Bare with me

[onefatfoot]

I bought my HA flat 3 years ago. It was valued at £43k and I was able to buy it for £32500. I've upgraded the bathroom.

I now have £26500 left on my mortgage.

I would like to move in the next 4/5 months, but not sure how easily my flat will sell. A few people have tired to convince me to rent it out. Similar flats around here rent for approx £400 a month.

I currently earn just under £29k. I have £4500 saved.

Can anyone tell me if renting out my flat would be in anyway feasible or do I realistically need to sell it to raise the deposit for somewhere else?

Prior to considering this, I have estimated I could get a new mortgage for about £110000 and would also have been putting down approx £20000 from the sale of the flat/savings.

I hope this makes sense. A lot of variables, I know! But hypothetically speaking...?

Dear god. I've written "bare" instead of "bear". 🙈

Can you afford for there to be gaps between tenants? You may have a few months with no rent coming in. Can you afford landlord insurance and a contingency fund?

It would be worth having a chat with a local mortgage broker and also with local estate agents to find out what demand there is for flats like yours.

Last summer I bought a one bed flat for £35,000. It had been on the market for 2 years with no interest - initially at £50k, with the price then reduced and my offer was lower again. It’s a lovely flat in a good area. Broker and local estate agents told me that the reason flats at that price were hard to sell was that Buy to Let mortgages usually have a minimum of about £55,000 so landlords can only buy if they have the cash. And, that young buyers are tending to get bigger residential mortgages over a longer term and buy 3 or 4 bed houses instead of ‘starter flats’.

If your area is similar, it might be worth thinking about converting to a BTL mortgage and taking out another residential mortgage. Definitely find a local broker/financial advisor who can talk you through your options.

In theory, yes, I do think I could afford to pay two mortgages if need be, for a period.

I will speak with the professionals when I can.

Ideally, the housing association would just buy it back at what it was valued at, but I can't see that happening.

It's definitely a "starter flat", but has two bedrooms .

Bear in mind that if you keep the flat to rent out and buy another property, you'll have to pay the Additional Rate Stamp Duty.

How is that calculated @Skykavin ?

Can you lease it to the local government to use as emergency housing. They will lease it as a block lease and they cover the lease even if they have no one in it ?

@onefatfoot this calculator works it out for you:

https://www.stampdutycalculator.org.uk

Make sure you use the additional property box to calculate the higher rate rather than the single property one

DON'T DO IT, you'll have to pay capital gains tax when you eventually sell the flat. You'll be taxed on all the improvements you've made, they won't be tax deductable (only building work is). I'm a landlord and whilst this was a great idea a few years ago, it's no longer a good idea due to the recent tax changes.

Would I pay the stamp duty on my new property or the first one? I'm in Scotland?

I don't think my local council do anything like leasing for emergency housing? Not that I'm aware of anyway.

Oh sorry I didn't realise you're in Scotland, I should've asked! Not sure how it works up there.

There are lots of legal obligations to being a landlord and you will need a contingency of £££ for potential repairs and void periods and have someone on hand to do repairs quickly. You will need specialist insurances and you'll need to declare the income each year to HMRC by submitting a tax return.

The law is changing re; Section 21 notices which will make it harder to evict if your tenant stops paying. Can you handle the hassle and expense? If you still want to go ahead, find a good broker and join the National Landlords Association -£99 for a years membership.

Personally, in that price bracket, I'd sell up and start afresh with just a normal mortgage.

If you’re in the Kilmarnock area, I can recommend a mortgage broker.

Thank you for all the advice! Lots to think about.

Is anyone able to tell me if me if this is doable, in principle? With what i have said in terms of the current financial info?

@Seeingadistance not Kilmarnock area, but thank you for the offer

The mortgage advisor I originally used was good. Obviously my purchase was straightforward, but he gets a good name anyway, so I'd probably go through him again initially.

You should try posting the same question on propertytribes.com
It's a landlord forum, they're very helpful and knowledgable, there are a few brokers who post sound information. Then pop over to HousePriceCrash.com and ask the same question, they'll inform you of every negative you could possibly encounter. Take in the information from both and then make your choice. Wishing you the best of luck.