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.......

positive price predictions here

But is this biased people talking the market up?

I know interest rates are meant to be going up and think this may affect prices. Though if I'm having the house long term does it matter? I suppose if it doesn't work out ill be annoyed if I sell it for 10k less than I paid for it. Though I've agreed a price approx 10k under market value due to quick sale and no estate agent fees. So that's a bit of a buffer.

If interest rates do rise and we've sold the house and I've got 70k in the bank then I guess I'd get a bit of income from interest on that?? Not much as things stand but maybe £100 a month.

So short term I'd get more from interest than I would from rental money.

I would have to pay tax at 20%. I know quite a bit of stuff can be off set. But I'd still be looking at £40 a month for a letting agent.

A different friend was really encouraging me to go for it today, reckons its a great opportunity.

I'd go for it. Even if the property market slows, which it shows a few signs of doing, the bottom is hardly going to fall out of the market, particularly with the numbers of foreign investors too.

I think your plan sounds sensible.

Problem is I think I'm a bit fed up of being sensible.

Its all well and good planning for. Nice retirement but I'd also like to travel abroad a bit more. Something I don't currently do as I feel I can't a afford it. I'd love to go cycling in Europe, etc.

I don't want to get to 60 a and have regrets over stuff like this.

But nor do I want to get to 60 and have minimal savings and still be working.

Can't have my cake and eat it though.....just can't work out which decision I'd regret more.

You'll pay tax on the rental income.

Where is this house - roughly? What is the LHA rental limit?

I think you have started something that after committing to it , you now are thinking maybe it's a mistake. Put the house back on the market and sell it. Sit on the money for a year. I honestly believe we will be in worse mess by then and the property market will correct massively . As a country we are borrowing billions by the week and we approaching the point where it has to be faced up to. So far property has been propped up by 0.5 base rate to save the banks . Every other recession when interest rates went up property dropped in price. This time banks will allowed to go to the wall or bail ins. It's already happened and the EU central bank applauded it .There's no appetite for any more bailout overstretched mortgage payers. At the expense of those that played fairly

House is in the midlands.

No idea what the lha rental limit is but friend has been to see the housing benefit people and after talking to them seems to think she can afford it, etc.

And if I had the cash I'd really have to look at investing it somewhere. You can't let that sort of money fester at 1% in a current account.

Even in a low risk tracker fund there's some risk that money might go down.

More people go into shared accommodation each week , it's a booming part of the housing market. Millions of people are buying less food although they would have us believe everyone is going to Aldis .
Millions rely on food banks . It's the recoverehhh don't ya know. You can fool some for some of the time , but not all for all of the time.

Well pay off your mortgage , that must save money. Buy some premium bonds you might have some luck. A fool and their money are soon parted. You seem an intelligent person who is fighting the other you who wants no part in all the hassle of tenants tax voids damage , calls in the evening when you are relaxing to let you know the bath fell through the ceiling.

Joke , anyway now you have decided to sell and enjoy your travels and debt free life I am happy

I haven't decided yet!

Do you have a mortgage on your existing property? If so you'd be better having your BTL interest only and paying down your own one as interest on the rental property will be tax deductible whilst your own one isn't. I know it can be scary whilst faced with the paperwork but you are only having a 25% mortgage - you have deep pockets to weather a storm.

The great thing about selling up is that you then have a massive wadge of cash. This is valuable in itself - you could buy a smaller property outright by auction, for instance. Although something tells me you might not be the most astute buyer in the auction room ;)

Don't get your friend any more involved in this - tell her you're putting it on hold as the more involved she gets the harder it is for you to back out. This will enable you to do your research fully.

LHA rents will be on your council website.

Even if the property market slows, which it shows a few signs of doing

I don't understand how anyone can make a statement as deluded as that. It's already slowing, and there are several policy changes already happened, more happening that will make it slow down further.

OK, that rental looks pretty high.

Depending on the number of kids, she'll only be entitled to a 2 bed flat. LHA tend to be set about 10%-20% less than the current rental market. Your figures do not very good or realistic. You should not be accepting what your friend claims she can get.

She's got two kids, but both girls so think she may only be e entitled to a 2 bed house and mine is a 3 bed.

One bedroom is allowed for:

Every adult couple
Any other adult aged 16 or over
Any two children of the same sex
Any two children regardless of sex under the age of 10

the current maximum weekly rent allowance rates:
Shared/single room £57.74
Single claimant under 35 (with exceptions, please ask for details) £57.74
One bedroom (self contained) £80.77
Two bedroom £99.23
Three bedroom £114
the current maximum weekly rent allowance rates:

She does work as well, waitressing part time. So some wages as well as housing benefit. I'm guessing some tax credits as well.

But it looks like she'll be £170 approx down a month. Which she has to make the shortfall.

She's been to see the housing benefit person but said that they didnt tell her how much she was entitled to. H
Gave her a ball park figure but said they couldn't give her a precise one until she made her claim.

She said she thinks its doable. But as well as finding £170 a month for rent she's got bills and food to buy.

That's worrying , no wonder you are having second thoughts about going through with it.

Sometimes a white lie can save the day. Maybe you could tell her your mortgage application fell through with the new stricter regulations.That way your friendship would not be affected

OK OP, tell us what half the value of the property is after taxes are taken away and you've taken off your cycling holiday money and let's see what else there is out there on the market.

I do love house hunting by proxy. Even if it's a 1 bedroom flat it's going to be better than taking these big risks.

I really don't think I'm interested in another property. It would be this or nothing.....

I liked the fact I knew the property, its in great condition, no legal fees. I really like the house myself and could see me living there in 20 years time. But when I want to downsize I guess there'd be other houses.

I'm worrying now my friend couldn't afford it all. I have no idea what benefits shed be entitled to.

You risk her asking for a rent reduction further down the line, thinking that she is paying your mortgage, and benefiting greatly from her, so the least you could do is to let her have an affordable rent...

I think you will find that many renters think landlords are the scum of the earth, and if they have never owned a property, wont know the cost of maintenance and repairs, and things, and just think they are the golden calf that lays your gold egg. Sort of.

What will you do then? Bend yourself as far as you can go or give notice?

I'd have to give notice. I couldn't afford to drop the rent.

But if SHE already is short?

That's what's worrying me. That I get the mortgage sorted tomorrow. She then goes to the council to sort out housing benefit and other benefits and realises she can't afford it.

I'd then be looking for another tenant in a big hurry.