Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • Storkeyj
    • By Storkeyj 12th Jun 19, 3:53 PM
    • 19Posts
    • 0Thanks
    Storkeyj
    Renting out property with mortgage
    • #1
    • 12th Jun 19, 3:53 PM
    Renting out property with mortgage 12th Jun 19 at 3:53 PM
    Hey,

    Just looking for a little advice! So we have been trying to sell our property however the market isnt giving us the money we ideally need so we are thinking of renting it out for min a year, we are moving into my parents and saving money that way, and dont think we should sell for less now and just wait until the market strengthens as we do not need the equity yet as need to save more anyway to buy somewhere bigger and thinking renting it out and paying off mortgage and also saving all of our salaries instead of spending on Bill's then selling once the market is stronger.

    Now renting seems very confusing! We have had 7 agents visit to give quotes and advise and every agent has advised it will achieve £850 per month. Our mortgage is £730. I'm trying to figure out all the fees and tax to make sure we are not making a mistake! All agents have been around the 10% fee for a full management of our property. Can anyone advise on any of the above and whether after the taxes and fees we would still come out with any money. Perhaps even just after the 10% fee and the tax and then we know what we have left to pay out for insurances etc

    Thank you so much in advance and hope that all makes sense!!

Page 2
    • Cakeguts
    • By Cakeguts 13th Jun 19, 11:28 AM
    • 6,660 Posts
    • 10,482 Thanks
    Cakeguts
    Yup! Another thing to put in the mixer! Caught inbetweeners a rock and a hard place! We have got an offer but its 9k less than what we had lowered our expectation too! It was originally 210, sold for 200, then no interest so dropped to 190-200 have now been offered 186... bottom line was 195.. 🤷!♂️ we bought the place 3 years ago for 185! Maybe even time to change estate agents! Allt he comments have been so helpful so thank you to everyone who has commented!
    Originally posted by Storkeyj

    How old was the flat when you bought it? Was it new or nearly new? If so it is probably still dropping in value to meet the value of any other second hand flat in the area.
    • Marvel1
    • By Marvel1 13th Jun 19, 12:35 PM
    • 4,410 Posts
    • 4,965 Thanks
    Marvel1
    Start here and read everything a guide by G_M:

    https://forums.moneysavingexpert.com/showthread.php?t=5180214

    Note: Using an agent does not withdraw your responsibilities.
    • Storkeyj
    • By Storkeyj 13th Jun 19, 1:45 PM
    • 19 Posts
    • 0 Thanks
    Storkeyj
    Thanks guys!

    This purchaser has increased to 186 from 180. Our estate agent has advised holding out until atleast 190 as the lowest property in our road sold for 195..

    We pay back capital it is not interest only.

    I think I'm trying to convince myself that if we rent out we will be better off as we will have less on the mortgage so the amount we sell in a years time we will have more equity even if we sell at the same/ little lower than now.. plus we would have saved both our salaries. 🤷!♂️🤷!♂️🤷!♂️

    Fingers crossed we have our open day Saturday and it will sell and all this worrying is for nothing!!
    • G_M
    • By G_M 13th Jun 19, 2:27 PM
    • 49,588 Posts
    • 61,553 Thanks
    G_M
    Don't try to sell and rent at the same time. Rarely works unless you get another landlord (who won't want to pay full market value).


    How much of your mortgage is capital repayments? how much is interest.In the early days (first 5+ years) most is interest. In the later days (last 5+ years) most in capital. Relevant as you only claim tax relief on the interst part. This willimpact your budget, which is lready tight.


    £850 pm? Maybe who knows, but it won't be every month! If tenants leave you get a void before new ones are in place so.... 2 months no rent? This could be as much as twice a year.


    Boiler breakdown? £2000 for a new one?


    Do a realistic worst-case budget! (and read my guide...)
    • kingstreet
    • By kingstreet 13th Jun 19, 2:31 PM
    • 35,509 Posts
    • 19,417 Thanks
    kingstreet
    Relevant as you only claim tax relief on the interest part...
    Originally posted by G_M
    ... and this is changing to limit the "relief" you will be able to obtain in future.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • Gwendo40
    • By Gwendo40 13th Jun 19, 2:33 PM
    • 343 Posts
    • 373 Thanks
    Gwendo40
    Hey,

    Just looking for a little advice! So we have been trying to sell our property however the market isnt giving us the money we ideally need

    Originally posted by Storkeyj

    Why do people always feel the need to use such obscure euphemisms such as this?

    They just can't bring themselves to say ''it turns out our house isn't worth as much as we'd like to think it's worth''
    • wine_night
    • By wine_night 13th Jun 19, 3:11 PM
    • 100 Posts
    • 142 Thanks
    wine_night
    If you let a flat, you as landlord are responsible for the ground rent and service charges. If these are £100+ per month and you add in agents’ charges then you will cost you to let it out.

    As other posters noted, it depends on what the capital vs interest split is on your mortgage payments. You would also have to split this for your tax returns.

    My gut feeling is that financially the numbers don’t stack up- unless you’re expecting significant capital gains on the property. Being a landlord is a hassle, especially if you aren’t making any money.

    If you’re moving in with family presumably you would hope to save more than the difference between in what you want to achieve and what’s been offered?
    • Storkeyj
    • By Storkeyj 13th Jun 19, 4:47 PM
    • 19 Posts
    • 0 Thanks
    Storkeyj
    Thanks for the advise Gwendo40!

    Year 3 ( this year ) is just over 5k interest and just over 3.5k capital.

    I will read through your guide at the weekend and hopefully settle our decision! We just dont want to loose equity from the property if holding out for a year would benefit us.. we dont mind paying a little extra each month, we arent looking at this as a money making through the renting just how it will work for us over the coming year or 2 and whether by then we would make more money.. potentially we could keep the property i am in the position to do so but that a whole other kettle of fish haha
    • Slithery
    • By Slithery 13th Jun 19, 4:48 PM
    • 1,969 Posts
    • 3,285 Thanks
    Slithery
    Yes but we will be saving money as well as paying off the mortgage?
    Originally posted by Storkeyj
    Is this before or after you've taken into account income tax, agency fees, yearly gas checks, referencing, maintenance, void periods, additional SDLT and all of the other 1001 costs that being a landlord involves?
    • Storkeyj
    • By Storkeyj 13th Jun 19, 5:09 PM
    • 19 Posts
    • 0 Thanks
    Storkeyj
    This post was set to determine that point exactly, this would be our first rental. Agency fees are around 10% perhaps negotiated lower to 8 ish?! Maybe. Potentially looking to put £500 ish to one side each month solely for any unexpected costs in relation to the property. We were just looking to see the potential costs from someone that has done this before!? I know that's difficult as all properties are different but even a rough guide of what could be expected on a monthly basis of outgoings. the estate agents fees include referencing, we will be covered by the included insurance for legal expenses, it includes rental cover of up to 20,000 including legal fees, landlord insurance, inventory check, 3 monthly visits and reports and many others.
    • kingstreet
    • By kingstreet 13th Jun 19, 5:13 PM
    • 35,509 Posts
    • 19,417 Thanks
    kingstreet
    The rules on mortgage interest are changing over five years so they will be finalised inn 2020/2021.

    We started with landlords able to offset all their mortgage interest against any surplus rental income for tax purposes at the highest rate of tax paid.

    Eventually, this will be limited to 20% and to a reduction in tax to the extent of the tax payable.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • c_guerrero
    • By c_guerrero 13th Jun 19, 5:25 PM
    • 3 Posts
    • 0 Thanks
    c_guerrero
    You should talk to a tax professional.
    Looking for a pal? I like to chat! cguerrero@tenxten.info
    • AnotherJoe
    • By AnotherJoe 13th Jun 19, 5:52 PM
    • 15,944 Posts
    • 19,158 Thanks
    AnotherJoe
    This makes absolutely no sense whatsoever. You'll be losing money every month, in effect you'll be paying someone to live in your property!
    You'd be better off selling it and putting the equity in a one year savings account.
    You've also assumed the flat will increase in value whereas you could have a double whammy, fall in value and tenants don't pay rent. Talk to my next door neighbor who is a landlord and down £10k after tenants stopped paying tenant and needed legal action to evict.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • Onemanandtwolittleladies
    • By Onemanandtwolittleladies 13th Jun 19, 7:15 PM
    • 36 Posts
    • 40 Thanks
    Onemanandtwolittleladies
    You seem really desperate to move back in with parents. I couldn’t think of anything worse personally, especially with a partner.

    In my experience, you become a landlord because you want to invest in property. Doing it half baked because you want to sell for £9k more is a recipe for disaster and will cost you far more in the long run, both financially and in stress.
    • p00hsticks
    • By p00hsticks 13th Jun 19, 7:25 PM
    • 7,148 Posts
    • 7,899 Thanks
    p00hsticks
    You seem really desperate to move back in with parents. I couldn’t think of anything worse personally, especially with a partner.
    Originally posted by Onemanandtwolittleladies

    I was also going to make this point.

    Are the parents fully on board with this idea ?

    And surely you wouldn't expect not to be contributing to their household expenses / paying them rent while you live there ?


    I can't really see how you are going to make this work financially.

    Either sell at the best price you can get now or decide your property isn't currently worth what you want to sell for, and just stay put.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

208Posts Today

2,839Users online

Martin's Twitter