Renting out house if it won't sell?

[Rentyhouse]

We are currently trying to sell our house and buy another. My parents have lent me the money to buy the new one as I didn't want to lose it waiting for mine to sell. But time is going on and nobody is buying it! I'm about to drop the price for the second time.

I'm conscious I owe the money to my parents, who need it for another purchase of their own. Luckily nothing has come up further to buy in the meantime.

If nobody buys mine, would it be possible / wise to get a buy to let type mortgage on it and rent it out? I really don't want to do this but do need to do something. I can afford to take a price drop to sell it but can't just keep dropping the price forever.

So far we have had 3 offers. The first changed her mind, second didn't produce his proof of funds, and third withdrew as she can't sell her own (bigger) house.

You will also need to pay the additional 3% stamp duty for second home owners although you can claim it back if you sell your current house within 3 years. I agree with pp it would be better to sell especially in the current climate although appreciate it is hard to do that given the current climate!

I had a flat in the mid 2000s that suddenly went into negative equity after the financial crash. I was in the process of selling to buy with DP and that fell through. I wasn’t in a position to take such a big loss on it so I rented it out for several years until the market improved.

If you do rent it out, I cannot advise strongly enough that you use a letting agent and don’t do it yourself, especially as an amateur LL. Ask around the area to find a good one locally.

Ensure you have a few grand set aside for when repairs need doing because they will. If you have a gas boiler, safety checks and servicing every year. It’s not acceptable to leave a tenant without heating or hot water while you try to scrape money together for a new boiler.

Treat it as a business, not a charity. I let to a couple at below market rate for several years because I felt sorry for them and they ended up leaving the place in a mess with ££££ repairs needed. They didn’t tell me when repairs needed doing because they were afraid I’d evict them (which I never would have).

I would personally not let property again now. Being a small LL now is much more onerous and financially risky.

Thank you! First it was on at 200K, aiming for 190-195 (according to estate agent). Reduced to offers over 180. First offer was 181, second 180 and third 175. I'm thinking to reduce to 170 after the next viewing which is tomorrow.

Good luck @Rentyhouse
It's a reflection of the current market that you have had so many aborted purchases. People don't have the money or are worried that prices will fall and they will end up in negative equity.
I expect you will feel relieved when it sells, even if it is 15K lower than you were hoping to achieve initially.

We have done this recently. But we are a landlord already. We have had houses since 2004.
We always use an agent in the area. Someone with a good reputation.
It costs money but chiefly the agent is able to do more detailed checking of finances and references than I do.
They will supervise the legal requirements and keep you informed of changes to legislation.
We would never try without an agent.

I mean, I think you’ve been presumably quite fair with your reductions? 15% so far seems the right?

Out of curiosity how much did you buy it for and when?

I bought it for £113K in 2006. Since then I've done a loft conversion and rearranged first floor rooms - giving 4 bedrooms rather than previous 2 bedrooms and box room. I've also done a small ground floor rear extension that has a toilet and utility space. Also recently put in a new kitchen and had the living room redone, and had a new front garden terrace.

I think you should be able to deduct the costs of the building work from capital gains and stamp duty and estate agent fees to buy and sell so you probably don't need to worry about that.

You need to work out the rental value and the mortgage repayment. A rental mortgage are running around 5.5% at the moment.

I have a £100k mortgage and paying £400 pm interest only mortgage repayment. It rents for £800pcm. Take into account annual maintainence cost, letting agent fees, insurance, stress, capital gain tax liabilities, lost stamp duty.

Accidental landlord just like you. My experience is very similar to yours. It's just a difficult set of circumstances at the moment for selling. But the news today reports house prices are back on the up and the market is moving again!

£113k to £175k in 17 years?

And you’ve done work to it which sounds like they cost tens of thousands?

Is the area not great? Have more desirable flats been built nearby? Does your building have some sort of issue?

Just doesn’t sound like the property has increased in value that much over a period when generally property prices have exploded.

i realise this property is a house not a flat! Got confused with when you mentioned a flat up thread

Would you be brave enough to post a Rightmove link on here? I've seen some constructive feedback that way before.

It's a house. I previously bought a flat in Manchester which I bought for 42K and sold for 113K to buy this house for the same price. I'm in a town in West Yorkshire with low housing prices. Our prices haven't exploded like elsewhere! There's no problem with my house, road or area in general.

I don't want to post a link. I can see it would be useful but can't face it at the moment! Thanks.

Found it. Looks fine OP.

I’d maybe declutter the loft room, and get rid of the football shirt (jokes).

I’d give it a bit longer at £180k.

Impressive sleuthing! Trust me, that is after a serious decluttering already. And we have more football shirts just waiting to be framed! Thank you, I will speak to the estate agent about waiting longer.

You might get £900 pcm for it rented

I'd say you've done a good job of renovations. It's worth £180k

I was quoted £800pm when I enquired with one local agent in March. Rental markets are definitely shooting up though.

Thank you, I will keep the price a while longer and hope someone appreciates it who is proceedable!

I’d say if you want one last throw of the dice. Reduce it Friday to £175k. Sit at the top of recent over the bank holiday.

Good idea thank you. I hadn't thought about the bank holiday.