Renting a house out

[Little Lofty]

Ordinarily I’d agree that it’s probably over priced, however, at the moment the market is really weird (at least where I live) so I wouldn't be too quick to reduce and maybe end up giving it away.

[Petrolsmasher]

Got an alternative idea, i could afford to buy the next house on my own.

My partner could afford to buy the house we live in now off me (its in my name).

Is there anyway we could do this, she rents it out, i buy the next one just in my name, we save on stamp duty etc etc? My main concern is ill have to leave my 25k deposit in the house that will be solely in her name, anyway i can protect that should the worst happen?

[Black_S3]

Petrolsmasher said:

Got an alternative idea, i could afford to buy the next house on my own.

My partner could afford to buy the house we live in now off me (its in my name).

Is there anyway we could do this, she rents it out, i buy the next one just in my name, we save on stamp duty etc etc? My main concern is ill have to leave my 25k deposit in the house that will be solely in her name, anyway i can protect that should the worst happen?

Depends on your status... if you want any protection on your money - no.

[philv]

Advertise below market and then hopefully you’ll have a choice of tenants.
A good tenant is like gold dust.

[Black_S3]

philv said:

Advertise below market and then hopefully you’ll have a choice of tenants.
A good tenant is like gold dust.

That’s some good thinking.... have been thinking of sacking off the LA but my primary concern is my ability to deal with bad tenants if they become problematic, definitely merit in the thought of passing on the saving to find good people who are less likely to fk you about.

[Little Lofty]

You can use an agent to find and vet a tenant, you don’t have to pay an ongoing monthly fee once they move in. You only pay monthly if you want it fully managed.

[Sir Bagalot]

Little Lofty said:

It can be worthwhile, just check out your tax position, as you can no longer claim relief for the mortgage.

You never could claim relief on the mortgage.

You can offset the interest on the mortgage (to a limit) but they're reducing that so it can only be done at basic rate and not higher rate if you're lucky enough to be paying an increased tax rate

[Little Lofty]

Sir Bagalot said:

You never could claim relief on the mortgage.

You can offset the interest on the mortgage (to a limit) but they're reducing that so it can only be done at basic rate and not higher rate if you're lucky enough to be paying an increased tax rate

Yes sorry I should have said it was only the interest. I guess as most buy to let mortgages are interest only the actual mortgage is forgotten. I still remember getting MIRAS on my residential mortgage in the good old days

[worsy]

I'm with mike74, if you want to sell then you need to find the sweet spot regarding price. However as you suggest rental and sales market are two different things. renters are looking at a property through a different lens and much more of a "does this suit me now" as a opposed to a longer term view.

As other posters have suggested, good tenants make renting out a piece of cake although you will no longer receive tax relief on your mortgage interest payments at the highest rate, and I would suggest that further punitive tax changes may come, especially if Labour get in. rent controls etc are a factor here.

You also need to ensure you have the necessary Landlord insurance, fire certificates, annual inspections etc, budget for wear and tear and fallow periods between lets.

My personal opinion is that a single rental is not worth it unless you are likely to see good capital growth. It stacks up more if you have several properties that you can spread risk across.

Best of luck.

Edited by worsy on Wednesday 3rd July 14:21

[Woody.GTJ]

Renting it out is not a bad option but shouldn't cost you 18% wherever you live in the country. That may be a headline figure they're quoting inclusive of VAT but otherwise run away. 10% max.
Do not get landlord or rent insurance, half of it isn't worth the paper its written on and trying to get money out of them is a slow nightmare. The policies are being sold hard at the moment because agents are trying to recoup fees they've lost from the tenant fee ban.
The best policy is to use the best agent you can find (don't expect that to be cheap but it won't be 18%) who will get you the best possible tenant. If you use a st agent you'll likely get a st tenant and the st agent will sell you a st insurance policy to cover your st tenant.
Don't try and do it yourself because it attracts st tenants and then if you do one part of the extensive compliance wrong then your st tenant will become a very big headache.
Letting property is still good business but do it right, don't cut corners.
Good luck

[The Moose]

Why not post the RightMove link and you will may get some sensible advice?

[Petrolsmasher]

can i just ask people, how come most rental mortgages are interest only?

surely you want to be paying off the mortgage with the rent otherwise long term you dont really gain much so your not really gaining any equity etc?

Also why is there no buy to let mortgages without fees, most of them have fees in the range of 1500-2000.

Edited by Petrolsmasher on Wednesday 3rd July 19:05

[worsy]

Petrolsmasher said:

can i just ask people, how come most rental mortgages are interest only?

surely you want to be paying off the mortgage with the rent otherwise long term you dont really gain much so your not really gaining any equity etc?

Also why is there no buy to let mortgages without fees, most of them have fees in the range of 1500-2000.

Edited by Petrolsmasher on Wednesday 3rd July 19:05

Mainly because you can claim tax against the interest paid so paying it down is less of an issue. Usually better to pay your own mortgage down, although AFAIK if you can demonstrate the loan provenance you can claim interest if it's leveraged elsewhere. (caveat check with your accountant etc etc)

Obviously this has changed for higher rate taxpayers and will likely change for basic rate in the future.

[zedx19]

Little Lofty said:

You can use an agent to find and vet a tenant, you don’t have to pay an ongoing monthly fee once they move in. You only pay monthly if you want it fully managed.

I did this, paid £300 iirc for an agent to find and vet a tenant, carried out all the background checks, financial checks, did all the paperwork etc, basically managed everything up until the point they moved in. Worked great as that was 5 years back and the same tenants are still in the property, having been no hassle whatsoever. Tenants are so good I've only put the rent up this month, by 25 quid which is still a good 50-75PCM under similar properties nearby.

Personally I wouldn't pay any agent to manage a property, all they do is act as a middleman taking a cut for managing messages. Before this property I rented another which was managed as it was my first property. Had 3 nightmare tenants and the letting agency were zero help. Had to evict one, letting agent sent out a letter but said that if the tenant doesn't leave on the day, there's nothing they can do and we'd have to go through the courts. After that I realised I was paying someone for doing nothing, so managed it all myself. You do need to know trades people though, so long as you have contacts, managing a property yourself is easy.

[Little Lofty]

zedx19 said:

Little Lofty said:

You can use an agent to find and vet a tenant, you don’t have to pay an ongoing monthly fee once they move in. You only pay monthly if you want it fully managed.

I did this, paid £300 iirc for an agent to find and vet a tenant, carried out all the background checks, financial checks, did all the paperwork etc, basically managed everything up until the point they moved in. Worked great as that was 5 years back and the same tenants are still in the property, having been no hassle whatsoever. Tenants are so good I've only put the rent up this month, by 25 quid which is still a good 50-75PCM under similar properties nearby.

Personally I wouldn't pay any agent to manage a property, all they do is act as a middleman taking a cut for managing messages. Before this property I rented another which was managed as it was my first property. Had 3 nightmare tenants and the letting agency were zero help. Had to evict one, letting agent sent out a letter but said that if the tenant doesn't leave on the day, there's nothing they can do and we'd have to go through the courts. After that I realised I was paying someone for doing nothing, so managed it all myself. You do need to know trades people though, so long as you have contacts, managing a property yourself is easy.

Yes that’s what I do, I pay half a months rent for them to find me a tenant, it may be slightly more now as they don’t get a fee off the tenant. I usually get them to do the CP12 as it’s only £70 and they arrange access with the tenant, I can get one done for £40 but it’s not worth the effort of organising. I’ve had mine 10 years, I think I’ve been called down less than half a dozen times to do minor repairs. If I’d paid the 10% fully managed charge that would have been around £8k over the 10 years for them to arrange 4 or 5 repairs. It’s worthwhile if you live at the other end of the country but not if local.

[MDMetal]

Petrolsmasher said:

can i just ask people, how come most rental mortgages are interest only?

surely you want to be paying off the mortgage with the rent otherwise long term you dont really gain much so your not really gaining any equity etc?

Also why is there no buy to let mortgages without fees, most of them have fees in the range of 1500-2000.

Edited by Petrolsmasher on Wednesday 3rd July 19:05

Just pay it off when you fancy? Ultimately you want to be paying the least per month to ensure if your property is un-let or you need to pay for repairs. Once that's ticking along overpay to your hearts content! Although obviously most landlords aren't interested in owning the house they want to take the income from properties so they can buy other properties to rent out. This is the issue that increased stamp duty is trying to address that for some people you can start owning a lot of properties quite quickly without actually having much capital and your then soaking up housing stock for your own benefit.

[Bumblebee7]

Black_S3 said:

Petrolsmasher said:

Got an alternative idea, i could afford to buy the next house on my own.

My partner could afford to buy the house we live in now off me (its in my name).

Is there anyway we could do this, she rents it out, i buy the next one just in my name, we save on stamp duty etc etc? My main concern is ill have to leave my 25k deposit in the house that will be solely in her name, anyway i can protect that should the worst happen?

Depends on your status... if you want any protection on your money - no.

It's not a bad idea, but there are a number of things you would need to consider. Firstly is your partner a first time buyer? If so there will be various incentives that will be 'used up' if they buy the property. Will your partner be able to pass mortgage affordability on their own? Also, there may still be some stamp duty to pay (depending on responses to the above) so will paying reduced stamp on two properties outweigh just paying the increased level on the second?

As far as protecting yourself, the best way to do this would be to put a charge on the property- which will either be impossible or very difficult as the bank will have the first charge. You could look into setting up an agreement in trust that a solicitor could draft but there could be tax implications. In short, protecting your money in the event of a relationship breakdown is not straightforward- how much can you trust your partner?

The responsibilities of a landlord are not to be taken on lightly, but it is a good way of generating a nice little pension pot for the future if managed correctly. Managed correctly is key though, you must have enough money set aside for non-payment by tenants and potential repair costs if something breaks. You must work out your taxes shrewdly etc. Ensure property complies with legislation and you meet your responsibilities.

My recommendation is if you're considering going down this avenue then start by reading the Beginners Guide to Property Investment by Rob Dix, he's a UK based investor and writer. The book is very straightforward and easy to digest. This should answer a lot of the questions you may have and will give you a feel if it's something you want to become involved in.