Is anyone both a landlord and a tenant?

[EvolvingElle]

And if so, is this your long term plan?

To cut a long story short we rent our ‘dream’ home - £900 pcm. But it would cost us £350k to buy which is out of our price range.

However we’ve saved hard and had some inheritance in the last few years and have £50k cash.

Now we could buy an OK house for £200k with decent deposit - or, in our City you can pick up a 2 up/2 down doer upper for £50k which after a few grands work and a bit of elbow grease would rent out for £500pm.

We’re thinking of doing this - we could spend 6 months doing somewhere up to make it as cost effective as possible - then, no mortgage so save the net rent, keep saving, and try and do it all again in a few years....so have 2 mortgage free small houses let out whilst continuing to rent our own home.

Anyone do this? My mum thinks we’re nuts and we should put the £50k into a mortgaged ‘OK’ house for us, but I just don’t want to - the house/area we’re in is fantastic and no house we could afford to buy is going to match it.

No direct experience so I'm basically taking out of my arse, but - it's not a risk-free strategy. The house might end up costing more to fix than you thought, problem tenants, all sorts of overheads, tenants moving out and no income but still council tax etc payable, property value falling... it's a faff if you do it all yourself and an agent would take a big chunk of your £500.

I think you should just buy a house you can afford, to be honest.

It's the tax that's the killer, and the basis of how rental income is taxed changed recently.

We let out our house in the UK whilst living abroad, and had out letting agent manage it. yes it cost, but it meant we weren't always having to dsah back to deal with things. You also need to be prepared for void periods, which can be a PITA if you were relying on the money.

I lived in my dream house abroad, and if I could have picked it up and brought it back, I would have done, but we could never buy it, as it is part of someone's estate. I cried when we left it, but I am back in my house in the UK, which still has all the things that made us buy it in the first place. No, it isn't the 'dream' house we left, but it can be a dream house, when we get it sorted after 13 years of it being let out; and more importantly, we own every square inch of it, as the mortgage is paid off. There is nothing quite like the feeling that your home is literally all yours.

If I were you, I'd buy a permanent home and make it yours. Rent is dead money to an extent. We rented abroad as we knew we weren't going to be there forever and would be coming home, and houses were expensive.

With the figures you have given, you would make very little profit, if any, for the amount of work and responsibility involved. Factor in some void periods and/or non paying tenants who could wreck your house and take up to a year to evict and it is a non starter.
Much better to buy your own home - maybe one with extension potential so that you could extend when you are able to one day.

We do this for similar reasons to live in a house we couldn’t afford to buy (and in different area to our first , much smaller home we bought ). I agree strongly with the advice given here and with the benefit of hindsight rather wish we had sold and bought again in new area. You lose income if no one there for any period, and there are a lot of overheads and hassle plus it’s more expensive if you aren’t in the area to sort problems as they come up.

You’d need your head checked if you did that TBH.

It makes such little financial sense it’s practically backwards.

Buy a £50k doer upper, renovate, sell for profit, buy another £50k doer upper, sell for profit, rinse repeat until you have enough in profit to stick a hefty deposit on dream home. Also consider whether dream home needs to be as £££ as you think it does. You’ll probably find, after working hard to renovate some properties that you’ll be happy with much less but with room to improve.

I have been in that situation - didn't choose to be though, and don't recommend it.

In the last crash 2008 OH was made redundant but managed to get a job in another city. We sold our house, and moved to a rented place in the new city. BUT...the house sale fell through, and we ended up not being able to sell it, and while living hundreds of miles away, had to find tenants in a hurry and rent it out.

Tenants are fine, if they pay their rent. Not so good if they stop paying after a couple of months, trash the place, and do a runner. (yes we had references, obviously fake in hindsight).

Of course you might have a super experience of being landlords, but consider that you might get the sort of people we did.

I’m in this situation by accident (inherited a house which I can’t practically live in and use the money I get from renting to subsidise my own rent).

I wouldn’t have planned it but in my case there have been no problems. My tenants are great, and I’ve only had one major repair in seven years.