After reading over some of the suggestions over on another thread, I’m after some advice regarding a rental property that l’m currently attempting to sell.
My wife and l were living in the house up until a few years ago. We wanted a bigger house to start a family but couldn’t sell it (low demand). I was in the position to be able to afford another deposit and so we let the house out to a tenant and moved into where we live now. Our relationship with the tenant unfortunately eventually broke down and the experience has left us wanting to get rid of the responsibility. The house is empty (and we’re paying the mortgage) and my wife has been off work for around three years. In addition, the rent only just pays the mortgage and insurance costs off each month – we cannot get a better deal as the LTV is poor, particularly as the house market has devalued the property – l cannot see us getting a better deal. In addition as the house has devalued l have lost around £10K already (and thats if l get the asking price)

In short the financial strain is now beyond what l want to deal with on top of work, family etc etc. and so I’m looking to get rid.

The question is, should l? With all the talk of non-existent pensions (I’m 32) etc I’m worried for the future. On the other hand, my wife has not taken the stress of the experience well, and she wants to get rid of it despite the potential income further down the line.

(I’m sure this thread may attract some negative responses re landlords, but I’m a big boy and have heard it all before – flame away elsewhere)

If you rent it and cover your costs monthly, then eventually you will pay off the mortgage and sell and reap the benefits.

If you cash out now, you sound seriously out of pocket. (£10k? who’s going to pay for that?). If I was paying out £10k for a house I didn’t own, I would hate it.

Your best bet is to get a tenant in and make it pay it’s way. If the market recovers, you can get out then. As the Loan against it decreases, you can cash out at that point.

If you keep your nerve, you can make it work. Doing it now is not the best bet with the factors you have listed.

Oh dear sorry to read about this. I am a landlord but sounds like we are in different geographic areas. If I were you I would try and salvage the situation by upgrading it to a decent rental standard, it’s tax deductible against future rents, get it let, get yr wife onside with the concept and sell when the market improves.

Selling now into a distressed market will crystallise your losses and leave the both of you with the bad tenant experience.

Fellow ll friends have either been burnt badly or making a decent return. The latter due to riding out the voids, continually investing and treating tenants well.

Good luck btw, it’s not for the faint hearted

The barriers to ownership of a BTL property are too high for most people. However, you have jumped that hurdle and therefore if I were you I would be reluctant to cash in the asset now.

The financial strain is only, presumably, because you don’t have a tenant at the moment? And yes, the rent might only cover the mortgage, but assuming it’s a repayment mortgage you’ll own it outright upon retirement, and it’ll be someone else who will have paid for it. It’s a no brainer!

You had a stressful experience with a tenant, and over the years you might have other stressful experiences with other tenants. You could probably do with seeing those problems as occupational hazards, “just business” and not get emotionally involved.

You could use a lettings service if you don’t want the hassle of dealing with tenants yourself.

In the last 50 years property has been a fantastic investment. Unrivalled really. Its effectively “index linked” and with a growing and ageing population demand (imo) will continue to outstrip supply.

Now that being said having said that borrowing substantial amounts introduces other risks rent vs mortgage and tax considerations (removal of interest offset). What you don’t wish is to be a forced seller if things move against you. It cannot be ignored that your wife finds being a landlord stressful. In your case it does seem to add up to a difficult situation. In your case it may well be that a sale for a sensible price is best option, focus on paying your other mortgage down and some tax efficient pension savings

Best of luck

Really sorry to hear the position you’re in but selling would be madness.

I’ve been a landlord for 20 years and on the whole I’ve had very few issues with tenants, one left a property a complete shite hole, another died in one property and wasn’t found for a few days but in general it’s been fine and I’ve had some fantastic tenants who have treated the property as their home.

Do you manage the property yourself or use an agent?

With the situation you’re in I’d recommend making the place look good, give it to an agent to look after, so taking any stress away from you, and try to stop worrying.

Thanks for the responses.

Management’s pretty much out – i’d literally lose money every month to do so, as we don’t make enough as it is (£20?). The house has recently been decorated so is up to scratch in that department. It has a few issues as it is old (condensation on a couple of walls in cold weather) but aside from that its low maintenance. I guess that because we’re not exactly raking it in, l am reluctant my either my wife or I to absorb any more stress from either the tenant or financial implications.

On the plus side, my wife goes back to work in a month (she’s been off on maternity leave effectively for three years) and so we’ll be back to somewhere approaching normal soon enough.

I dont want to look back on the situation in a few years and regret losing out on a potential income, but at the same time l want to look after my family in the short term

i’d literally lose money every month

Mate you’re not losing money! Every mortgage payment you make is buying you equity. And you have someone else to pay (almost all) of this for you.

Take your costs for keeping that house. Mortgage, insurance, maintenance. Now take away the income from the tenant. How much is it “costing” you?

Now you mentioned not having a pension. Work out how much you’d need to save every month in order to have the same income in retirement that the house will pay.

I think you’ll find that the house is a good deal.

It might be worth getting a quote from a letting agent or two. They might be able to get a little more for the rental, which could go some way to covering their fees.

Would your council want to rent it from you?

you’re not losing money! Every mortgage payment you make is buying you equity. And you have someone else to pay (almost all) of this for you.

This. You aren’t loosing the money, it’s costing you a small amount to buy a second house. Daft if you think otherwise really.

Is the rent covering the interest payment only? Or your repayment of the loan too?

Mentioned them on another thread recently – look at Northwood.
It works because they are your tenant – therefore they pay you regardless of occupancy.
Yes – you get a little less but like everything its negotiable.

Is the rent covering the interest payment only? Or your repayment of the loan too?

Its repayment.

I guess l just don’t like the responsibility!

No do not sell it.

If it makes money, wisest thing is to keep it as investment.

So you’re paying off the mortgage and it’s costing you £20 a month. If there’s no issues getting tenants then keeping it is a no brainer.

But as above try an agent, they’ll probably get a higher monthly rent to any cost will be neutralised, and it takes the stress away from you.

Ive done a bit of reading up on Northwood and they seem to be a bit hit and miss to be honest !!

Know three friends who use them and have had no issues down here.

If you’re worried about it think about interest only, then you’ll have a bit more spare cash

But the fact they’re paying off your mortgage means you shouldn’t really be complaining!

Yes ditto above if the potential rent covers the repayment mortgage you would be mad to let it go. Go and see a few agents and get a tenant in, manage it yourself to save a few quid.

Be aware of the tax changes though – no more wear and tear allowance from April 16 and mortgage offset against rent. Not sure when the full effect of the latter kicks in.

As above put the rent up and get an agent they charge approx 8% + vat for full management. Put it in their hands and forget about it.
The council may rent it but they will want to pay at £150 – £200 per month below market rent value. However they will pay you when it’s empty you have no maintenance worries and they pay the council tax if it’s empty. They will also reinstate the property to as it was when they rented it.

People telling you that you’re making money with the tenant paying your mortgage are right, but they’re probably forgetting about the extra interest you’ll be paying on your own mortgage from the capital you have tied up in the rental.

One may not be offsetting the other

If you can’t be bothered with the hassle get rid. Life’s too short for agro now vs potential profit 20 years down the line…….

where abouts are you?

we’re looking for a new gaff and we’re very conscientious tenants

Hi Yunki. North East Wales

Just done a quick calculation regarding the new tax rules on mortgage interest. Oh ****. Think that clears things up for me! Interest is approx £350 a month. Rental income is £500pcm. I’d have to pay out an additional £1500 a year to cover the interest.

I’m oot…

I don’t understand how you are 10k down when property has gone up? Anyone in negative equity should be in the clear by now?

Do the new tax laws effect you that much? Surely its only an issue if you are both earning a shitload of cash (in which case you have a little less sympathy 🙂 ) If it really is stressful then getting rid is the only realistic option but if you can work it out then it’ll make financial sense to keep it. The key is good tenants which is pot luck to some extent but you can weigh the deck in your favour.

I don’t understand how you are 10k down when property has gone up? Anyone in negative equity should be in the clear by now?

We paid £110k for it, and the best sale price l can get is currently £95k. Ok so the mortgage paid by the tenant has reduced the capital a bit, but property hasnt gone up round here. We bought just before the financial markets collapsed in 2007. Bad timing

We paid £110k for it, and the best sale price l can get is currently £95k. Ok so the mortgage paid by the tenant has reduced the capital a bit, but property hasnt gone up round here. We bought just before the financial markets collapsed in 2007. Bad timing

I’m confused; in 9 years you will have repaid a fair chunk of the capital, surely?

Interest is approx £350 a month. Rental income is £500pcm. I’d have to pay out an additional £1500 a year to cover the interest.

Que?

We paid £110k for it, and the best sale price l can get is currently £95k. Ok so the mortgage paid by the tenant has reduced the capital a bit, but property hasnt gone up round here. We bought just before the financial markets collapsed in 2007. Bad timing

All the more reason not to sell. It has a lifetime of value to you as income rather than a sale at a loss.

Just done a quick calculation regarding the new tax rules on mortgage interest. Oh ****. Think that clears things up for me! Interest is approx £350 a month. Rental income is £500pcm. I’d have to pay out an additional £1500 a year to cover the interest.

Not following your logic?

Hah “put it in an agent’s hands and forget about it” that is the opposite of my experience. Their office was literally still 2 doors from the property and they still tried to charge £50 to let a tradesperson in. Usually the wrong one, like the time they sent for a gas heating firm to fix my electric heating. And tried to pass the callout fee to me. Sharks, all of them, and a long way from hassle free.

Presume reference to fact that interest no longer tax deductible (well soon) so you pay tax on all of rent, not rent-mortgage interest.

they still tried to charge £50 to let a tradesperson in

If I’m getting any work done I ask the the person to pick the keys up from the agent. You can’t really expect the agent to give their time away fro free.

Presume reference to fact that interest no longer tax deductible (well soon) so you pay tax on all of rent, not rent-mortgage interest.

But there will be 20% tax relief. In real terms this only hits higher rate tax payers. Only impact it’ll have on basic rate tax payer is it might push into the higher rate tax bracket if the total income is enough. That’s how I understand it. Might have it all wrong though

That £50 was to allow the tradesperson to pick up the keys from the agent…

Calculator Here

For a ‘typical’ rental property its going to cost people and additional £500 a year once the legislation is fully rolled out.

I was in the same position a few years ago, bought high, sold low, sucked up the loss of about £10k and never looked back. £10k not to have to deal with tenants moaning about broken lightbulbs etc? Worth. Every. Penny.

I’d have changed the bulb for £5k, you’d be laughing now.

Hels, why are you letting an agent charge you 50gbp to let someone collect keys, you have been had. Mine holds the keys for nothing as he knows he will get repeat business, and he does

Best thing I ever did was get someone local to manage mine, then I don’t have to get involved.

Hels, why are you letting an agent charge you 50gbp to let someone collect keys, you have been had. Mine holds the keys for nothing as he knows he will get repeat business, and he does

Mine to, an agent always holds a spare set of keys and neigher agent I use has ever charged to hand them over to someone. Although I do have long term relationships with both agents, if they charged to hand over keys that wouldn’t be the case.

Their office was literally still 2 doors from the property and they still tried to charge £50 to let a tradesperson in.

Letting someone in isn’t the same as handing over the keys. And what does the office being two doors away matter if the person was picking the keys up?

£10k not to have to deal with tenants moaning about broken lightbulbs etc? Worth. Every. Penny.

In 20 years of being a landlord I have never, ever had a tenant ask me to change a lightbulb.