are going to do when your fixed rate ends.

If you are still renting the place out you will either be stuck on your lenders SVR - you will not be able to re-mortgage as you will be a BTL and nowhere near meeting the required rent ratios. Have you worked out what your payments are when your mortgage moves to the SVR, what if rates go up another 1,2,3,4,5(etc)%. Can you afford to continue subsidising your tenant at this point?

It may still be worth going ahead with your plan short-term but I think at the very least I would factor in the possibility you will be forced to move back into your flat when your fixed rate ends. You need to plan you rental contracts for both yourself and your tenants accordingly.

Depending on how the figures add up, and how you see your area of the housing market I would seriously consider taking the hit now and selling at a loss to rid yourself of this liability. Perhaps you can shift the flat at an auction?
I understand why you want to hang onto it but you have to do the sums for now and the future + not let the the money you have already lost cloud your judgment.

It is a difficult situation to be in and I hope that if you do proceed with letting the place out it helps you and doesn't just cost you more money and delay the inevitable. That would be my main concern but then I'm very bearish for a monkey!

Tassotti

That's what I said but with a lot less words

I was a bull, and think NOW is the time to sell..May take a while, but 10 million profit may ease the pain

Tass

moneysavinmonkey

Tassotti wrote: »

That's what I said but with a lot less words

I was a bull, and think NOW is the time to sell..May take a while, but 10 million profit may ease the pain

Tass

I don't think the OP will sell as he/she is too emotionally invested. If that is the case I think they would be far better staying in the flat, battening down the hatches + overpaying the mortgage.

People say Negative equity is only a problem if you need to sell but that is wrong.. if can also cause problems if you need to re-mortgage which the OP does (in the near future anyway).

Tassotti

I agree...Re-mortgaging is a major problrm for me. All of my mortgages are below 5%. If they increase to 7%, thats an extra 20K per month...Ahhhhhhh!!

Cheddar_2

Tassotti wrote: »

Oh dear..You made a major mistake buying a new build at that price.

I know... I don't need reminding!! The problem is, there are so many apartment available around here at the moment and NONE of them are shifting, so it's not really a case of cutting our losses... we just can't sell. We have too much invested here to sell at auction or something... one apartment went for £115k apparently (neighbour told me) and there is just no way we could afford to pay such a large amount back to the bank. I really doubt we'll end up in negative equity over the next 12 months. We are intending on paying a lump sum off the mortgage next year, too...

Will reply to the other posts above when I get home from work later - thanks so much to you all

Claire x

Cheddar_2

moneysavinmonkey wrote: »

In all likelihood you are in Negative Equity already or at the least teetering on the edge

Not quite... our mortgage is for £141k and our apartment is worth around £155k.

moneysavinmonkey wrote: »

You need to start planning now what you are going to do when your fixed rate ends.

If you are still renting the place out you will either be stuck on your lenders SVR - you will not be able to re-mortgage as you will be a BTL and nowhere near meeting the required rent ratios. Have you worked out what your payments are when your mortgage moves to the SVR, what if rates go up another 1,2,3,4,5(etc)%. Can you afford to continue subsidising your tenant at this point?

It may still be worth going ahead with your plan short-term but I think at the very least I would factor in the possibility you will be forced to move back into your flat when your fixed rate ends. You need to plan you rental contracts for both yourself and your tenants accordingly.

Yes, we have thought about that... we are moving out of here next month and our tenant should be moving in then, too. Our mortgage is up for renewal in 12 months, so that should work out nicely. We will move back if need be, but we are hoping the situation may be slightly better by then, and who knows, we may win the lottery?!

In the short term, we need to make the break.

moneysavinmonkey wrote: »

Depending on how the figures add up, and how you see your area of the housing market I would seriously consider taking the hit now and selling at a loss to rid yourself of this liability. Perhaps you can shift the flat at an auction?

As I mention above, if we only get £115k for it at auction (or less), we're screwed. I honestly don't believe the price will go down that low in the housing market. We're prepared to keep the apartment on long-term if necessary until the market recovers somewhat and the developers stop building apartments nearby! :rolleyes:

doglover_3

We did exactly the same back in the 90s when we had the recession negative equity, could not sell, rented out our flat and rented a bigger house we had started family and needed more space, its the best thing we did, we got good working tennants i just checked their working refers with their employers and got a contract and inventory which i did myself. But i guess we were lucky in finding good tenants back then, today one has to be very careful as laws keeps changing. For peace of mind today we use full management estate agent ok they dont do much but they know what is needed and the right advice should we need it. Also they get someone to carry out the gas and electric safety checks every year and check the house every 3months. Best of luck.

Cheddar_2

doglover wrote: »

We did exactly the same back in the 90s when we had the recession negative equity, could not sell, rented out our flat and rented a bigger house we had started family and needed more space, its the best thing we did, we got good working tennants i just checked their working refers with their employers and got a contract and inventory which i did myself. But i guess we were lucky in finding good tenants back then, today one has to be very careful as laws keeps changing. For peace of mind today we use full management estate agent ok they dont do much but they know what is needed and the right advice should we need it. Also they get someone to carry out the gas and electric safety checks every year and check the house every 3months. Best of luck.

Wow! Thanks so much for the supportive reply - at least someone's helping us look on the bright side! :money::money::money:

clutton_2

cheddar - you clearly have your mind set on this - and your mind set on doing this yourself - without an agent.

my advice would be -

any property is best empty rather than inhabited by a bad tenant


dont ignore your gut "people" instinct when interviewing prospective tenants - if it doesn't feel right - een if you dont know why - dont proceed

get a mate (who is hopefully) impartial to check out the information you have about your tenant to see if you are still looking at them thru rose coloured glasses

never ever ever ever ever hand over keys till you have the deposit and first months rent and any credit check fees in your hand in cash or cleared funds (building society cheques are ok)

Document absolutely everything

good luck