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I'm meant to be signing a buy to let mortgage next week and am getting cold feet

(199 Posts)
GalaxyInMyPants Sun 20-Jul-14 08:39:48

I inherited half a house recently and am in the process of buying my sibling out. First of all we were going to sell it and I arranged valuations, etc. then I decided I'd buy it.

I need a 70k BTL mortgage which the bank has said I'll get no problem.

I have a tenant lined up, someone I know. And I do trust that she'll look after it.

But I know that long term she won't stay there....maybe two years. After that I'd be looking for tenants. I keep hearing horror stories on here and in real life of nightmare tenants, or just the general expense, etc of a BTL.

My mortgage repayments would be £470 a month and rent £600. So after tax, insurance there's not a lot of money to save each month for repairs, new carpets, etc.

so short term I think it might at times cost me money and that's not even thinking about empty periods.

Long term I'd have the benefit of someone else paying my mortgage off. In 15 years I'd be mortgage free and could maybe think about retiring earlier than 67.

I worry if I don't buy this house that I will be working till 67. But then it would be nice to have some money now and enjoy life a bit more rather than having to be careful all the time.

If I don't buy the house I now feel I'd be letting down my friend who's excited about moving in and also my brother who's waiting for his money. Though he'd get it after we sold the house I guess.

Interest rates are meant to be rising. So that worries me a bit about the mortgage. If we sold the house I'd end up with about 70k cash, which I could try and save most of it I guess so I might be able to retire at 60 if I've got good savings still. And rising interest rates may help grow the money.

Then I think well I could try the buy to let and if it doesn't work out I could sell it down the line.......

Norfolknway Sun 20-Jul-14 08:42:25

I'd go for it.

If you struggled letting it, could you not live there?

GalaxyInMyPants Sun 20-Jul-14 08:46:42

We've already got a home so no need to live there.

It is in a popular area so I'd hope it would rent ok. Property prices are meant to be rising so that's good.

My head tells me it will be a good investment. I'm just a cautious person and this is so scary.

mousmous Sun 20-Jul-14 08:47:47

go for it.
just make sure you read up about the tennancy rules and make a contract with your friend. put your business head on wrt to letting the place out.
landlordzone and shelter are great sources of information.

doziedoozie Sun 20-Jul-14 08:50:48

I have a buy to let house. The mistake is to be 'friends' with your tenant, I don't mean your situation where it is a friend who is moving in but in the future.

I tried to help two tenants who got into financial difficulties with paying the rent, I gave them extra time to pay, allowed a missed payment, one ended up owing my 6 months rent. Went to a solicitor and she still owes the money, plus I had solicitor bills.

You must stick to all the rules, if they don't pay the rent they must be evicted, check all info, their bank statements, work status etc. before letting. Or get an agent.

My tenants were single mothers which made it hard to evict so perhaps only go for people without children.

Remember it is a business and you should be ok.

doziedoozie Sun 20-Jul-14 08:53:09

I am in a small market town and I wasn't throwing people onto the streets, they had family in the town, by the way!

Bowlersarm Sun 20-Jul-14 08:53:33

If you do decide to go for it make sure you have a watertight contract with your friend. No matter how much you trust her - or think you trust her - it is a business arrangement and has to be treated as such.

GalaxyInMyPants Sun 20-Jul-14 08:56:28

Yes Id be doing a contract and I've also insisted her dad is guarentor and signs a contract for that as she will be relying on housing benefit.

NovemberRainbow Sun 20-Jul-14 09:54:42

So your mortgage will be repayment? I was led to believe by a mortgage advisor that most buy to let mortgages are interest only payments, therefore the mortgage would not be paid off in 15 years, only payments of the interest.

You would either need to hope it went up in value really well to pay the mortgage off or make enough profit on the rent coming in to save that to pay the mortgage off.

Sorry if I have got that wrong, that's how our adviser explained it to us when we were doing the same.

GalaxyInMyPants Sun 20-Jul-14 10:06:50

Yes I've insisted on a repayment mortgage. I couldn't cope with the stress and worry of an interest only one. Which is why my repayments are higher. My sil has some BTL properties and I think she thinks I'm bonkers for having a repayment mortgage.

specialsubject Sun 20-Jul-14 10:18:18

Go for it - but do things properly. Proper tenancy agreement tying everything down, full inventory, check in/check out, plus all the legal stuff of protected deposit, gas safe etc. Arrange regular visits (at her convenience) to make sure all is well.

have insurance: not just buildings and contents but legal expenses, malicious damage and rent guarantee.

then you are pretty well covered against everything except voids. Plan to redecorate every 4 years, recarpet every 6-8.

foxdongle Sun 20-Jul-14 10:18:58

In 15 years you will have a house worth more (most probably) than it is now and an income from it.

Ours is to part fund our retirement. If we sold it we would have a load of cash earning rubbish interest rates and one day it will be gone.
We intend to keep it and keep drawing the income.(ours is mortgage free now). We have never had a void period.
Like you say you could sell if you have to, this would be our last resort, we hope to pass it on to DCs.

specialsubject Sun 20-Jul-14 10:19:01

oh, and have emergency call out cover for boiler, pipes etc; doesn't cost much and can save a fortune, as well as hassle reduction.

NovemberRainbow Sun 20-Jul-14 10:23:35

That's great. We sold our property at a loss as we couldn't cope with the stress anymore and the fact we were not even paying any of the mortgage off. Repayment feels like a much safer option imo.

We were landlords for 3 years and it had its ups and downs, we had roughly £50 left over every month after the mortgage and fees.

In the first 6months we had a massive leak and bit by bit the costs ran up-to £800, that was a tough time. Then our lovely tenants were expecting a baby and had to leave the property for something bigger. After this the property was unoccupied for 6months and we had to pay the mortgage from our own savings, which left us in a really tricky position. We eventually managed to get some new tenants in, but only after dropping the rent by £75 a month. This left us short on the mortgage ever month and topping up with our wages. We had also spent £300 on re-decorating.

We tried to carry on sticking it out, but I found out we were expecting our first child and DH had to relocate for his new job, so we decided to cut our loses and sell up.

All in all I think we were just unlucky, but it can be really difficult.

We never really had a problem with our tenants, they were lovely.

Sleepysheepsleeping Sun 20-Jul-14 10:28:54

Do you have savings to cover the voids and repairs? Even big things? (We had to spend 3k the other month as a boiler came to the end of it's life, then 600 quid the next month on an electrical problem!)
I see it as worthwhile as the value of the property has increased more than that over the last year, but you do need to have cash available for that sort of thing. You can get insurance for various repairs but it will never cover everything. I prefer to pay as and when needed and over the years we've had rental property it's worked out cheaper than getting insurance. Last year we had a 2 month void and had to put in double glazing to get it let and completely refurbished just as I had a baby and went on maternity leave pay, however we'd virtually paid nothing on repairs in the last four years so it's swings and roundabouts.
It is possible to get landlord insurance if your tenant fails to pay rent in contract and to cover the legal costs of getting them out - I don't pay for that as I'm a lawyer and am fairly hot on the legal side and happy to deal with court proceedings if necessary but you could look into? We once got it included with one agent who let the property, it was with maras.

unrealhousewife Sun 20-Jul-14 10:29:16

I'm not sure what makes you think property prices are going up.

The Bank have made it fairly clear that interest rates will rise soon, this will bring prices down.

I would invest a little money in doing it up with your brother, sell it and split the money. With real cash in your pocket you can then buy a smaller more easy to maintain property (assuming yours is a family home) which leaves you with security and a lot less worry about mortgage issues.

Eve Sun 20-Jul-14 10:31:29

Use a good letting agent!

I have been with the same agent for 15 years & they have never let me down. Never had an issue.

If it's. M4 corridor I can recommend them.

LadyRabbit Sun 20-Jul-14 11:03:51

Do it. And do it on repayment - and pay it off as fast as you can. If you can afford to overpay, do that. You will never regret it - you will always have an asset that can be translated into cash or a decent return to top up a pension or other investments. Being a landlord on a small scale isn't as labour intensive as you'd think as long as you keep your properties in good nick, fully vet tenants and TAKE OUT FULL LANDLORD INSURANCE!!!!!

Good luck OP.

GalaxyInMyPants Sun 20-Jul-14 11:07:06

Its not exactly a family home. Its a 3 bed terrace. Its been done up very recently so is in very good condition with new kitchen, floors, double glazing, doors, etc.

I've done the gas safe certificate and will get landlord insurance and building insurance. Emergency gas, boiler repair is a good idea.

I've got 2-3k savings so enough for minor repairs, etc. from my wages I save £120 a month so savings are increasing. In 2 years time I'll have paid my car loan off so will have another £150 a month to put to savings. I also get a pay rise of 1k in sept and will get another next June of the same amount.

Dh has about 40k in the bank which in a real emergency I could use but I'm trying to not rely on him.

GalaxyInMyPants Sun 20-Jul-14 11:08:04

Thanks for all the encouragement by the way. Am feeling more positive. Think I'm just having a wobble. Selling and taking the money would be the easy option but one I know I'd regret in 20 years.

purplemeggie Sun 20-Jul-14 11:20:49

Do it. I had a 3 bed terrace - lovely house, dodgy area, before I met dh. There was never a good time to sell it, and we didn't want to live in it (I'd lived there with xh), so we let. We were really reluctant landlords, but we're now selling and I'm really glad we hung on to it.

We have let for 7 years, during which we've had three lots of house-share tenants. One lot were awful, did a lot of damage and it was empty for 6 months while we got it back into a good state. Their deposit didn't cover the damage and we were paying two mortgages while we did it. The second lot were okay, not great, not dreadful, and the final lot have been absolutely brilliant - they've kept the house in beautiful condition.

We tried to sell a couple of years ago, and the market really wasn't on our side, so we let it again - to the fabulous tenants. In that two years the housing market has picked up a lot, and we're really glad we didn't sell it when we planned to.

Even though it's been stressful at times, the need for housing in this country makes me feel that investing in property is always going to be a winner long term. If things get really tight at any time, you have a substantial asset that you could sell.

How far away from the house do you live? The one thing that's been a problem for us, is that it was a 120 mile round-trip, so when work needed doing it took an entire day, and we inevitably didn't have the right tools for the job and ended up buying duplicates quite often! In the end, we'd just fill the car with every tool we had.

The good thing about a buy-to-let is that, to a much greater extent, you can pick your moment to sell based on the housing market, as opposed to your own house, where you're caught up in what else is happening in your life.

Good advice above - and if you can, as Lady Rabbit suggests, overpay a bit on the mortgage, you can use that to take a mortgage break if the house is empty between tenants.

QuintessentiallyQS Sun 20-Jul-14 11:25:08

What is your motivation?

Providing accommodation to your friend?

Securing yourself financially, long term?

I would say "do it", but am hesitant as your fist tenant is a friend on benefits. Hardly business savvy to become financially dependent on a friend whose own finances are rocky?

You need to check the terms of your mortgage carefully, some wont allow housing benefit.

The only real advice I can give is to rent unfurnished. Less for you to repair and be responsible for. If you supply a chest of drawer or a kettle, and it becomes faulty/broken, the responsibility is YOURS, and you need to either fix or buy a replacement. The second is, to arrange that her housing benefit is paid direct to YOU, not to her first.

We let our London home for 4 years while overseas, and in this time had to replace a shelf on the fridge for £40, this came to £84 including labour, have a handyman out to repair a daybed, he charged £44 per hour plus vat, plus part. Spend 6k on rewiring the property, not receive rent for the days the property was uninhabited due to rewiring, and endless problems I cant remember now.

I did have a single mum on benefits as a tenant, she had glowing references (probably because her landlord wanted to get shot of her), she filled our garden with nappies that she threw out of the bathroom window, let her kids scribble on the walls (3 coats of paint were needed on all the walls, after scrubbing with sugarsoap). She never cleaned. The floor next to the toilet was orange of dried up piss.

The most important bit though, she failed to notify us when there was a leek under the kitchen floor, and left it until the ceramic floor tiles were bulging and cracking before she said something, by then plaster was coming off the walls, and the house was a damp pit. The house had to dry out with industrial fans and dehumidifiers for three months before work could commence. 6 month void period, and expensive repairs to the value of £20k on top of what insurance paid for make good works to kitchen and hallway. It was so water logged outside the ground had to be dug up and irrigated!

When she left, this coincided with the dehumidifiers being brought in, she was 2 months in arrears with rent, and 3 months in arrears on gas and electricity. It did not matter much that we took meter readings when she left to close her accounts, as Landlord, I was responsible. We could not have gas and electricity cut off when we needed both to dry out the property. It truly was a nightmare.

Our next tenants were lovely though. Students at a nearby uni. Their parents acted as guarantors. Never late with rent, tidy, and took great care of the property - it was totally refurbished when they moved in. We did not have to do much to it when they left.

I know she is your friend, but you cant let her tug at your heartstrings!

Why does she need somewhere new to live?

ShineSmile Sun 20-Jul-14 12:21:35

Go for it!

You'll be fine. We've stayed in many rental properties and always looked after them like our own. We even painted one property from our own pocket and renovated parts of it.

ShineSmile Sun 20-Jul-14 12:23:52

Get a good agent. One house we were at there were inspections from the agent every six months. That's the type of agents you need, who'll keep a good eye out for you. They were also very thorough with all paperwork etc.

GalaxyInMyPants Sun 20-Jul-14 13:21:47

My motivation is for myself and my long term finances.

Friend needs somewhere to live as she's fleeing an abusive relationship. The council will pay her deposit and a months rent in advance. She keeps her house in lovely condition....its cleaner and tidier than mine so I've no reason to think she wouldn't look after this one.

We're 5 miles from the house. Dh is very good at DIY. We know he can't touch the electrics or gas even though he's capable. But any plumbing problems he can sort. He rebuilt our brick garden wall when it fell down, he can do pointing and plastering, etc. though realistically with a full time job it would depend how much time he has.

He's going rou d next week to work out why the upstairs loo and sink aren't working, fitting a new curtain pole and replacing some fence panels.

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