EddScott

I know theres a few on here who have more than one property and I could do with some advice and opinions.

We are considering buying another property but keeping our current property to let. We've confirmed with the current lender that its fine to do this and with the mortgage payments being much lower than potential rental income the current mortgage is ignored when calculating further borrowing. We are about 50/50 with our current home.

The house we are considering is ideal for our current needs (more rooms for new baby and wider doors downstairs for disabled access and shower room downstairs for a disabled person - some of you know my wife is very ill) and we'd be looking at 25/75.

Currently paying £200 a month but rental on the estate is about £600 (we are renting the house next door for the inlaws to help look after my wife and thats £550 on a 6 month deal) The new mortgage will be £660 a month. So I'll be paying an extra £200 ish a month for the new house which is manageable. I'll keep £3K aside to cover up to 3 months if the current house is empty for a while. I'm quite comfortable I'll be able to cope when rates do go up. Not saying I won't notice it but I'll not be destitute with a coupe of % rise.

One question though is should I do it through a letting agency - the estate agent with the house we like will do this for 10% a month of the rent - thus reducing the money offsetting the new mortgage. Or do it myself? Am I better protected from non-payers if I use an agency?

Also, what about social? I have a few friends on the social and one in particular has almost OCD like tendencies towards keeping her house tidy so I wouldn't be too concerned about this particular person renting the house through social - what is the obvious worry is payment. Does the tenant pay or does the social pay directly?

Is there anything else I should be considering? Theres a couple of things I'm not 100% on with this new house so will be asking for a full survey before putting in a firm offer.

mattstant

if you can afford it DO use an agent and DONT let to friends or family.
If their circumstances change you will lose money and friends/family or both.

An agent is most useful for vetting and credit searching tennants and will already have a list of potential tenants and will help reduce the risk but they will NOT guarantee the rent.

Your figures are a little confusing DO make sure your lender is aware you are letting commercially even though you may be hit for higher commercial rates any insurances in place will be void if you have told fibs.

With only one property voids and malicious damage (ie ripped apart by cannabis growers etc) are your biggest risk.
Make sure the insurances covers you for about 20 odd grand for malicious damage.

Again a good agent will spot the signs and scams behind cannabis farms (usually a patsy with a large deposit and 3 months rent up front who seems to good to be true).

the good news is there are lots of good wage earning tennats out there who should give you no trouble.

Oh and make sure you have gas certificates for relevant appliances make sure everything is in good working order and if you can decorate throughout in white so its easy for tennant to leave it as is

hodgy0_2

I have posted on this before

and I don't use an agent (I am not saying agents are wrong for every circumstance, but for me - no)

but as above - they will not guarantee the rent and as to vetting etc I suspect most just go thru a tick box exercise

one thing to check is whether the agent will take their 10% on any re-lets (whether they are involved or not)

say the agents let the place for you, and after a while those tenants move out, but thru, say, work colleagues put you in touch with other people who take over the lease

do the original agents want 10% of the subsequent “let” --- some do, and it will be in the contract

cookstar

iTrader: (6)

I've collected quite a few properties over the last few years, and I always use an agent to find/vet tenants. Sometimes it seems like it's money for old rope, as sometimes they are let on the first viewing, but others make them work for their money.

If you can afford it, then go for it.

I completely stay away from the social, the rent is now paid direct to the tenant, who then decides whether or not to pass it on.

As above, don't rent it to anybody you know.

There are a few things you legally have to do as a Landlord, i.e Gas safety, furniture (if any) must have fire labels, smoke alarms. But that's pretty much it. Any good agent can and should run you through all of these.

You will also have to have an EPC carried out on your existing property before it can be marketed by law.

If you need anything else then feel free to PM.

EddScott

Thanks for the replies.

So our current mortgage is 200 the mortgage on the new house is 660 so total a month is 860. With our house rented at 550 our personal outlay per month will be 310 so 110 more than we pay now. I've checked our existing lender who will allow the house to be let. I need written proof the house rental can cover the existing mortgage so the new lender will ignore the current mortgage when calculating affordability.

I will avoid social and not rent to friends.

What happens if the tenant stops paying but continues to live there. Where do I stand and can the agent help in that situation? Only one room in our house hasn't been redecorated in recent years and is in overall very good condition. The house we are renting next door is actually owned by an estate agent and knows our situation and will help with getting all the required insurances and certificates etc.

cookstar

iTrader: (6)

Right, your first mistake is to forget to factor commision costs, also ongoing maintenance. So to be safe add £80 per month into your budget. Oh, and lets not forget any tax, you will only be able to offset the interest part of your mortgage, not the whole lot.

It's easily done and can catch people out, it's best to put it away so when something does happen you have the cash waiting.

If tenants refuse to pay rent and continue to live there, you will probably find the agent will wash their hands of you and recommend you seek legal advice.

EddScott

I've seen commission costs of 10 or 15 percent a month. I'm happy enough with 400 a month and still be comfortable so 90 a month for costs isn't a problem. I've got a bit of money spare which can be set aside for one off cost like the boiler going pop or if I have stump up the money for both mortgages for few months.

Do I have to pay tax on the difference between what I get from rent and what the existing mortgage is? So tax on 350 a month? That I didn't know! Do I have to declare that on a return?

hodgy0_2

Convert your mortgage to interest only

Then you get 100% relief on it

EddScott

The current one is interest only hence why it's only 200 a month. It hung on whether the existing lender would let me rent without changing the product. It's .99 above base for life so pretty good at the moment. New mortgage is Cap and Rep at 3.44 fixed for 2 years with Halifax.

cookstar

iTrader: (6)

Yes, you will have to delcare it on a return. There are a lot of other things you can use to offset it though. Best of speaking to an accountant, there are specialist accountants that deal with this.

Do you intend to manage it yourself or let the agent do the whole lot?

In my experience the charges for a "let only" start at 10% but you can normally squeeze them down on this. This commision will be taken out of your first months rent.

If your not too far away from the house, then you might want to consider managing it yourself, you could save yourself around £360 a year!

If the agent manages it, all they seem to do is have the rent bounce into thie account then straight to yours (minus 5%). Then if there are any problems they just call you and tell you what needs doing, seems a bit of a waste of money to me.

cookstar

iTrader: (6)

Lucky! you have what is now essentially a BTL mortgage at less than 2%

cookstar

iTrader: (6)

Just a couple of other things to consider, then I'll stop rattling on.

A professional inventory/"check in" is well worth it (around £100) But can pay dividends if there is a dispute. If you have one of these it's usually written in to the AST that the tenant will pay for the "check out"

You may want to hold the deposit yourself, in which case you will have to register with one of the companies that deal with the TDS (Tenancy deposit scheme). ~£30 per year/new tenancy.

EddScott

Really appreciate all the input.

Went to have another viewing of the house today. I wanted to view the houses on our shortlist first before taking my wife along as she can really only manage a couple of hours before she gets tired and needs to rest.

I want a survey completing before actually going in with offers.

I asked about letting with the estate agent today and the guy who I'm dealing with actually worked for us for a while and he said you could use our letting agency but "They're rubbish" were his words. He said if you don't mind doing a bit of the leg work then I could probably do it myself and he would help me with getting everything just so.

The houses are in the same area and probably no more than 2 miles apart.

cookstar

iTrader: (6)

Cool, if you need blank contracts, or any other docs let me know.

njkmrs

Just go into it with your eyes open.
There are good /bad tenants and it can sometimes be a bumpy ride.
I have used all means discussed here.Estate agents who take 10% and will take care of most stuff,although they will phone to say this ,that or the other is wrong ,but will then get a tradesman in to put it right for you.Then you get the bill.
I have done it myself and spent many an hour tracking down the tenant for my money!
I am also looking at a slightly different one at the moment.I basically hand my property to an agent for a set period ,2 to 5 years.They get someone in and pay me 70% of the rent they collect.This is guaranteed for the set period.No tenant in ,I still get my rent.Any damage caused they put right.I am still responsible for the cost of any major repairs ,ie if the boiler fails totally ,but if it needs a minor part or the radiator leaks or a window handle falls off they take care of it .
This is basically a lazy way of doing it or for someone who is too busy to deal with day to day stuff.
Not sure how it will work out on this one but I may give it a go.
As has been mentioned,it may be worth steering clear of housing benefit tenants as the rent usually goes to them now and they may decide to stock up on special brews and **** rather than pay the rent.Dealing with the Council is also not much fun.They will stop paying the rent at the drop of a hat,and if your tenant does not provide the info to the Council they ask for ,they just stop the rent and penalise the Landlord.Ummm ,thanks for that.
Anyway,dont be put off.Give it a go,but have a little contingency tucked away .
Good Luck.