Becoming a landlord. Any advice?

NitrogenY3K · 15 Aug 2009 at 20:17

Since I have started my new job last year i have been saving a lot of my wage to enable me to buy my first house.
What I plan to do with this house is rent it out and hopefully make a little bit of extra money and then from there me and my mate are going to put our money together and hopefully start renovating and selling property.

I have had viewings on various different houses and have finally found the one that i think is best. The house im looking at is pretty local to me so i know the area pretty well and also have a lot of friends who live prety close to where my potential house will be.

I have put an offer in for this house and estate agent thinks I have a good chance of getting it (but even from my limited experience with these people i know they talk a lot of BS)
Anyway if i get the house for the price I have offered i will be putting down between a 25-30% deposit. So i should have some scope to make a tidy bit of extra cash per month
Im leaving a bit of money behind me because it needs a few bits and bobs (mostly cosmetic, no building work)

Now my question is, I have never done this before and I know there all all kinds of insurences etc to be considered when becoming a landlord. So is anyone here a landlord? and would they be able to offer me any advice?

Thanks In advance

Sankari · 15 Aug 2009 at 20:21

Speaking as a landlord myself:

Find a good agency and let them manage everything for you (they'll charge around 10% of the monthly rent; this is deducted from the tenant's payments before the balance is passed on to you)
Find a good tax accountant who will claw back everything you are permitted to claim (it's quite a lot!)
???
Profit

That's the formula I've always used, and it works for me. Insurance is not a big deal; you insure the house, and the tenant insures the contents.

NitrogenY3K · 15 Aug 2009 at 20:32

Evangelion said:
Speaking as a landlord myself:

Find a good agency and let them manage everything for you (they'll charge around 10% of the monthly rent; this is deducted from the tenant's payments before the balance is passed on to you)

Find a good tax accountant who will claw back everything you are permitted to claim (it's quite a lot!)

???

Profit

That's the formula I've always used, and it works for me. Insurance is not a big deal; you insure the house, and the tenant insures the contents.

Thanks for that mate. So basically if I employ a company to get teannts for me and they take care of everything. The tennant pays them first and they take their deductions and then pass the blanace onto you.

Also a tax accountant, would I be able to go into the bank and see one of these? or would it be best to find an independant one.

Also with the agency is using an estate agent ok?

lambda · 15 Aug 2009 at 20:32

Make sure you get a BTL mortgage, and not a residential mortgage, or you are technically commiting fraud. Ensure you declear your extra earnings, so the tax man can take his cut, or you may get reported, and HMRC will rape you.

Although the media is basically saying house prices are going to shoot up again, its actually much more likely they are going to fall further, but at a slower rate. The economy isn't fixed, and the market is currently stabalised on false sentiment, driven by the media.

Not so much of a problem when buying to live in for 15years, but when buying as an investment, its silly to pay overinflated prices!

If you do buy now, try and get over 20% off peak prices.

dilated · 15 Aug 2009 at 20:39

Make sure you can afford to pay the mortgage with no income for several months - if this is true, no matter how difficult you will be ok.

NitrogenY3K · 15 Aug 2009 at 20:43

lambda said:
Make sure you get a BTL mortgage, and not a residential mortgage, or you are technically commiting fraud. Ensure you declear your extra earnings, so the tax man can take his cut, or you may get reported, and HMRC will rape you.

Although the media is basically saying house prices are going to shoot up again, its actually much more likely they are going to fall further, but at a slower rate. The economy isn't fixed, and the market is currently stabalised on false sentiment, driven by the media.

Not so much of a problem when buying to live in for 15years, but when buying as an investment, its silly to pay overinflated prices!

If you do buy now, try and get over 20% off peak prices.

Yeh i know the market isnt exactly brilliant at the moment, but i will be keeping this house for a while and know expecting a profit in the short term is unrealistic.
But the house is a re-posession and is selling for quite a lot less than the average price (for that type of house). So the house i feel is a good buy

NitrogenY3K · 15 Aug 2009 at 20:44

dilated said:
Make sure you can afford to pay the mortgage with no income for several months - if this is true, no matter how difficult you will be ok.

Morgage is basically bugger all, with a 30% deposit the morgage is only 1/7th of my monthly wage

Camalot · 15 Aug 2009 at 20:49

Who does the contract for you? The agency?

Example, repairs and what not. You have to pay for them?

Have been interested in doing this myself in the future.

Sankari · 15 Aug 2009 at 20:59

NitrogenY3K said:
Thanks for that mate. So basically if I employ a company to get teannts for me and they take care of everything. The tennant pays them first and they take their deductions and then pass the blanace onto you.

Correct. Any decent real estate agent will take care of this for you. I tend to use the same agency through which I purchased the property; it's simpler and easier that way.

You can also give the agency permission to carry out any maintenance up to a certain cost, without consulting with you. I also find this very convenient.

For example, I needed a tree removed from the back yard of my Australian property this year, after it was struck by lightning. The agency informed me of this and arranged all the necessary work on my behalf; this came to about £400, which was automatically deducted from that month's rental payment.

Earlier in the year, I had replaced the hot water system, at a cost of ~£1,500 (electric hot water tank had died, so I replaced it with a nice new heat pump

). The agency contacted me on behalf of the tenant (who was complaining about cold showers

) and did not proceed with any work until I had given my full assent. Again, they assisted with the sourcing and supervision of the installation, and I just paid the costs from my savings account. It's tax deductible, of course.

Also a tax accountant, would I be able to go into the bank and see one of these? or would it be best to find an independant one.

I use an independent. There's plenty of very decent tax accountants working from home.

Also with the agency is using an estate agent ok?

Yes; in fact, I'd recommend it.

Re. the mortgage (excellent advice by lamda & dilated, btw), you could try an interest-only mortgage if you don't have much start-up capital, but for goodness sake do your sums and make sure the rent will pay for it! Be aware that an interest-only mortgage is like treading water; it will keep the property in your hands at minimum expense, but you won't be building up any equity. Don't keep it running like this for too long.

Sankari · 15 Aug 2009 at 21:03

Camalot said:
Who does the contract for you? The agency?

Yes. They'll have a standard agreement which they can take off the shelf and tweak to suit your needs. You can specify additional bits & pieces (like "tenant must maintain lawn and garden"; "tenant is not permitted to keep pets indoors"; "tenant may not harpoon next door neighbour's daughter, even though she looks like a whale", etc.) if necessary.

Example, repairs and what not. You have to pay for them?

Yes, you are responsible for all maintenance unless you can prove that the tenant is at fault (ie. tenant's home brew kit exploded and destroyed half the conservatory). Fortunately it's tax deductible, as are depreciation and insurance.

Naamiko_O · 15 Aug 2009 at 21:03

Treat your tennants with respect and they will treat your house with it.
Obviously make sure you choose the right tennants, that line of advice might not apply to scrote cocaine smoking scumbags.

Camalot · 15 Aug 2009 at 21:07

Evangelion said:
"tenant may not harpoon next door neighbour's daughter, even though she looks like a whale", etc.) if necessary.
.

haha, good advice

NitrogenY3K · 15 Aug 2009 at 21:19

Evangelion said:
Re. the mortgage (excellent advice by lamda & dilated, btw), you could try an interest-only mortgage if you don't have much start-up capital, but for goodness sake do your sums and make sure the rent will pay for it! Be aware that an interest-only mortgage is like treading water; it will keep the property in your hands at minimum expense, but you won't be building up any equity. Don't keep it running like this for too long.

I have got the AIP and so know how much the monthly cost wil be and I have researched around for the average rental yeild, and the rent will easly cover the mortgage and more.
So thats not a problem, I do have quite a lot of money behind me for my age

Also will the mortgage company actually do a background check on the potential tennants or will thye just throw anybody in there.

Bes · 15 Aug 2009 at 21:23

NitrogenY3K said:
Since I have started my new job last year i have been saving a lot of my wage to enable me to buy my first house.
What I plan to do with this house is rent it out and hopefully make a little bit of extra money and then from there me and my mate are going to put our money together and hopefully start renovating and selling property.

I have had viewings on various different houses and have finally found the one that i think is best. The house im looking at is pretty local to me so i know the area pretty well and also have a lot of friends who live prety close to where my potential house will be.

I have put an offer in for this house and estate agent thinks I have a good chance of getting it (but even from my limited experience with these people i know they talk a lot of BS)
Anyway if i get the house for the price I have offered i will be putting down between a 25-30% deposit. So i should have some scope to make a tidy bit of extra cash per month
Im leaving a bit of money behind me because it needs a few bits and bobs (mostly cosmetic, no building work)

Now my question is, I have never done this before and I know there all all kinds of insurences etc to be considered when becoming a landlord. So is anyone here a landlord? and would they be able to offer me any advice?

Thanks In advance

So this is your first house purchase?

So where are you living? in rented? with parents? The tax implications mean it is not really a good idea to -say- rent a house to live in and let out the house you own unless you are getting a particularly good deal.

Also bear in mind interest rates are low, and unemployment is rising. Once interest rates start heading north again, then price-wise housing market will be under a lot of pressure.

Bes · 15 Aug 2009 at 21:25

NitrogenY3K said:
Yeh i know the market isnt exactly brilliant at the moment, but i will be keeping this house for a while and know expecting a profit in the short term is unrealistic.

So why do it?

NitrogenY3K said:
But the house is a re-posession and is selling for quite a lot less than the average price (for that type of house). So the house i feel is a good buy

Compared to what? are there any more identical houses on sale RIGHT NOW?

NitrogenY3K · 15 Aug 2009 at 21:37

Bes said:
So why do it?

Compared to what? are there any more identical houses on sale RIGHT NOW?

Because its a long term investment, and in the long term I believe i will gain.
I basically have a plan, i hopefully want to rent this out and have the little extra cash coming in, and then my and my mate put our money together and try and start to renovate houses to sell on.

Of course there is a risk, but there is always some element of risk.

Yes there are identical houses for sale right now. One of which is a few streets over. Which needs work done to it, and that has just been bought (after 2 weeks on the market) for nearly 20% more.

Sankari · 15 Aug 2009 at 21:39

NitrogenY3K said:
Also will the mortgage company actually do a background check on the potential tennants or will thye just throw anybody in there.

They will do; after all, it's in their own best interests, as well as yours. You can always ask to see their procedures, if you're not sure.

NitrogenY3K · 15 Aug 2009 at 21:41

Bes said:
So why do it?

Compared to what? are there any more identical houses on sale RIGHT NOW?

Thats good then, seems like a good way to go. Could save me a lot of head work.

Dr House · 15 Aug 2009 at 22:19

lambda said:
Although the media is basically saying house prices are going to shoot up again, its actually much more likely they are going to fall further, but at a slower rate. The economy isn't fixed, and the market is currently stabalised on false sentiment, driven by the media.
.

I agree with you 100% on this.

EDIT: http://www.sheffieldforum.co.uk/showthread.php?t=495929

Think long and hard before you put your hard earned money into something.

Amnesia · 15 Aug 2009 at 23:12

letting agencies dont always do a background check ....they just claim to so they can justify their expenses. usually its just a case of checking the paperwork the tenants hand to you.

also there are plenty of corrupt letting agencies who put a charge ontop of the house repairs so they make money from any phone calls to builders/repair men.

now im not saying dont use a letting agency......it all depends on your house really...what area it is in.

if its a good area and the amount of rent you are looking for isnt covered by LHA rates then you will want working tenants.

on the other hand if the rent is covered by LHA rates then i would personally avoid working class as if they decide not to work then you cant really do much.

if you have tenants which are on benefits and they fall behind so many payments then you can phone your local council up and get the payments made directly to you(4 weeks in arrears mind)...but atleast the money comes straight to u and u dont need to deal with the tenants or pay a letting agency.

sorry ive just quickly typed that so it may be full of contradictions and errors