mattk
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Registered: 27th Feb 06
Location: St. Helens
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Got another deposit so Im after another house, buying with a friend, we are going to veiw on friday
to rent a house is there anything more than Mortgage, Landlord Insurance, Buildings Insurance, Safety Checks that we need or should consider? will be using an agent to look after it for us most probably while its our first one
any experiences or tips would greatly be appriciated
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Aaron
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Registered: 9th Aug 04
Location: Cottingham, East Riding
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Perhaps consider the house being empty. Can you afford to pay the mortgage every month in this case? Sorry to sounds so negative, but i know some people who are having this exact problem.
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Rob_Quads
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Registered: 29th Mar 01
Location: southampton
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Yup - always account to have a couple months un-rented a year and be able to pay the mortgage.
Also have a slush fund for the property for when things break, as you will have a due duty to fix them if they do.
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RichR
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Registered: 17th Oct 01
Location: Waterhouses, Staffordshire
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My personal preference is Interest only mortgages on BTL properties; when tenants are in, we overpay on the mortgages to bring the capital down but when/if they're empty, we don't have such a big amount to find
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RichR
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Registered: 17th Oct 01
Location: Waterhouses, Staffordshire
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are you going to rent furnished or unfurnished?
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James
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Registered: 1st Jun 02
Location: Surrey
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I looked into this, after you get shafted on income tax for the rental income it wasn't worth it. Your situation might be different though.
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RichR
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Registered: 17th Oct 01
Location: Waterhouses, Staffordshire
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you have to look at it long term - its not about profiteering in the short term. Effectively, I view it that come retirement, the properties will have been paid off (minus the deposits) by a third party. Even if I got shafted at 40-50% capital gains on selling them, thats still a wodge of cash that hasn't really cost us anything.
We have 4 flats and are looking at a fifth at the minute and volume definitely helps.
[Edited on 23-08-2012 by LiVe LeE]
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James
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Registered: 1st Jun 02
Location: Surrey
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Yeh but I'm even talking about profiting, I would have been losing a few hundred a month. Unless you can put down a huge deposit (I mean like 50% or more), or it's your sole income so you don't pay as much tax, I can't see how it would be worth it.
But as I said, everyone's situation is different.
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RichR
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Registered: 17th Oct 01
Location: Waterhouses, Staffordshire
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strange, we're not losing on our's at all; we're not making a great deal but they're more than breaking even. I guess the difference between North/South property prices comes into the picture though. The two porperties (each of 2 flats) that we have were sub £250k and the first was bought with a 20% deposit; the second is secured against the first; total investment including work carried out is sub £20k and now someone else is paying the mortgages off. Even if they never appreciate in value, that's £230k gross for very little outlay
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James
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Registered: 1st Jun 02
Location: Surrey
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It's been a while since I've done the sums. I'll do them again later and let you know how it looks 
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Toby
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Registered: 29th Nov 05
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I rent out my house.
BTL mortgages require a massive depoist (usually 25%). The amount you can lend will be subject to the potential rental value of the property and not based upon your earnings. Im not using a BTL lender though and have carried on with my current mortgage lender (this is not really an option for those that are purchasing with the intenion of letting though i have seen it done)
Things to consider are the letting agents and the service they provide. Most will offer a range of management services and most mid level services are 10% + VAT. There will also be an inital contract fee of around £250 + VAT.
Shop around here and look for the best value for money, i didnt go with the cheapest but they Let my house out within 3 days and they were moved in, in less than 2 weeks. I went for a service that included them doing all the work, admin, checks, inventories etc but i arrange to fix any issues (best for me as i know lots of tradesman that can fix on the cheaper side).
I got some good tennants in and have sacked off my letting agent and know profitting from the additonal £750 a year.
You need to budget for periods of availbility, average is one month a year. Ive seen a couple of agents even offer protection for this on their premium managment services.
My house was in a very good state of repair but i did go around and repaint a lot of the property with a big tub of white paint as there were a few shades of cream/white and made it look fresher.
Requirements:
Electrical items will require PAT Testing (not by Law but 99% of letting agents will require it),
Gas Safety Cert (im sure you can sort that out).
Landlords insurance (mine includes buildings - also a requirment for most mortgage lenders).
Furniture - Requires Fire Regs compliance and needs assoicated proof from the manufactuer.
In terms tax returns, yeah you do get taxed on the income, if you declare it but there are a lot of things you can offset agaisnt it, i.e. interest payable on the mortgage, any repair work during the rental, purchase of furniture, accountat fee's etc (though these can only be claimed back 'technically' when the property is occupied) I earn't £6900 in rental last year and i ended up paying 80p in tax as i managed to ofset it all and this year it should only be a couple of hundred max.
Another thing to be aware of is, if its rented for more than 3 years and then sold without occupancy from the owner, you have to pay capital gaisn tax on the sale of the property.
I think that covers most of it. If theres anything else let me know and i should be able to answer it.
edit for discussion about figures: I earning £302 a month after paying my mortgage and my insurance on the property. So definatley worth while
[Edited on 23-08-2012 by Toby]
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James
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Registered: 1st Jun 02
Location: Surrey
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OK I've done the sums. This assumes a 25% deposit (usually the minimum), I've based it on local property prices and associated rental incomes and assumed a 20% income tax rate. I know you can offset mortgage interest and maintenance costs against the taxable rental income, I've estimated that to be about £400. I've also assumed a mortgage rate of 5%.
All of this results in a small monthly loss (£68), which is manageable for the long term benefits. However, once you consider the 40% tax bracket, you'll lose £228 a month.
Purchase Price £250,000
Deposit £62,500
Loan Amount £187,500
Interest Rate 5%
Repayments £1,108
Rental Income £1,200
Offset Amount £400
Taxable Rental Income £800
---------------------------------------------------------------------
Income Tax Rate 20%
Offset Amount + Post-Tax Rental Income £1,040
Monthly Profit/Loss -£68
---------------------------------------------------------------------
Income Tax Rate 40%
Offset Amount + Post-Tax Rental Income £880
Monthly Profit/Loss -£228
P.s. Yes I'm bored.
[Edited on 23-08-2012 by James]
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James
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Registered: 1st Jun 02
Location: Surrey
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Also, the argument about North/South property prices should be largely irrelevant for buy-to-let. The key thing is the relationship between property prices and potential rental income. That should be fairly consistent across the UK I would imagine?
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Toby
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Registered: 29th Nov 05
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You will be paying more than £400 interest on £1108 in your first few years of the mortgage. Plus i take it you have allowed for additional expenditure/maintainence in that £400 so that would also effect it.
edit: If you can afford it, i would say £228 a month is still a bargin for an investment for the return and risk is minimal if you buy well.
[Edited on 23-08-2012 by Toby]
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James
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Registered: 1st Jun 02
Location: Surrey
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Yeh the £400 offset amount was plucked out of the air and TBH it could be more than that, in which case it would look better. I'd have to look into the amount of interest in a bit more detail.
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Toby
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Registered: 29th Nov 05
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well put it this way my original mortgage, admittidely not BTL but was 5.79% (similar rates to BTL) and of £19,XXX in three years paid all i paid equity was about £2,XXX. which is a bout 90% interest (in the first 3 years). Using those figures as a guide i would imagine your interest would be nearer £1000 a month.
While the interest rate will drop (increaing your tax) etc over time as your LTV improves your monthly replayment will drop also which shold cover the increase in income tax from bigger profits.
[Edited on 23-08-2012 by Toby]
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RichR
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Registered: 17th Oct 01
Location: Waterhouses, Staffordshire
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quote:
Originally posted by James
Also, the argument about North/South property prices should be largely irrelevant for buy-to-let. The key thing is the relationship between property prices and potential rental income. That should be fairly consistent across the UK I would imagine?
I'm not sure, the rental retun on the 4 flats is £1500 total per calandar month over a purchase cost of about £240k so a return of 7.5%. What would the return be on a single £240k property in the south?
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James
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Registered: 1st Jun 02
Location: Surrey
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quote:
Originally posted by LiVe LeE
quote:
Originally posted by James
Also, the argument about North/South property prices should be largely irrelevant for buy-to-let. The key thing is the relationship between property prices and potential rental income. That should be fairly consistent across the UK I would imagine?
I'm not sure, the rental retun on the 4 flats is £1500 total per calandar month over a purchase cost of about £240k so a return of 7.5%. What would the return be on a single £240k property in the south?
Less than £1500. My flat cost £250k and the rental potential is only about £1200. So it's actually more favourable in the north 
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Toby
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Registered: 29th Nov 05
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quote:
Originally posted by James
quote:
Originally posted by LiVe LeE
quote:
Originally posted by James
Also, the argument about North/South property prices should be largely irrelevant for buy-to-let. The key thing is the relationship between property prices and potential rental income. That should be fairly consistent across the UK I would imagine?
I'm not sure, the rental retun on the 4 flats is £1500 total per calandar month over a purchase cost of about £240k so a return of 7.5%. What would the return be on a single £240k property in the south?
Less than £1500. My flat cost £250k and the rental potential is only about £1200. So it's actually more favourable in the north
I'd disagree purley on the basis that your comparing Flat's to a single dewelling which are always going to return a greater revenue.
edit: spelling
[Edited on 23-08-2012 by Toby]
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RichR
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Registered: 17th Oct 01
Location: Waterhouses, Staffordshire
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I'm comparing purchase price to revenue. Any investment is judged on revenue and profit.
Both James and I are comparing flats; albeit his is worth £250k and my 4 were purchased for around £240k but my rental return and security are better. With 4 flats, I only have to have two of them filled to cover the interest for all. Therefore, the North is a better investement prospect
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James
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Registered: 1st Jun 02
Location: Surrey
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Toby's point is valid though. To be fair you need to compare a single flat with a single flat. I suspect in that case the difference will be negligible.
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RichR
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Registered: 17th Oct 01
Location: Waterhouses, Staffordshire
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You simply wouldn't get a flat for £250k around this area. I'm looking purely from an investable amount of capital point of view.
I would want maximum return on my investment but I also get the security with 4 as opposed to one; if a single flat lies empty, you have to pay the mortgage; If I have one or even two empty, then the mortgage is still more than covered
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James
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Registered: 1st Jun 02
Location: Surrey
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I don't necessarily mean a £250k flat, I just mean work out the relative return for a single flat up north and the same for a single flat down south.
Anyway this is a pointless discussion. I was just trying to highlight that the relationship between property price and rental income is probably fairly similar across the UK.
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Toby
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Registered: 29th Nov 05
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quote:
Originally posted by LiVe LeE
You simply wouldn't get a flat for £250k around this area. I'm looking purely from an investable amount of capital point of view.
I would want maximum return on my investment but I also get the security with 4 as opposed to one; if a single flat lies empty, you have to pay the mortgage; If I have one or even two empty, then the mortgage is still more than covered
While your last point is a benefit on one hand it can be just as detrimental and imo brings more risk than it does benefits for several reasons.
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RichR
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Registered: 17th Oct 01
Location: Waterhouses, Staffordshire
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I don't see more pros than cons; there are cons of course, but the benefits outweigh the negatives and remember, I only have 2 mortgages for 4 flats; not 4 separate mortgages.
Also, its spreading the risk - only had one non-paying tenant in 2 years and lost out £450 total which wasn't the end of the world. One faulty boiler which cost £75 to fix and that is pretty much it.
[Edited on 23-08-2012 by LiVe LeE]
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