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

[GalaxyInMyPants]

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.......

Sell it now while you can. A lot of factors that are not obvious to the casual observer are going to decimate property prices.Some good news today though the tax man is going after 900 thousand buy to let landlords who have not declared their profits. That in itself will some mighty damage . Some must owe mega money. Now is not the time to buy but to sell. It's over every idiot and their dog is an investor in a ponzi scheme.
Take the money and run

you sound well placed to do this, so go for it.

make sure the tenancy makes it clear what belongs to you and what is being given to the tenant. If the furniture doesn't have the flameproof foam it must be binned - but it would have to be pretty old to be in that situation.

What have you casually observed that's going to affect the property prices ron?

I can see why you are getting cold feet. The rent isn't a lot higher than the mortgage and interest rates could very well rise in the near future. And also there are repairs and other maintenance to be considered. If you really think it's a mistake then you should withdraw. I know you will be letting people down but that simply can't be helped sometimes. There is no point in setting yourself up for years of stress and worry.

But on the other hand you will have equity in the house and if the going gets too tough you could sell. It's a difficult decision.

Remember we are getting near the election and one thing is for sure , the millions of renter will have to be considered by all parties.
With the possibility of lot's of regulation regarding BTL it will be even more of a pain. I could tell you some horror stories of tenants from hell. I live in a road with eleven buy to lets and most of the properties need work after they leave.

All the long term forecasts I've looked at for property prices show the rises slowing down but still going up.

The mortgage prices I've quoted are based on a 15 year mortgage, maybe I could get a 20 year mortgage to make it more breathing space. Oh and only £235 of the £470 payments is for the mortgage. The other half of the payments are to pay dh as he's lending me 35k interest free so I don't have to take such a big mortgage. So technically my repayments are only £235.

Dh is drawing up a contract with me but is saying that he'd like his money back (don't go there). But worse case scenario and I have an empty period he'll be fine about me not paying him for a bit.

Bowlersarm Here,s a couple

Less mortgages being granted
Reports of banks hiding liabilities
Financial times article “banks are in worse position than before the crisis”
No real recovery
Affordability of housing compared to historical
Wage deflation
The cutbacks that any elected government in May 2015 will have to make and their effect on house prices
A whole generation locked out of having any life quality, and they may buy pitchforks
Reductions in prices on rightmove
Chains collapsing big style
Real jobs going in thousands every week, replaced by burger flip wages and job types

What signs are there of a drop in house prices and rents?

There's the intended 3 year leases proposed by Labour.
There's the endless threat of interest rate rises from the Bank of England.
There's the tax office who are going to push Landlords to pay more and penalise them if homes are left empty.
There's the increase in new-builds.
There's the relaxation of planning laws meaning more properties being turned into smaller flats, a bigger effect than new-builds as people are prepared to live in towns in smaller places.
There's the slow-down of interest in purchasing properties because mortgage companies are being more choosy about who they lend to.
There's the halt of the Help to Buy scheme reducing first time buyers further.
There's the dramatic birth rate slowdown.

All of these reduce house prices. There is not one policy currently being discussed by any party which is designed to increase house prices.

So I would say don't BTL unless you are making considerable profit or better still, sell up and buy a small property outright.

x post Roneik

So as well as the £70k mortgage you have also borrowed £35K from your DH. And to rent to a friend who is on benefit. I think you could easily find yourself in financial difficulty. Listen to your instincts. That's why I think you are getting cold feet. A slight change in interest rates or benefit rates could have a big impact. It's a huge risk.

No. I'm Borrowing 70k in total. So 35k proper mortgage and 35k from dh. House is worth 140-145k.

The mortgage is fixed for two years so no short term worry about rates.

After then I will be at least £300 a month better off due to pay rises and no car loan repayments. So if necessary I can use some of that £300.

Have you factored in the hassle of benefit tenant? What about her deposit and placing in a guarantee program. What about decorating wear and tear. Have you got pre pay meters? because if you have quarterly you may well get tenant disputes when a new tenant moves in. Will they buy a dog as did a tenant on my street that bit its way out of a UPVC door costing 600 quid. Will they rack up debt and do a runner giving the property black mark credit rating? Have you ever seen the damage on a house when it's been empty and tenant returns and cuts a water pipe .
Benefits get sanctioned at a whim and take forever to be reinstated.
That's how quite a few people become homeless.
The monies you have, and the monies from the sale are a nice buffer for the unpredicted £hit life can give you when you were not looking,
you have some security there that millions would love to have.

Sorry Galaxy I misunderstood. That doesn't sound so bad. But this renting to a friend. I think that's a bit of a no no. Only from an experience one of my relatives had renting to a friend. But it's up to you in the end. Hope things work out well.

Yes good luck, it's nice to have a few grand when others are laying awake with worry, as many did in previous crashes.
A house is to live in and it's worth is currently in many areas an illusion created by greed in many instances.
It will revert back to normal 3x or less shortly
The crash has begun , mirages only fool the eye while the sun shines

What would be wrong with cashing in your £70k and reducing your current mortgage?

The council are going to provide the deposit as a virtual deposit and put it in their own deposit scheme. Which is fine by me.

I'm happy to decorate it myself between tenants. Its all painted so no repapering.

I'm slightly worried what if her benefits get stopped. Which is why I've insisted on her dad being a guarentor. I don't think she's any more likely, in fact less likely, to damage it than any other tenant.

Well we've just signed up on a five year fixed mortgage eight months ago. So couldn't for 4 years.

Guess we could do that then but we can manage the current repayments fine. We only owe 30k on this mortgage. It almost seems like we wouldn't notice the benefit.

Personally I wouldn't worry about what happens in the property market for the next 20 years. There are bound to be fluctuations. It may be extreme - can't see it - but as long as it is a very desirable property you shouldn't have problems letting it.

The situation with your friend however would worry me more. If her benefits are stopped/reduced which may be likely it doesn't matter if she has a guarantor or not. You would have to take her to court to get the money if they refuse to pay the rent. Would you have funds to cover that period?

I cannot stress enough, however good friends you think you are, there are many many disputes from friends falling out. Make sure you factor everything in.

Your sibling is not keen to be a landlord with you then?

If you are really being professional you wouldn't let to a friend.

Also if it is an easily let property why are you letting to her.

If you can't find it in you to tell her sorry, you don't want to let to her, how would you find the courage to evict her, demand money from her DF?

No my brother needs the money.

I suppose I'm letting to my friend because its easy, no letting agency, no finding fee and I do feel reassured by the fact I think she'd take good care of the house. She's not the sort of person who wouldn't prioritise rent money, I think she will, but I admit the benefit situation worries me a bit.

I also worry that when push comes to shove she'll bottle it on the day and not leave him. And leave me with mortgage repayments and no tenant.

You're buying while property prices are at their peak, pushing yourself to the limit of your lending and risking getting into debt.

I would strongly suggest selling the 3 bedroom and buying a smaller flat which is going to be much easier to manage.

Re-read your thread title- trust your instinct.

Have you researched whether you will you have to declare rental income and pay tax on it? Agents fees and finding fees, as well other expenses such as inventory and check in, gas safety check and certificates, electricity check, etc, are tax deductable expenses.

I fear that you are walking into a long term financial commitment as a hobby landlord in order to help your friend in case she moves.

sorry for typos and superfluous words.