ScooBStu

What are peoples thoughts on this. We were considering renting our current house and buying a new one. The house will pay for itself providing it is occupied and nothing major needs doing on an interest only mortgage basis.

What are peoples thoughts on the likelyhood of the market going down, up or remaining as they are and over what time period. Also as a long term investment is it likely to increase at a rate which will give a reasonable return.

Cheers

Stuart

imlach

Also include the hassle factor unless using a fully factored letting agency (10-15% of your rent).

Annual gas checks, maintenance, problems, finding tenants, late payments, bad tenants, impossible evictions, etc etc etc

It's certainly an investment, but not the 'no-brainer' it is sometimes made out to be.

Also, in your calcs, allow for at least 1, if not 2, months void every year. You can't always guarantee seamless tenant transistion.

Petem95

As imlach says, theres often more to it than what the "get rick quick" property programmes make out. Remember there are other forms of investments to property, and a lot with higher returns.

In the short term it looks like property prices will creep up due to interest rates looking like they'll be cut to 4.25 or even 4% before climbing again.

With the economic outlook being a case of rising unemployment, massive consumer debts which are starting to show signs of hurting (constant increases in the numbers going bankrupt) then outlook for the housing market may not be so rosy.

There has to be new buyers entering the market for it to 'work' basically. BTL isnt really worthwhile anymore with such high prices, FTB's cant afford to buy, so where will the money come from? IMO it will be from FTB's, but prices need to fall at least 20% for them to be able to return to the market.

MikeCardiff

iTrader: (2)

One thing I'd consider is how it would effect you financially if the house stood empty for 6 months ( which is not uncommon, especially in areas where there are lots of houses for renters to choose from ) - would you be able to pay the mortgage on it AND the mortgage on the new house ?

Find out how much your payments on both houses would go up if the interest rate rose by 1%, 2%, 3% etc... - on an interest only mortgage you may be shocked at how much the payments can go up on a relatively small interest rate rise.

Also remember rental prices have very little to do with house prices - if a house doubles in value, it doesnt mean you can charge twice the rent ;0) - rental prices tend to increase a few percent a year at most, but it also depends on how many other similar houses there are to rent in the same area, and what the charges are for those. If the interest rate goes up ( which it will soon !!! ) your mortgage payments will increase, but you wont be getting in more rent to cover them.

OllyK

I rented my place out when I went back to Uni and moved back in with my parents (about 9 years ago now - Ouch!) I didn't make a penny out of renting TBH (but it wasn't a repayment mortgage). There was plenty of hasle and when I moved back in I need to replace the kitchen and bathroom and spend a lot of time on the garden. Having said that, if I had sold the property and invested the money, it wouldn't have kept up with the housing market, so I'm glad I kept the house for that reason.

I suspect now the market is not as bouyant and you are unlikely to make value gains on the property of the same magnitude unless you are in for the long haul and plan to make money from the sale of the property at some point in the future. Also if you have an interest only mortgage, the money you make will only be due to the rise in the market and it may end being a lot of effort and hassle for a few K.

I take on what was said about "full letting services", but again you'll go through a good few crap ones before you find a half decent one.