Letting your property: Advise required please

Fortheloveofguitar

Thanks for your continued input on this. It's been very helpful

I have an agent coming tomorrow from Purple Bricks to give me a valuation so will see how that pans out

Will then get a couple of others in to see what they say as well and see if there's enough money in it 

johnswiss

Me and my Mrs have been renting her old place out for 6 years. It can be a royal pain in the arse at times - you have to think of it like a job when it's rough and make the most of it when it's smooth. It's great when you hear nothing for 6 months except when the money goes in but when there's issues or they move out and you have to go through the whole clean up and set up for new tenants again it can be hard if you're working full time, got small kids etc. Even the best tenants can cause you some sort of mild grief, and you'll generally be left with some sort of issue to sort when they go. Also factor in that sometimes peoples circumstances change and they can no longer afford to live - and the first thing to go is often the rent - not the 100 quid a month sky package - happened to us! We've had 5 tenants in 6 years - 1 Mate of my Mrs wanted it for 6 months. Bit whingey about really minor things and left the place in one piece but pretty dirty. 2 Mum of 50 and son of 25 (or that's what they said). Stayed for 2 years and we lost over 2 grand on unpaid rent and had a fair amount of hassle asking them to go. However the place was immaculate when they left! 3 Newly divorced bloke stayed for 2 years, on the whole pretty good, good relationship with him, just general maintenance things to sort out. 4 Young couple with a toddler. Was meant to be long term but his grandmother's house became available to buy after 6 months. I spent a fair amount of time sorting minor stuff out - they seemed to wear the old place out a bit. 5 Young couple. 6 months in and so far so good. I'd recommend an agent to Market it, find tenants for you and to set them up, check them out and take the deposit. We've had one do that for 50% of the first month's rent and I think that is pretty good. Factor in all the on costs others have mentioned - Tax, gas checks, maintenance, and that you'll probably need to get it professionally cleaned on each change over to get it up to scratch. It's not always easy but when you think what it's earning it's not bad. You're not doing stuff all that time but when you are it can be intense. But hey it's interesting too, I've learnt a lot and met some interesting folk along the way. Hope this helps.

Fortheloveofguitar

johnswiss said:

Me and my Mrs have been renting her old place out for 6 years. It can be a royal pain in the arse at times - you have to think of it like a job when it's rough and make the most of it when it's smooth. It's great when you hear nothing for 6 months except when the money goes in but when there's issues or they move out and you have to go through the whole clean up and set up for new tenants again it can be hard if you're working full time, got small kids etc. Even the best tenants can cause you some sort of mild grief, and you'll generally be left with some sort of issue to sort when they go. Also factor in that sometimes peoples circumstances change and they can no longer afford to live - and the first thing to go is often the rent - not the 100 quid a month sky package - happened to us! We've had 5 tenants in 6 years - 1 Mate of my Mrs wanted it for 6 months. Bit whingey about really minor things and left the place in one piece but pretty dirty. 2 Mum of 50 and son of 25 (or that's what they said). Stayed for 2 years and we lost over 2 grand on unpaid rent and had a fair amount of hassle asking them to go. However the place was immaculate when they left! 3 Newly divorced bloke stayed for 2 years, on the whole pretty good, good relationship with him, just general maintenance things to sort out. 4 Young couple with a toddler. Was meant to be long term but his grandmother's house became available to buy after 6 months. I spent a fair amount of time sorting minor stuff out - they seemed to wear the old place out a bit. 5 Young couple. 6 months in and so far so good. I'd recommend an agent to Market it, find tenants for you and to set them up, check them out and take the deposit. We've had one do that for 50% of the first month's rent and I think that is pretty good. Factor in all the on costs others have mentioned - Tax, gas checks, maintenance, and that you'll probably need to get it professionally cleaned on each change over to get it up to scratch. It's not always easy but when you think what it's earning it's not bad. You're not doing stuff all that time but when you are it can be intense. But hey it's interesting too, I've learnt a lot and met some interesting folk along the way. Hope this helps.

Thanks for the detailed post buddy

Will definetly be using an agent to find tenants and take the money etc

The house is in great shape and any plumbing or minor electrical work I will handle myself. I've gutted this place and built it from the ground up over the last 15 years so know it like the back of my hand 

Anything major or involving gas then I'll get someone in. I won't be letting the agent use their contractors to undertake work at hugely inflated prices either. 

johnswiss

@Fortheloveofguitar from what you've said there you'll have a total handle on the maintenance side both from knowing what your dealing with - and being able to deal with anything that crops up. Which is a big plus. Part of the problem with the wife's house is that a lot of the work done prior to her buying it was pretty dubious. For example whoever fitted the kitchen unit under the sink built it in such a way that you can't access the sink's tap from underneath - not without taking half the unit out! It's full of nice little surprises like that. As you said too you can try it and always sell it later on if you change your mind.

Fortheloveofguitar

johnswiss said:

@Fortheloveofguitar from what you've said there you'll have a total handle on the maintenance side both from knowing what your dealing with - and being able to deal with anything that crops up. Which is a big plus. Part of the problem with the wife's house is that a lot of the work done prior to her buying it was pretty dubious. For example whoever fitted the kitchen unit under the sink built it in such a way that you can't access the sink's tap from underneath - not without taking half the unit out! It's full of nice little surprises like that. As you said too you can try it and always sell it later on if you change your mind.

This place was very much like they when I moved in. Dodgy d.i.y and general cutting corners 

I've rectified it all over the years and improved from there so I'll have that covered unless there's suddenly a major issue 

House is pretty much ready to go. Just needs a coat of paint In the upstairs rooms. 

Ro_S

Fortheloveofguitar said:

 Purple Bricks

If you experience purple bricks, I suggest seeing your GP.   

guitars4you

Laws change as well which you need to be aware of hence use an agent as they should update you on info - I know yearly gas safety and appropriate checks are required each tear by a corgi registered plumber - But now I believe a Carbon Monoxide detector is now compulsory - Only £20 or so but something to be aware of

ditto for smoke alarms now have to be hardwired - so no battery units

Then you need the energy efficiency survey to be carried out by a qualified agent - letting agent can arrange - but this will cost £50-100 - Not sure if this is required every time you get a new tennant or it is lasts for so many years

Plukky

guitars4you said:

Laws change as well which you need to be aware of hence use an agent as they should update you on info - I know yearly gas safety and appropriate checks are required each tear by a corgi registered plumber - But now I believe a Carbon Monoxide detector is now compulsory - Only £20 or so but something to be aware of

Only in "rooms with a solid fuel appliance".

Fortheloveofguitar

The purple bricks fella has just left. Valued the place at £800 pcm. The mortgage will be in the region of £450-475 

So minus agent fees, landlord insurance and tax I will still come away with some extra money. The main thing is to hold onto the house but will still generate some extra cash on top in the region of £200 and the house will still have £30,000 equity in it 

Things I need to do before letting are:
Gas safety cert: £50-100
Electrical safety cert: £100
Energy rating Cert: £75-85

After that it's good to go on the rental market 

Waiting to chat with brokers next week and get the ball rolling on re-mortgaging this place and release some equity as a deposit for a new home 

A long way to go yet but on paper it looks ideal 

guitars4you

@Fortheloveofguitar ;The purple bricks fella has just left. Valued the place at £800 pcm. The mortgage will be in the region of £450-475 

The great news is that you will no longer be paying the mortgage either - Not sure if you have a interest only loan at that figure or it is paying the interest and capital - So hopefully the value goes up of the property and from now on wards it is not costing you money to 'purchase' the property

Fortheloveofguitar

guitars4you said:

@Fortheloveofguitar ;The purple bricks fella has just left. Valued the place at £800 pcm. The mortgage will be in the region of £450-475 

The great news is that you will no longer be paying the mortgage either - Not sure if you have a interest only loan at that figure or it is paying the interest and capital - So hopefully the value goes up of the property and from now on wards it is not costing you money to 'purchase' the property

The £450-475 would be on interest only as i will be letting it they will only give me interest only as i will be renting

According to him the rental market is on the up at the moment. Property isn't selling well after brexit he also said that predictions are that it will drop 10% in the coming months due to brexit

So it's a buyers market and as i'm not selling that will work in my favour but also possibly against should i not get in quick as my house will also drop which will affect my equity amount and releasing it 

Fortheloveofguitar

A little update 

I now have both mortgage offers in place and have put an offer on a house but we're currently in a bidding war so will see how that pans out 

Got the buy to let at £400 per month interest only and will be renting it out at £800 per month. Just selecting an agent still at this time 

Only downside to all of it is the colossal rate of stamp duty I've got to pay as I'll be a second home owner. If I'd down this before April 30th then my bill would have been £3000 but under George Osbornes new incentive to fuck over landlords i'm going to have to stump up £11,500

That is the really painful part of all this and with other fees will all but wipe out my savings so I won't be able to spend a lot on the new place for the first year

will be worth it In the long run as I still have £50k in equity left in my current house plus an LTV of 85% on the new place so theres still plenty on money kicking around even if I can't see it 

The house im letting has gone up £100,000 in the last 14 years and £50k of that since 2009 whereas the one I'm buying has only gone up £40k in the same period so i really want to hold onto the current house as its in a good location 

thomasross20

We're thinking about buying a mammoth house in a nice location. 
If gf sold her flat and I chucked in all my savings we could put down almost 80% deposit leaving only a little mortgage. 
(Alternatively we could buy a house outright where we are right now but it's a bit more of a commute for me). 

For a nanosecond she considered letting her flat out but we'd rather have peace of mind that the main mortgage is gone. 

I think it's fair the government are taxing multiple home ownership a bit more, to be honest. 

Good luck with it all!

ToneControl

Fortheloveofguitar said:

A little update 

I now have both mortgage offers in place and have put an offer on a house but we're currently in a bidding war so will see how that pans out 

Got the buy to let at £400 per month interest only and will be renting it out at £800 per month. Just selecting an agent still at this time 

Only downside to all of it is the colossal rate of stamp duty I've got to pay as I'll be a second home owner. If I'd down this before April 30th then my bill would have been £3000 but under George Osbornes new incentive to fuck over landlords i'm going to have to stump up £11,500

That is the really painful part of all this and with other fees will all but wipe out my savings so I won't be able to spend a lot on the new place for the first year

will be worth it In the long run as I still have £50k in equity left in my current house plus an LTV of 85% on the new place so theres still plenty on money kicking around even if I can't see it 

The house im letting has gone up £100,000 in the last 14 years and £50k of that since 2009 whereas the one I'm buying has only gone up £40k in the same period so i really want to hold onto the current house as its in a good location 

are you married?
if not, the second property can be in your other half's name as a "not second home", assuming your current home is not  in both names
You can get  one name removed from a property, it's a legal process, costs  a small amount of solicitor's time, probably need to update the land registry

ToneControl

Fortheloveofguitar said:

A little update 



The house im letting has gone up £100,000 in the last 14 years and £50k of that since 2009 whereas the one I'm buying has only gone up £40k in the same period so i really want to hold onto the current house as its in a good location 

btw  after a set period, you will be liable for some capital gains tax on the house you have now, so you would pay tax on the  £100k  gain when you sell
They've change the rules completely since I sold our last home after renting it for 2 -3 years. Back then, your  status as a CGT-immune homeowner expired after 2-3 years
It looks like now they assess the  CGT as the fraction of time it's been not occupied by you, + 18 months
So  in 10 years I think you'd pay CGT on £100k x (  10-1.5 ) / (14.5+10) 
the CGT rate 8% is higher for landlords

I'd get that £100k+ CGT  cashed in  within the next 2-3 years if I were you

anyway - my point is you need to learn all these rules, or else you can end up investing your equity and  working very hard, just to hand the cashs to the building society and HMRC.

btw I'm assuming you know that you can only claim full tax relief on the interest payments  if you are on the lower rate of income tax?
http://www.moneysupermarket.com/landlord-insurance/buy-to-let-tax-relief/
 

Fortheloveofguitar

ToneControl said:

Fortheloveofguitar said:

A little update 



The house im letting has gone up £100,000 in the last 14 years and £50k of that since 2009 whereas the one I'm buying has only gone up £40k in the same period so i really want to hold onto the current house as its in a good location 

btw  after a set period, you will be liable for some capital gains tax on the house you have now, so you would pay tax on the  £100k  gain when you sell
They've change the rules completely since I sold our last home after renting it for 2 -3 years. Back then, your  status as a CGT-immune homeowner expired after 2-3 years
It looks like now they assess the  CGT as the fraction of time it's been not occupied by you, + 18 months
So  in 10 years I think you'd pay CGT on £100k x (  10-1.5 ) / (14.5+10) 
the CGT rate 8% is higher for landlords

I'd get that £100k+ CGT  cashed in  within the next 2-3 years if I were you

anyway - my point is you need to learn all these rules, or else you can end up investing your equity and  working very hard, just to hand the cashs to the building society and HMRC.

btw I'm assuming you know that you can only claim full tax relief on the interest payments  if you are on the lower rate of income tax?
http://www.moneysupermarket.com/landlord-insurance/buy-to-let-tax-relief/
 

The 100k I've made since buying the house is exempt from CGT as this has been my only residence during this time and I have lived here fully for that whole 15 years.

I'll also get 18 months grace on top of that under the new rules but was previously 3 years grace before the changes 

When the time comes to sell I will also receive allowances such as lettings relief etc plus the standard 11k CGT allowance and a few more bits and pieces that you're legally entitled to and this will bring it down some more 

I also pay at the lowest rate of tax at 18-20%

Ro_S

Fortheloveofguitar said:

Only downside to all of it is the colossal rate of stamp duty I've got to pay as I'll be a second home owner. If I'd down this before April 30th then my bill would have been £3000 but under George Osbornes new incentive to fuck over landlords i'm going to have to stump up £11,500

why will it count as a second home if you are letting your existing home?      

i suggest you check this out really carefully.   you can obtain a ruling from HRMC.

you can demonstrate you are letting it.

has someone told you this or is this your deduction?     if your solicitor told you this, he is not a tax expert/ advisor.

when is this rule active from anyway?

Fortheloveofguitar

Ro_S said:

Fortheloveofguitar said:

Only downside to all of it is the colossal rate of stamp duty I've got to pay as I'll be a second home owner. If I'd down this before April 30th then my bill would have been £3000 but under George Osbornes new incentive to fuck over landlords i'm going to have to stump up £11,500

why will it count as a second home if you are letting your existing home?      

i suggest you check this out really carefully.   you can obtain a ruling from HRMC.

you can demonstrate you are letting it.

has someone told you this or is this your deduction?     if your solicitor told you this, he is not a tax expert/ advisor.

when is this rule active from anyway?

Hi buddy

It became active from the end of April 2016 and was announced by George Osborne lady at year 

He believed that landlords were buying up all the affordable housing for first time buyers which was causing a shortage so he hit the landlords hard with increased income tax levels over the next 5 years and increased stamp duty in second homes

Despite the fact that I will be letting my current property and living in a new place it makes no difference anymore as it simply classes as a second property so you have to stump up the huge increase in stamp duty 

The place I want is £265k so I pay the usual SD rates which would be 3k then you pay an additional 3% tax across the whole of the 265K which comes in at just under 8K on top of that initial 3K

Theres no way of avoiding it if I want to retain both houses  

chrispy108

http://static.tvtropes.org/pmwiki/pub/images/reservoir_dogs_violine.jpg

ToneControl

http://www.thisismoney.co.uk/money/buytolet/article-3394231/Why-concerned-second-home-stamp-duty-reforms.html

as I read this, 
if you sell your current home within  3 years of buying your new home, you can claim a refund on the stamp duty
:-)