Letting your property: Advise required please

Fortheloveofguitar

I'm looking at remortgaging my current home to release equity in order to buy a bigger house to move into and then rent out my existing property to hang onto to it for the future and sell it down the line should i need funds for my sons education or to get him started on the property ladder with a deposit when the time comes

The mortgage will be around £400-450 and local equivalent properties asking £750-850 monthly rent

They seem acceptable figures to me but i'm after clarification from anyone who already lets their house 

Thanks

guitars4you

Rent income will depend on size of property, area and other factors including furnished/unfurnished etc - most estate agents and letting companies will offer free valuation and advice anyway so I'd take up that option

You'd need to check with your insurance company as well - buildings not content - depends if it is combined or separate insurance

Best bet is to do it via an agent - some will charge a one off fee - find and vet a client and arrange deposit etc plus a good short hold letting contract handling then you become the contact in case of any queries, repairs etc etc

Others can charge a monthly handling fee and then they remain the contact for any queries etc

You'll need to look at gas safety certificate, hard wired alarms are now a must

Not as it as it was so my best advice is get free advice from a good local estate/letting agent

Hope that helps for now

mike_l

As you're letting one property, not a bunch (as a letting Co.) use a local agent. They can vet all prospective renters.
Make sure you get a good damage deposit, renters tend not to give too much of a fuck about a rented house.
Remember no pets means no pets.
A good long-term tenant at slightly less £ is better than a short-term tenant at more £. IE if you can have a tenant on a 2-3 Yr deal at (EG) £50/month less than a 6month tenant then take it, the 6m tenant could be there for 6m, and you not get another for 2-3 months. This is what I've done with my rental. 
Remember the taxman. He will remember you. Declare what you take in rent, offset against the mortgage, and any other expenses on the house.

ToneControl

you need to look at supply and demand where you live
often,  houses with a rent of the amount you mention are worth £250k +
If so, this is a very poor rate of return, and you should sell instead
Higher-rent properties outside the South east are often hard to let, which means less money in, and council tax to pay

DiscoStu

I'm in the process of doing this. Want to move in with my g/f in a different city and rent out my house. It's a second income stream and a plan B if we decide to move back.
It should rent for around £400 per month above my mortgage payment, so even after agency fees and tax it's still good.

Fortheloveofguitar

Thanks for all the info so far everyone. Some really helpful stuff in there

Fortheloveofguitar

ToneControl said:

you need to look at supply and demand where you live
often,  houses with a rent of the amount you mention are worth £250k +
If so, this is a very poor rate of return, and you should sell instead
Higher-rent properties outside the South east are often hard to let, which means less money in, and council tax to pay

My house is valued at 190K but rentals for this type of property in the area are around £750-850. A previous customer of mine owns and lets one in the next street and the only difference between the houses is that she has a garage where as mine has been converted into another room 

I'm going to get a local letting agent in and have them look around and give me an appraisal and see what they say

Will obviously be less profit than its real potential considering the equity i will be releasing in order to get the new place

Will see how it pans out but if in the short term i find that its not working then i will just sell the house and take the loss on the chin. Given how much equity is still in the house i'll still come away with a reasonable amount after all expenses

Ro_S

get, say, three valuations from local agents.  they might also give you helpful tips on how to present the property.  

will you be letting it furnished, partly furnished or unfurnished?

'impossible for any of us to advise on a monthly rental figure.  so many factors.

you will need specialist house insurance.  

you will need gas safety inspection and certificate.   dunno about electrical.  

fire alarm requirements?

there's a new deposit system that came out several years ago.

you'll need to a do an annual tax return.  make sure you deduct all your deduct all outgoings.  remember to include your admin costs, telephone, and trips to house/agents.  you could even apportion some of your computer/internet/phone-line costs.

if either you or your wife/partner don't work or are part-time or or a lower wage, probably worth doing the tax return in the respective person's name for tax efficiency purposes.

jaytmon

This:
"Your landlord must put your deposit in a government-approved tenancy deposit protection scheme if you have an assured shorthold tenancy (AST) that started after 6 April 2007 (in England and Wales)." (From gov.uk).
Officially speaking of course. I don't know if everybody does, but afaik if you don't, you don't have a legal leg to stand on when it comes to returning the bond/deposit.

Also worth making sure you could afford two mortgages if the rental place was empty, plus decide whether you want to handle any repairs/issues/maintenance etc or pay an agency to handle it. 

Fortheloveofguitar

There's certainly a lot to consider and i'm not walking blindly into this by any stretch

I thought about doing this anyway and my financial advisor has advised me to try and retain the property if i can rather than selling it off.

In the short term it will be a little bit tight what with the bigger mortgage on the new place but i have enough to take up the slack should there be no tenants in for a set period 

I would prefer to let an agent deal with the day to day things should it not cut into the profit margin too much

But i can always sell it if its not working out and still come away with a decent amount of money

ToneControl

I rented out our last house for 2 years  after our move. It was a lot harder to find tenants than with a house worth 25% as much for a rent of 50% as much. More expensive houses are  harder to rent out, not easier, even though the yield is half as much

boogieman

It's worth doing some serious research or getting a personal recommendation for a letting agent if you decide to go down that path. My stepson let his flat out for a couple of years and all the letting agent seemed to do was hassle him to use their services (such as annual gas checks, that made them lots of money) while giving bugger all in return for their fee. Their communication skills were crap too, until it came to contract renewal time. 

Meanwhile a friend of mine has had her place out on short term lets for the last three years and her agents have been brilliant. Btw, I know long term lets are usually considered better for owners, but there are some advantages to short term too. Renters tend to use the place more as a hotel, so for instance they don't use the kitchen. Also they're usually business people so they're generally more considerate users, so there's less wear and tear. It all depends where the property is of course, whether you can attract business users and a lot of owners prefer the guarantee of a certain income. Horses for courses. 

JohnnyPlectrum

In Wales landlords have to passed a course and be registered. Dunno if England is going that way. 6m contracts only! Change to periodic tenancy after 6.

mike_l

A leasing agency will take around 10% of your rent/month.
This is well worth doing as they take care of any issues regarding the property and/or tenant.
Some for a little extra will cover the rent if they cannot find a tenant in a specified period.

Ro_S

JohnnyPlectrum said:

In Wales landlords have to passed a course and be registered..

In fairness, it is Welsh ppl.

;p

Plukky

In my experience, agents can be next to useless and I will not be using one again if I can help it.

I paid for a "fully managed" service from an agent - then I had a constant stream of unreasonable requests/complaints from one tenant (asking me to replace light bulbs, unblock sinks etc all things they were responsible for) and all the agent did was pass it on, no filtering whatsoever.  If work needed doing they passed it on to their contractors, who charged more than they should.  So the only thing I was saved was literally the phone call to the contractor - not great value for money from the 10% or so I paid.

chrispy108

In my experiences as a tenant all the 'managing' company do is half listen to the tenant's issues and then eventually pass on half the story to the landlord. We had several issues with our flat which we were made to feel like nuisances for reporting, which they agency did nothing about, so ended up much worse and more expensive in the long run.

@Plukky do your contracts contain a clear list of things that are the tenant's responsibilities? I've never seen one in a contract I've signed, it's always a bit of a gray area. I'd be wary unblocking a sink in a rented property incase I caused further issues which I'd then be responsible for. Happily change lightbulbs myself, but somewhat begrudge paying for them (always have though)

DarnWeight

Plukky said:

In my experience, agents can be next to useless and I will not be using one again if I can help it.

I paid for a "fully managed" service from an agent - then I had a constant stream of unreasonable requests/complaints from one tenant (asking me to replace light bulbs, unblock sinks etc all things they were responsible for) and all the agent did was pass it on, no filtering whatsoever.  If work needed doing they passed it on to their contractors, who charged more than they should.  So the only thing I was saved was literally the phone call to the contractor - not great value for money from the 10% or so I paid.

A friend of mine had a similar experience...no real intervention from them, just endless passing on of requests/problems/etc.  The tenants ended up in arrears and doing a runner...electricity got cut off, damage to the property, the whole works.  He was working in Germany at the time so couldn't be around to deal with everything as it was turning to shit, and the agents were next to useless.

We were in a similar position to the OP...moving to a bigger/nicer house, our sale fell through, so we decided to remortgage and rent instead.  We're lucky enough to work at a large institute with a lot of professionals (mostly EU workers) coming and going on a relatively short term basis (from 6 months up to years).  We ended up doing it ourselves, and once you sort out the necessary paperwork, gas safety stuff, etc., it was plain sailing.  There were a few big outlays like roofing repairs (flat roof is the devil's work), but nothing major, and our tenants rented for 6-7 years, before offering to buy it from us.  Couldn't have worked out any better, really.

Jalapeno

Interview prospective tenants.

Plukky

chrispy108 said:

In my experiences as a tenant all the 'managing' company do is half listen to the tenant's issues and then eventually pass on half the story to the landlord. We had several issues with our flat which we were made to feel like nuisances for reporting, which they agency did nothing about, so ended up much worse and more expensive in the long run.

@Plukky do your contracts contain a clear list of things that are the tenant's responsibilities? I've never seen one in a contract I've signed, it's always a bit of a gray area. I'd be wary unblocking a sink in a rented property incase I caused further issues which I'd then be responsible for. Happily change lightbulbs myself, but somewhat begrudge paying for them (always have though)

@chrispy108 ;;;

Yes, the Assured Shorthold Tenancy Agreement that I use has the following under Tenant Responsibilities, I *think* I bought it at WHSmiths:

10. To replace all electric light bulbs, fluorescent tubes and fuses.

15. To clear or pay for the clearance of any blockage or over-flow when any occur in any of the drains, gutters, down-pipes, sinks, toilets, or waste pipes, which serve the Premises, if the blockage is caused by the negligence of, or the misuse by the Tenant, his family or any visitors.

Obviously, this relies on the lights working and the sinks not being blocked at the start of the tenancy, but that's what the Check In Report is for.


@fortheloveofguitar ;;; - make sure you get a good independent check in and check out report - invaluable!

Ro_S

I have my own worded tenancy agreement, if you're interested in it.