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No idea re btl but considering it - can we do it?

(20 Posts)
RabbitIssue Sun 07-Jun-15 15:08:38

We've found a lovely house we'd like to purchase. We're considering renting our current house out rather than selling it but I'm not sure we can, I know very little about btl as have never done it before.

If anyone around has ever done it could you have a look at these figures please and see if we're being silly?? I thought you could only borrow in relation to your salary but have been told they actually take the rental value rather than salary on a btl?

So, house want to buy is £399k, ours is worth £150k ish. Mortgage is 83k. Have another 40k deposit.

Therefore- btl on this place, put mortgage up to 80% - 120k - so gives us 37k of equity. Plus the 40k in bank - 77k deposit on new place. Mortgage have said they will lend us 330k (going by our wages). Rental income on current house would be between 650-700 pcm.

Is this doable? Crazy? What other costs should I think about? Sorry, just had this as an idea and want to know if it's a pipe dream!! smile

Rubyrooo Sun 07-Jun-15 15:21:30

Can you even get a btl mortgage with only a 20% deposit? You will definitely need a bigger deposit to get the better rates.

I'd be v wary given that (in your own admission!) you know nothing about it. It's definitely not the easy money that it's made out to be - you will have ongoing maintenance obligations towards any tenants that you have and income will be taxed (you will need to start doing a self assessment if you don't already).

RabbitIssue Sun 07-Jun-15 15:30:47

Just working out figures now, I think it might be tight, looking at the rates they're v high if you don't have 40% deposit... Will keep thinking on it smile

specialsubject Sun 07-Jun-15 15:35:03

only the fuckwit journos (excuse language but the endless stupid articles on this REALLY piss me off) think BTL is an easy money goldmine. Of course the idea is to make profit, like any business, but you should expect no more than 3-4% return AT THE MOST.

will it really rent for that much? What's the rental demand in your area like? (look on rightmove)

I pay about 25% of my rental income in insurances and fees, and that is after heavy shopping around. It doesn't include fixes, although I have reserves for those as all landlords must. This doesn't include tax either because I don't earn enough. But if I did, it would. And yes, I do a tax return every year although that's not a big deal with good record keeping.

Allow 10% plus VAT for basic agency services, get quotes for landlord insurance including malicious damage, legal expenses, home emergency cover and rent guarantee. Remember a non-payer can take 6 months to evict legally and the place could have been destroyed in that time.

You have to do gas checks, protect deposit, fit smoke alarms, check immigration status of tenants, redecorate every 4-5 years and so on and so forth.

be prepared to be on permanent call. You may not hear from your tenant much but when you do, you'll need to do something.

worst case of course - most tenants are fine.

finally, the place will attract CGT when you do sell it.

VivaLeBeaver Sun 07-Jun-15 15:40:50

Crazy. Sorry.

I partly inherited a house which I needed a mortgage of 30k on and rental would have been £600 a month. I was worried that would be tight.

You know you'd need a BTL mortgage don't you which normally have worse interest rates? You have to pay income tax on your rental income. So you'd lose at least 20% of the £600. Landlord insurance and building insurance, factor those in. Repairs. Letting agency fees would be about 8%, maybe 10%. Tenant finder fee of about £500. Extra for doing an inventory, etc.

How you going to manage when you have a void period and you have two mortgages to pay for months on end?

RabbitIssue Sun 07-Jun-15 16:17:59

Damn, I think the answers here are correct (thank you) but not the ones I wanted to hear! :D we weren't doing it for the money btw, but because we want to buy the other house and if we sell it might takes ages and we'd lose the house we want to buy (if that makes sense).

Think back to putting on market then sad thank you everyone smile

VivaLeBeaver Sun 07-Jun-15 16:27:47

You never know, you might sell it quickly.

I was in your position once. Saw a house I liked and ours wasn't in the market. Our house was sold a week later and we got the house I liked.

RabbitIssue Sun 07-Jun-15 16:33:31

Thank you Viva, feel a bit more optimistic, will get on with cleaning the bloody windows bah!! X

specialsubject Sun 07-Jun-15 17:00:07

in that case, don't even think about it. Sell yours - go into rental if the chains don't work out.

good luck with it all; you never know, it may all happen quickly!

Pumpeedo Sun 07-Jun-15 17:03:57

I've got a few buy to lets. Usually lenders expect your rental income to be 125% of your mortgage repayments.

All I'll say is there's no such thing as easy money. Some days I hate those bloody buy to lets.

BlueBee Sun 07-Jun-15 17:07:32

Speak to your current mortgage company. I rented out my old house when we bought another, they just upped my rate by a %. So basically gave me permission to rent it out. Really easy.

specialsubject Mon 08-Jun-15 11:34:22

permission to rent may be easy. Running the 24/7 business of being a landlord is not.

BlueBee Mon 08-Jun-15 16:54:58

Sorry, the easy was referring to getting the mortgage sorted. I rent out 2 houses, managed by agents. I didn't want the faff so agents suited me.

KneesofEggleston Mon 08-Jun-15 17:09:24

Why not just live in the house you have? What is it about being a landlord that is appealing to you?

specialsubject Mon 08-Jun-15 18:40:58

OP wants to move (it is allowed) and is concerned about selling the current place in time to get the new one she wants.

It was an idea, and I think now she knows the realities it is straight in the bin!

Sunnyshores Mon 08-Jun-15 18:53:07

Always worth looking at the options and I think OP has been responsible in realising that being a landlord isnt an easy job, is a huge risk and doesnt make loads of money. Too many people dont think about it and thats why we have so many MNetters complaining about LLs (there are other reasons too but Ill keep them in this time).

Good luck with getting your dream home.

RabbitIssue Mon 08-Jun-15 20:31:55

Hello, to answer the question I do love my current house but it isn't big enough now we have two children hence looking to move.

I think the rental would be at least 125% of the mortgage so that would be ok.

I don't think it's easy money at all :O I imagine it can be a nightmare, I think we'd do it through an agent so wouldn't have to do the majority of the work (although obv would have to pay for it).

Just looking at all options, even looking at fast sell agents (!) as I want this other house so much.

Don't think we have enough equity to do the btl thing so prob a pipe dream, although mil has now said she'd quite like to rent it off us... Now that's a whole another story!!!! :D

RabbitIssue Mon 08-Jun-15 20:32:44

Sorry to reiterate, we weren't doing it for the money at all, just so that we could move quickly and buy the other house smile

specialsubject Tue 09-Jun-15 16:10:19

no sin about renting out property for money, except for the boneheaded bile-spewers on here.

making money from renting property is no more immoral than selling food, clothes, mortgages or medicines.

renting out dumps is immoral, which is why people need not to become tenants of these places.

TarkaTheOtter Tue 09-Jun-15 16:19:09

Our mortgage company wanted the rent to be 125% of what the payments would be if the interest rate was 7%. Not sure why as it was a fixed rate much lower than that at the time.

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