sure someone will have some experiance in doing this, anyway we have just had our old house renovated and where going to sell it but have decided to let it out instead, subject to advice really, spoke to my accountant about the financial side of things, inheritance etc, but would like to here any pitfalls and any other info on people who have done this, maybe stuff like so do you let it through an estate agent and let them manage it, any trouble with tennents, any regulations we need to abide by, landlord -tennet contract, do we need contents insurance still or just buildings, and anything you think would be a benifit to us knowing house is current empty and unfurnished, has a mortgage on, about half oustanding, and rental would just about cover mortgage payment, ta kevin
used an reputable agent, it costs but they are better at handling problem tenants that the average person and know the legal means of priomptly getting rid of problem tenants
Hi Kev, haven't done it myself, but my brother rents out 2 properties. You will need certificates that your gas and electric are safe and these cost @£50 or so. For peace of mind I would use a letting agent, particularly if you can find one that guarantees income, even if property is empty. It will cost a bit more, but your income is assured. You will also need to tell your mortgage supplier who will probably up the interest rate a bit, so your rental income will need to reflect all this. A good letting agent should give you all the info you need, including likely costs, which will allow you to make a sensible decision. Chris
Yep, always use a reputable agent. It saves so much hassle if you have a problem, especially with a bad tenant. i have rented mine out for about 3 years now.first tenant was ok,but started paying late.all sorted by agency and eventually got them out with no financial loss to me. they got a new tenant straight away who has been no trouble at all. Agency fees can be a pain but they earn their money when you need them and i think it is a small price to pay for peace of mind. You could always go for fully managed by an agent initially,then change to part managed if you fancy taking on some of the responsibility yourself. You will need landlord insurance,legal insurance is optional,need an EPC done (£80 ish),smoke and carbon monoxide detectors and a gas safety certificate done for the boiler. You probably wont get much change from your first months rent after that but from then on it should all be plain sailing!
You might also have to inform your lender. They might make you change the mortgage to a 'buy to let'. my mum has a few properties that she lets out. She used to use agents, but now does it herself as the fees were getting silly and agents getting lazy. as others have said you will need the relevant insurances, gas/ electrical safety certificates. You will also have to deal with the taxman as its income. Matt
thanks guys, really good advice, ive taken notes from all your comments, stuff i hadnt even thought off, but thats why i asked, much appreciated, kev
Kev, also worth considering is, where you have your main property (where you live) with a mortgage and a rented property, you can move your mortgage to the rented and claim the mortgage against rental income. Less tax on your income.
thanks jerry, will add that to my list, made an appointment with mortgage advisors, so ill be ready for them and prepared now : ) instead of going in blind
Tips as an accountant: 1. Make sure you register with the Revenue otherwise they will fine you. 2. YOu don't have to move a mortgage. With rental properties you are treated on day 1 as 'introducing' the property to the 'business' at cost. Therefore any mortgage you raise regardless of what property you raise it on can be treated as a return of the capital value you have introduced at the start and you will get tax relief. 3. From a saving money point of view it is cheaper to use equity in your main home as you get a better mortgage rate. 4. Bear in mind you pay tax on the rental income less mortgage interest (not the repayment made) and any other expenses. Therefore you might still end up with tax due. 5. If you let the property furnished you get 10% of the rents taken off as an additional expense.
thanks for that ozz , the house we want to rent has a mortgage on, the house we now live in is paid off so no mortgage, we also spent approx 6k on doing it up, so assume this will also ofset on any tax due? will this only count on year one tax, the figure we have been given to rent it for is about £700 , and current mortgage is about £640, although if we have to imform our lender, they my well try hike it up, plus buildings insurance, plus some above mentioned landlords insurance, plus a management fee, so possibly we will break even or make a loss, but the idea was for it to pay for its self, and give use some kind of retirement fund etc, current mortgage is a straight repayment morgage, what do you think, ta kev
With the £6k it depends what you did and when you did it. If you were buying a property and spent loads in the first say 3 months then the Revenue argue that the house was that much cheaper when you bought it and treat the money you spent as additional cost (improvements) to the property. I would suspect they would argue that for the money you have spent here to be honest although small amounts may be able to go through.... With the mortgage as I said see how much is interest. Most repayment mortgages the actual interest element is pretty small so although you may be paying out £640 the interest which offsets against the rents is probably less than half that depending what rate you have. That means you have to think about the tax (at whatever your tax rate is) on the rent - mortgage interest - other expenses and provide for it. I would suggest doing a rough work out just so you know where you are. Obviously if the mortgage gets hiked up then everything changes. May be then worth getting a new mortgage on a good rate on your own house and paying off the one on the rented one.... Its certainly a good idea to do. My Wife and I are thinking about a buy to let at the moment having seen the pension forecast for a pension I pay £165 a month into. Apparently I may get a pension of £2000 a year or something like that!
thanks for the advice, much appreciated, yes my forecast was something silly like £1600 per year lol, best just put us all out of our missery at 65 and be done with it, opps didnt say that, theres no politicians on here is there, dont want to give them ideas
I use a letting agent who charge 8%. They will do all the safety / gas checks, find a tennant who they will credit check and get references for. The agent also collects the cash each month and pays it diect to our account. They do regular visits to check on the property and arrange (after checking with us) for any minor repairs to be carried out. So far I would say its been hassle free and worth the 8%. Just need to get landloards insurance on the place. We specified not DSS, no pets, and no smokers and currently have a great young family as tenants. Make sure you keep clear records of all expenditure on the rental so you can offset any costs against any possible profits as Inland Rev will want their cut.
Hi Kev, we currently rent out 3 houses, all on a buy-to-let mortgage which is considered to be a 'commercial' mortgage and therefore has a slightly higher interest rate. A mortgage adviser might come along soon and advise you on what mortgage is best for you but I don't think you can have a domestic mortgage on a rental property (I could be wrong). We use a letting agent to find tenants as they do all the background checks and they also hold the deposit (you're not allowed to hold it yourself anyway) in case of disputes when the tenant leaves. They also act as an adviser as to what needs doing, what would be best in your area in terms of fully/part or unfurnished. We do unfurnished but provide a washing machine, fridge etc. Remember, anything you put in the house, YOU are responsible for. We didn't want to be called out every five minutes to replace a sofa just because it was getting 'slightly' old if you see what I mean. As said earlier, you have to have a gas/elec certificate once a year. And a standard tenancy agreement (which you can find on 'tinternet), that states how much notice they must give, deposits etc. As Ozz has said, you'll be taxed on any income other than the interest on the mortgage. So, the more mortgage you pay off, the more you'll be taxed. Keep all your receipts, for everything! A good accountant can mitigate it against your tax bill. Any cleaning, estate agents fees, maintenance etc. Also, find a really good handyman, if the gutter starts dripping while you're on holiday, you want someone you can trust to go and sort it out for you. If you rent it out fully managed by an estate agent, you won't need to worry about that but looking at your mortgage/rental income, I don't think you'll be making enough each month unless you're prepared to subsidise it yourself.
thanks, yes i suspected we might have to subsidise it, but luckily our other house is mortgage free so we can manage ok, im self employed already so have an accountant so will rely on his good judgement and pick his brains on all advice you and others have given, i have a whopper of a list, but like to be prepared, also have made an arrangement with a local letting agency on friday and meeting the mortgage advisor too, many thanks for help ; )
thanks for everyone with there advice on this, all sorted,EPC , gas, electrics, house fully decorated, house on fully managed with agents, and tennents moved in the weekend, hopefully happy days with our old house and a pension pot when we retire instead of nowt, ta again, kev
by the way, we stayed with direct line and they changed our mortgage from domestic to buy to let for £100, after all the other independent advisers wanted a few grand to do this and the mortgage would have gone up by £200 a month as well? , so i think we got of well lightly
Quick thread hijack, if you don't mind, Kev, but looking into the same here. any financial types out there who know the capital gains implications on the value of a house that is flipped from main domicile to rental? If I rent out my current home which I bought for, say, £100k in 2009, but is valued at £125k now, and after the rental period of 10 years I sell the house for £200k, will I be liable to CG tax on £100k, or £75k (or something entirely different)? also, as HMRC only allow offset of the interest portion of a mortgage, and I have £40k of capital tied up in the house it would seem I would be taxed for being frugal enough to put a big deposit down, therefore, would it be in my interest to up the mortgage to the nominal 75% LTV ratio for a buy to let over a shorter period so the interest portion is higher for the period of the rental and hence the rental profit (and income tax on it) is lower (with the aim of not trying to muster a profit in the short term, but maybe keep it ticking over until nearer retirement)? oh, and tried the quiet clutch mod on the 998 tonight with crap results (clutch pack just seemed too thick for the clutch to engage) - will just crack on with the reassembly and tinker with the clutch once I get her running again. cheers, pete
