PowerSwitch

Hi,

We want to sell our house to downsize and get somewhere smaller, a bit cheaper but with a bit more land.

As our house is a bit "odd", selling could take some time. It is however quite big and so we could convert it to rent out, either as a house or as rooms.

We would then remortgage (we have a VERY small amount to pay off at the moment) in order to have "cash" available to buy somewhere else.

This would have the following benefits:
1. No need to find a buyer ... tenants locally are easier to find.
2. No Stamp Duty to pay.
3. The rent will go some way to paying the mortgage.
4. We could conceivably buy somewhere at auction.
5. We would end up owning TWO properties.

The downsides could include:
1. We would end up paying out more each month - the shortfall between the rent and the mortage payments.
2. We might need a more expensive "commercial mortgage".

I now need some advice from someone who understands money!

Has anyone ever done this remortgage / rent / buy scheme?

Are there any blindingly obvious "showstoppers"?

Thanks for any feedback!

Is your house an old large house on a large plot? Could it be sold as a knock down, rebuild new flats site. That can be lucrative.

In many areas "buy to let" has led to a glut of rentable properties so rents are low compared with mortgage repayments.

kenneal wrote:Is your house an old large house on a large plot? Could it be sold as a knock down, rebuild new flats site. That can be lucrative.

In many areas "buy to let" has led to a glut of rentable properties so rents are low compared with mortgage repayments.

We live in a rural area popular with Eastern Europeans, so renting might not be a problem ... although probably not for huge sums

Sadly the knock down rebuild approach is not possible ... conservation area etc.

Most likely we'll ending up selling in the usual way ... ho, humm ...

Vortex

In the early 1970's my dad (now deceased) started buying houses to rent out. In a short period of time he amassed nearly 40 different properties (telly speak ) and things were looking very rosy.

Then along came 1974 (da da da da da) and the world went crazy, interest rates soared etc etc and my dad was forced to dump all the houses. He had to put them all up for sale and get rid quick (which wasn't as easy then because first of all he had to evict the pesky tennants - the law has since been changed to the advantage of the landlord). Anyway, he survived just but when things started to go wrong they went wrong very quickly.

Obviously, things are alot different now.

I am in the business of renting out rooms.

Actually, I have done quiet alot of renting out as when I first bought my first house I used to rent out the spare room to lodgers to help pay the mortgage - with things going the way they are and an increasing number of either young wanting to move away from home or foreigners coming in looking for lodging I also envisage this becoming more and more popular and an increasing market for accommodation is given a lending hand by the fact that more and more people are going to be in the situation of not being able to afford their mortgage payments and seeing their spare room as a cash generator!

People are increasingly finding themselves in difficult situations. Just this morning, as I started typing this bit of blar blar I received a telephone call from a guy asking if I had a room available for 2 weeks, he then went on to explain that he was on housing benefit. The rules for housing benefit are that you get the accommodation and then the DSS re-imburses the landlord but all 6 weeks in arrears. You know as well that people in this sort of situation also come with much baggage, both emotional and physical. Ask yourself can you deal with these problems as well as your own?

So I told the guy that unfortunately I couldn't help him. If you are going to deal with migrants, homeless etc (and don't forget own the property and therefore be responsible not only for all current costs but also future depreciation and increasing costs) you are going to have to IMO be a pretty astute and tough business man. I think as the next couple of years progresses you will also find yourself with increased competition, most probably from folks who haven't bothered putting any additional cash into their homes but are just trying to keep hold of the roof over their heads.

There is alot more I could say on this subject, but I think for now, this is probably enough!

If you are thinking of selling your house, my best advise would be to do so and if you believe that it will take a while to sell because its a bit odd, then price and market it accordingly (and definately don't be greedy .

Hope this helps.

Thanks Pippa ... you and my wife are in agreement!

I'm fairly new to the forums and delurking with this post, so please be kind!

Due to a really complicated set of circumstances (far too long and boring to go into now) we own a cottage that we rent out as holiday accommodation, and live next door, which we rent. We also own a piece of land a short distance away on which we will be building our new house over the next 12 months.

I've also done the "renting your house out long-term in order to live somewhere else" thing.

We got *badly* burned on renting the house out long-term. We wanted to live a long way away, and left it in the hands of a "friend". To cut a long story short, the house got trashed and lost thousands off it's value, not to mention all the unpaid rent. Renting like this is far from a sure-fire bet, and I found it incredibly upsetting to see my former home wrecked.

The holiday let thing is less stressful, although more work, and depends on having a holiday destination kind of place. However, we are very aware that we are at financial full-stretch, what with effectively paying two and a half mortgages every month. It is also preying on my mind that if we own another *house* (as opposed to the glorified garden our plot currently is), then we will have to pay Capital Gains Tax if we sell the first one at a later date - it's a LOT of money to pay out to the government.

My advice is to do the sums really thoroughly, and build in allowances for empty time, damages and subsequent taxes. When we did this again for our cottage this year we discovered that unless we have another huge housing boom in the next 5 years, it isn't worth keeping the cottage - ergo: it's up for sale.

Good luck with your decision!

Hello, you! Welcome aboard!

I rent out nine properties and have done for about 18 years, what you will have to consider is you will be buying at the top of a long curve and even though you will have equity fall back on your first property you are still paying top dollar for the new one. How about renting your new smallholding for a year, once you try the animal slaying, windy waether growing veg thing...you may HATE it!!

As for renting out to tennants who may trash your house, there is one golden rule for landlords,

NEVER RENT A HOUSE TO ANYONE BIGGER THAN YOURSELF.

You may have to evict them, you may have to sternly advise them as to the consequences of not paying you're rent,you will certainly have to issue orders backed by threats.
If you think you can engage a lawyer to do it for you , it will cost you thousands not including the lost rent.
There is a lot to think about, good luck

Personally I'd rather use letting agents than even consider trying to manage tenants myself. The 10 to 15% fee is worth it to my mind.

Letting agents are worse than lawyers!!

If you have errant tennants, they will just inform you that your tennant has not paid the rent and then you will have to decide what to do, letting agents will say 'you're problem ' and you still owe us the 15%.

I rented out my place once while I lived elsewhere. It was an 'okay' experience, but I wouldn't do it again. The house just about survived the experience but was quite tatty and I had to have it professionally cleaned and decorated before I could sell. This is why I've decided to sell my house while moving onto a narrowboat, rather than buying the boat with equity in the house and using rent to pay the mortgage.

My wife has been renting out one house or another for twenty years.
As far as I can tell, the key to successful renting is to keep the
house in very good condition and then very carefully vet the tenents.
Academics (but definately not male students!) work the best. It helps
to have property close to a prestigious university of course! Agencies
are useless. Take your money and simply add beaurocracy.

The very worst tenants were, as reported here, (previously) close
friends. We eventually solved the problem by selling the house
to them, and leaving them (and it) to rot. Family tend to be a problem
as well, especially when they forget to pay the rent...