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I may be looking to move house, but it looks like I'll break even on the house I'm selling - the zoopla estimated sale price is the same as I owe on the mortgage. Thankfully I'm not dependent on this to buy another property but it would be nice to make a bit of money given the modest work we've done to it in the last few years.
I can take the hit and sell the house, or I could get an interest only mortgage on the current house and rent it out. I seem to recall that I'd have to do a fair bit of work though to make it suitable for renting out e.g. hardwired fire / smoke alarms, get all the electrics bang up to scratch and so on.
Therefore what with the hassle of being a landlord (agent can take care of some off this) and the work required to get the house up to standard, should I sell up or rent it out and sell on when / if the market ever recovers?
renting out - it depends on whether it an HMO or not and what the regulations in your areas are.
If you rent it to a family not as an HMO the regs are easier.
do your sums on 9 months rent a year - that gives you some flexibility if things go wrong
I've just been through almost this exact decision.
We have a baby Silverfishy arriving in January so NEED to move but didnt want to get our pants pulled down over the selling price of ours so looked into renting.
After all the work we needed to do, the hassle of being a landlord and the changes to the mortgage it just wasnt worth it for us.
I'm sure if you rented it out to someone you knew, didnt change the mortgage and kept it all a bit 'mates rates' it would be fine but to do it legit was pricey.
Oh and for the record - we sold it, lost a load of money and I utterley felt as though I had my pants pulled down!!!
Did you really *need* to move? We could do with moving (no real garden to speak of, small bedroom for the twins, third bedroom only accessible via the master bedroom etc etc) but we aren't prepared to lose out so just getting on with it. And *hopefully* in about 4 years I will be mortgage-free and can perhaps think again.
It wouldn't be HMO, would be targeting young couples or even young & small families.
Why do we want to move? - because to get a house of the size and type we really want to in a nicer area is only a bit more money than we currently pay on our mortgage (extra £50 pm). Alternatively I could stick loads of money into our current mortgage and live on cheap mortgage payments. I know that this may make a lot of nice holidays affordable, but your house is your home and you spend a lot of time there.
"Did you really *need* to move?"
Yes.
I live in a 3rd floor appartment in the student area of Plymouth. Its sandwiched between two bars and opposite a kebab shop.
Trust me - you do not want to have a new born baby here.
The market in Bristol has collapsed over the past few months so to sell prices have to be slashed (asking price doesn't mean selling price!) and I think this may be the case all over the country, so you mighten even get the zoopla price ....
Renting isn't too bad, but you will need to get insurance, inspections etc sorted, and you need to screen you tenants carefully.
Yes.I live in a 3rd floor appartment in the student area of Plymouth. Its sandwiched between two bars and opposite a kebab shop.
Trust me - you do not want to have a new born baby here.
Fair enough 🙁
the zoopla estimated sale price is the same as I owe on the mortgage.
The zoopla estimates are pie in the sky figures based on their estimates for where I live 🙁
TBF the zoopla estimates are rather conservative for my street.
TBF the zoopla estimates are rather conservative for my street.
Asking price or selling price? As selling prices seem to be 15%-20% under initial asking price at the moment.
One website (rightmove? I can't remember) had recent selling prices that looked quite positive, whereas zoopla is showing stuff as rather negative.
If it would not be an HMO then the regulations you have to meet are much simpler.
If 9 months rent a year would cover all costs I would go for it.
Agreed - 3 months rent / 20-30% gross return ain't bad. We usually aim for 7-10% overall return a year - currently doing much better as shortage of houses / rents going up.
one thought - if you're only just at 'break even' point on the mortgauge (ie 100% mortgauge) - i'd be surprised if the bank would be happy with you letting it out. most btl mortgauges require ~25% deposits and the monthly income to cover the payments by 140% or thereabouts. If it was as simple as getting a personal mortgauge and converting it over later, I think they'd be onto that by now.
we rented our old house out for about 3 years with zero problems to the same tennant.
One month he decided he couldn't afford it and then we spent the next 6 months getting him out of there. He left the place in a complete shit state (new carpets throughout and about 5 coats of paint as the arse decided that our no smoking policy/pet didn't apply to him). All the money that we'd made over the 3 years went into getting the place sorted out, then we sold it as the wife was annoyed at all the stress etc
Worse thing was that I had to walk past it on the way to/from work and was told by solicitors that I couldn't say anything to the tennant if I saw him.
For the first 3 years it was hassle free (apart from a couple of issues with plumbing/heating) and a nice steady addition to the income but the stress and hassle of the last 6 months really put us off.
We'd like to do it again, and may consider investing the money we made on the property in a buy to let in the future, but not until I get a job where I can be a bit more hands on (with both the upkeep and actual 'landlording')
I haven't done any research but if i need a deposit to do a BTL mortgage I'm kind of scuppered.
ring your provider, they might be able to convert you over to btl, but the rate might not be as good etc. I've never done it so don't know
pieface your existing lender will probably OK you to rent it out - tehy might put a bit on the mortgage rate
Why not just sell it. I've rented out a flat for the last 6 years. Bought it for 150k in 2005. Sold it 2 months ago for 152k.
To be honest although it was rented out pretty much constantly, the return (when you include agents and legal fees, stamp duty, service charges, insurance and maintainence) has hardly been more than if I'd have just stuck the money in the bank. Plus your bank does not phone you up whilst you're on holiday to tell you your washing machine has leaked all over and ruined the laminate flooring.
With all the hastle that comes with renting out a place not sure if I'd do it again. All my tenants have been good and paid their rent on time but letting a flat was still quite a bit of work. You sometimes hear some real horror stories from other landlords though.
I was kind of counting on a capital value increase in the property to make money. Unfortunately that hasn't happened.
House prices are on the way down. If I were you then I'd get shot now and move on. You might make a loss on your current house but surely the house you buy will be cheaper too?
Like others I've been in a similar situation recently - elected to sell up at a 15% loss (in terms of the buying / selling price). This was a flat in a nice part of Edinburgh where decent tennants would be queuing up, as well.
Our circumstances made it a bit harder to rent out - we moved 200 miles away and my wife lost her job, so two mortgages would have been a stretch. Factor in general can't be arsed being a landlord, and we're all heading to feudalism where no one's house will be worth a carrot anyhow, and it became an easier decision.
Facts are that it sucks being a seller right now - I'm actually glad that I shifted my flat for what I could get for it. If you can get out on an even keel and start looking to buy it feels like a good time to do that.
pieface your existing lender will probably OK you to rent it out - tehy might put a bit on the mortgage rate
hahahahahahahahahahahahahaha ..................hahahahahaha ..... hahahahaha .... muppet.
That's a good one TJ, of course your lender will be fine with you getting a lower mortgage rate than they offer on BTL mortgages, and won't want the £1.5K in setup fees, as they aren't worried about profits.
If you rent it out without telling them, you are in breach of contract which is not good, as you will need to get another mortgage pronto if they spot it and you *will* have to disclose that you have had a mortgage rejected/cancelled, so the rates will be mental.
and regardless when you come to sell the place, if the solicitor on the other side are any good they will find this out and you will have to reduce the price to appease the buyer or watch sale after sale fall through.
and then there is your buildings insurance .....
All in all, not a good idea.
richc - I Have done this myself. 1/2 % on top to let out a house on a standard mortgage.
Not every lender will do it but I know that some will (or used to)
agree with TJ. Our mortgage provider wanted £250 to set it up, then £250 with every change of tenant. This was 3 years ago.
We had this same conundrum a couple of years ago (18 month old sharing our bedroom in a one bedroom flat) We were lucky to be able to rent to friends and keep quiet on the mortgage front as all our mail was still able to be sent there...I did worry about being found out at any moment though.
When they decided to buy a place of their own, I didn't think for a minute of letting it out 'properly' - way too much worry over agent's fees, having it unoccupied with a mortgage to pay, damage etc etc. We sold in the end earlier this year and although it went for 10% less than the asking price, I felt that was about right and we had still made a little on it despite doing a hell of a lot of work on it ourselves since we bought it. If you have work to do to make it 'lettable' too, then I would definitely say to sell instead.
Remember that in a falling market, as long as you want to trade up, you're probably ok. e.g. If your house was worth £100k and has lost £20k, it's likely the £200k house you want to buy has dropped by a similar percentage too. (Presuming a similar area blah blah blah etc.)
We're thinking of doing this, made a bit of an epic fail and purcahsed in feb 2008 (doh). Now got a wife and not enough room in the flat, so need to trade up / rent out the flat. If we flog it we stand to 'loose' 30k or so (but as pointed out what ever we buy is probably at least that much cheaper). Luckily we've saved up another deposit in the mean time and over paying the mortgage quite a bit.... still undecided tho, tempted to rent it out.
For what it's worth, I investigated with Nationwide, they'll let us rent it out with no change in the mortgage rate (2.5%) for 6 months and after that they'll add an additional 1.5% on. We'd make a little bit of money for the first 6 months and then break even from then onwards, the idea being that at some point the market will recover...
<edit> I believe the additional 1.5% after 6 months is standard for nationwide customers wanting to let their property </edit>