Renting flat to cover mortgage?

[rentmyflat]

Sorry in advance if this is a really stupid question.
I own a flat outright, which if rented out, could bring in around £900 pcm (based on other flats nearby).
Id be interested to hear from anyone who kept their first property, but rented it out to cover a mortgage on a second property?
I could sell my flat and get a small mortgage, around £30k, to buy a house. But I am wondering if renting the flat is also a possibility?
Thanks.

You need to look into the costs of being a landlord - in the UK, you'll pay tax on the income, need insurance, may need a management company. You will need to consider how you would cover the costs if the flat is empty, if a tenant stops paying rent, or if it needs full redecoration after a few years (or a shorter period if you have bad tenants).

We sold our flat to buy a house - for us, it was the best option, as our loan to value on the mortgage was much lower (as we used the flat equity to fund the deposit).

I take it you're already fully up to speed with all the legislation and obligations you have to adhere to when taking on the responsibility of being a landlord and this is just the final piece of decision making that you need help with?

As above, do you know know all the costs involved and have you calculated the taxes? Even if you're a low earner and you'd still only be in the basic income tax bracket, I doubt that you'd have more than 400-500 left to spend out of the 900. Whether that's a good return on investment depends on the overall value of the property.

Having been a landlady for about 15 years now, I'd also add that it can be pretty stressful. The government is also trying to discourage investing in property and encourage other investments. Generally speaking, in the current market it's probably better to invest elsewhere.

Also, you would have to pay huge stamp duty on your second home. It isn't worth it in my opinion.

Renting is not as lucrative as it used to be. You’d need to pay tax on it and you’d have a huge stamp duty hit.
Also a lot of lenders don’t lend under £50k

Thanks for all your helpful replies.
I hadn't heard of not being able to borrow under £50k - how does that work when say your property is worth £250k, and you want to buy one that's £280k? Sorry if this is a stupid question. Thanks.

Either you find the 30k elsewhere and buy outright or the bank lends you the max which is 230k on a 280k property and you keep the remaining 20k.

Yep, I did it. I only needed to borrow 16K, whilst my lender requires the rental income to cover 125% of the monthly mortgage (which it does, several times over).

But I pay an agency (would not recommend self-managing as a novice), taxes (including potentially CGT if I sell in future), and comply with LL legislation. And I have a reasonable understanding of what can go wrong, risks etc.

I consider it my pension.

See a good IFA & looks at options; it sounds very-doable if you want to.

Our son is doing exactly this!!! My DH is a retired Financial Adviser. Our son was able to buy outright a very small new flat from a bequest [my late parents]. He lived in it for 18 months. He has just rented it out [£700 pcm] .

He is in the process of purchasing a 3-bedroomed flat nearer to where he works. It seems to be taking ages as many issues with leasehold things... meanwhile he is back at home.

However, his Let to Buy [no - NOT Buy to Let!!!] mortgage has been approved to provide him with the deposit, and the mortgage on the new flat is also OK. Despite changes to tax etc etc, he is going to be better off overall and have a second property.

Maybe you could discuss it with a IFA?
Good idea - go for it!!!