In the next 12 months there may be an opportunity to buy the house off of my in laws. They have it as a buy to let and we will be looking at doing the same. They want to cash out and spend the accumilated money.

We are looking at it long term. To add to our pension portfolio. We expect the rent = mortgage and therefore only earn on the equity capital.

Obviously we have a pool of info with the inlaws but also know that LCB members have a word to say about anything!

I dont really have particular questions so am just interested to hear what people say.

[Edited on 19/1/15 by bi22le]

This sounds harsh but don't have a DSS tenant.

My friend rents one out to a DSS tenant, she's 2k in arrears and has wrecked the place. Our neighbour tried renting their house, their DSS tenant paid no rent and it took three months to evict.

Of course I expect most DSS tenants are fine.

Sad to say my only experience as a landlord was as above. Tennant (dss) redecorated in bright blue and fell behind with rent. I was too soft.

However my brother lets his via agency to professionals only. Never any bother.

Treat it as a long term investment, if it is a new thing to you use a decent agent.
Do not get attached to the house, it is there as an investment, not to be your home. Don't get upset when people do not look after it as you would hope.

On the plus side, the whole income thing works out very nicely over the long term. ie the first investment house we bought nearly 20 years ago cost us 60K plus about 5k spent (heating and rewire, a kitchen etc but stuff was cheaper back then) Today it rents for about 25k pa. OK, it has had a couple of kitchens, several coats of paint etc, but it is currently worth about 400k. If we sell it we would clear about £180k profit after tax.
Not bad on something that has paid for itself.

BTL are a self funding pension. Keep it 15 years, take no profit and it will be paid for outright, easily. Then you have a nice asset, but more importantly an excellent income for life........

Several friends have properties and all same the same thing, If you have decent tenants then its fine.
One lad had a bloke that fell behind with his rent, trashed the place and disappeared. It needed a new kitchen etc.

But on the whole they give favourable reports from both an income and investment basis...

Sounds good so far.

It's in Bath but that does not stop bad tenants trashing it.

The inlaws use an agency as will we. The one they use seems to provide good tenants, no students and get good prices for work required.

Sounds like it is currently managed with a good agent, stick with them!

I was 10 years in lettings and now train estate agents for a living. BTL is great, but you must go into it expecting and budgeting for the worst.

We've got a little 2 bed place which we rent out. We don't use an agency because it's just around the corner (walking distance). We use the local Facebook page to rent it and last time we looked for a tennant, we had 8 people chomping at the bit to rent it. SWMBO's mate is a property layer and she does the contracts.
I will say - if you get a good tennant, make sure you look after them and they should look after your house - convince them it's their home.

We put together an idiots guide booklet with the location of the stop cock, gas main etc, which answers some dumb questions.
We also have the British Gas cover at £30 / month which enables out tennant to call them up for electric fault, boiler faults radiators etc.

quote:

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Originally posted by bi22le
Sounds good so far.

It's in Bath but that does not stop bad tenants trashing it.

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I purchased my first flat when i was 20 and decided to rent it. I was asked if I would rent it to a friends friend as they wanted somewhere ASAP. He worked for northern rock and his Girlfriend was a mother with no job. First month was fine second month he left her and she asked to stay on go on dss. I didn't see it being a problem and helped her fill the forms out ran her round to do it all. Long story short she was in there for 1 year not paying a penny. She got free legal aid and even got a restraining order against me from contacting her or her ex partner who I found out they never actually split he just wanted to get of the tenancy agreement.

The recession hit the 2nd month they where in and I was layer if work. Savings went then my cars where sold and then I had nothing. They finally left after 13 months only because they had the gas and electricity cut off. Once I got the keys back they trashed the place. They even pulled all the flooring up. Took the coals out of the gas fire and stamped on them.

I ended up having the placed respossed then ended up going bankrupt for just under 100k

But am not put of am looking to buy again in the next year once I sell my current property.

[Edited on 20/1/15 by mk85]

Mk85, as soon as she was 2 months behind a section 8 notice under grounds 8, 10 and 11 would have allowed you to evict. No need to let it drag on and these types.of tenants are simply hoping you will be "too nice" to evict immediately.

quote:

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Originally posted by theduck
Mk85, as soon as she was 2 months behind a section 8 notice under grounds 8, 10 and 11 would have allowed you to evict. No need to let it drag on and these types.of tenants are simply hoping you will be "too nice" to evict immediately.

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I was to nice they all ways had a story. I got a solicitor onto in hence the bloody debt. I learnt the hard way but I hear that the couple do the same time and time again

I think the story above tells it about as bad as it can get. Most important thing is to ensure that whoever gets you the tenant has them properly vetted. The agency we use charges prospective tenants around £40 for a vetting procedure which checks that they are who they say they are, are entitled to rent in UK (that's a new one just come in), don't have court orders etc. & have decent references, usually from previous landlords, letters from friends, relatives etc are NOT accepted as a reference. It SHOULD, if all paperwork is in order & has been properly lodged, not take more than around 5 months to get someone out who's not paying, but don't expect judges to be sympathetic & if Xmas gets in the way add at least a month to that!

Never, let to "friends" or friends of friends without first having them properly vetted thro' credit checks etc., never let to anyone (even close family) without a proper tenancy agreement in place, it's illegal & can cost you at least 3 months rent, I rent a house to my son & his girlfriend (at a heavily discounted rate!), but they still have a normal tenancy agreement in place. Always take a deposit, it is becoming more common now to ask for 1 & 1/2 months up front rather than the traditional 1 month.

We have let to both private & DSS, probably the best tenant I ever had was DSS & the worst 3 I've had have all been private & employed - at least at the start of the tenancy, we've had good & bad from both sides. I cannot emphasize how important it is to use an agent that vets people properly & does the right credit checks etc., we only have them find the tenant for us, we do our own management which reduces ongoing costs, none of the 3 bad tenants I've had (this is in over 20 years of letting property) were thro' the agency we now use - it's a good idea to join a landlords group, we are members of Eastern Landlords, & go along to a few local meetings, meet & talk to other landlords, find out what agents they use & pick up info & tips. Eastern landlords cost us around £70pa, but we save more than that thro' an insurance scheme available only thro' them. Worst tenant we currently have is about 1 & 1/2 months behind with her rent, but that has been due to specific circumstances & she is now slowly catching up, we find about 50% finish up getting at least slightly behind at some point, but we aim at keeping people happy, setting rent fairly, (not trying to screw the last fiver out of it), working with the tenant rather than creating a war & looking at things long term, nearly all of our tenants stay with us for several years - downtime & voids are to be avoided if at all possible.

Good luck with your venture, I doubt you'll regret it - best thing I've ever done!

I have a second property that is on a interest only mortgage. I took some bad bad financial advice on buying the property and went interest only (I was young and naive). About 18 months ago my partners father died unexpectedly and we got 27K. We bought a new house and we have been renting my old house. I is in mint condition because I have renovated myself and it has new everything. The first person who viewed it rented it. They cheated me slightly by not telling me the girl was pregnant and she gave up work. I would suspect they are struggling to pay the rent on one income but they pay it.

My advice is this:

1. Get a professional estate agent to advertise and vet the potential renters.
2. Insist on doing the viewings yourself so you can vet them!
3. Work with your tenant to sort problems but stick to the tenancy agreement - I bend slightly in the tenants favour.
4. Don't take any crap from the tenant - If they fall behind with the rent they are gone!


For the first 8 months my tenants tried to get me to do all sorts of stuff that I have refused to do. These include, changing lightbulbs (I kid you not), unblocking the toilet, putting up curtains, mowing the lawn, getting damp specialists in (they were drying baby cloths all over the house and were wondering why the windows were wet), getting the house fumigated against fleas (6months after they moved in).

On the whole the renting thing has gone very well and as I don't have a pension I am putting everything I can to get the mortgage paid off.

My experience was bad because I could not afford the down time.

Flat entered negative equity so got a huge mortgage and purchased another property and let my flat out which covered the mortgage on it, any problems and I struggled badly so once it could cover itself sold it.

Worst tenants I had, grammar school teachers.... Go figure.

So if you can afford 3 months empty per year you should be fine.

I've had a couple of hovels, and a fair selection of shite tenants to be honest. In the long run it works out well, so long as you can afford to get through the hiccups.

I'm in the process of offloading the hovels to try to get decent houses closer to home.

Make sure you can still afford the mortgage and the council tax/bills for the property if it's empty for a couple of months.

If you have a good management company already then keep them, saving a couple of % is not worthwhile if you end up with a shite management company

Local is better. I bought one 40mins drive away. Pain in the arse sorting it out between tenants, but my property 5 mins away is simple, plus you can drive past easier to see if they're looking after the basics outside.

BTL mortgages require higher deposits and charge higher rates. If your folks are currently benefitting from a low rate, or it is on a residential mortgage, you could find a new mortgage will be more expensive. If rent only equals mortgage, you will be out of pocket for all the other expenses - landlords' safety checks, repairs, outgoings when empty etc. Bear in mind that mortgage rates are at an all time low and can only go up.

Non-payers can be difficult to evict, even with all the correct section whatever notices and an agent and a solicitor. I have had 2 non-paying tenants despite all the vetting and guarantors and now always have insurance to cover loss of rent and legal fees - good value at only £160 per year.

As Mr Duck says above. Use a proper letting agent.

Feel free to U2U me if you need any advice in the future. I have run my own Letting Agency for 11 years now.

Cheers

Mooky

Thanks for all of the advice.

Once the time actually comes we can start sitting down and doing figures. If we have to put a little in to make it viable we may still go for it as the oppotunity is fair and wont come much cheaper than this (family rates).

I really wish it was more local but the house was purchased 13 years ago when my wife went to uni @ Bath. They come into some inheritence money and investied it in that to trade off against my wifes living costs and allow her to chose her house mates.

We cant move it closer as the equivalent of a house in my area would be double the cost, infact I dont think I could buy a flat near me for the price of a 3 bed house in that area.

We will certainly try and stick with their agent and hopefully the same tennant.

The figures will be tight, no doubt, but hopefully with a bid deposit and a long term (not interest only) we will get the deal done.

Ill keep y'all posted either way.

I wouldn't be afraid of students.
We recently bought a place that was already let via a university scheme. The uni rented the house, and then put students in it. Yes, they were a bit fussy in their requirements, but nothing outrageous. And the rent was a little below what we now get. But rent is guaranteed, and damages etc are paid by the uni and they get it back off the students.
Just a hassle free way of renting, which returns a little less.

quote:

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Originally posted by bi22le
We cant move it closer as the equivalent of a house in my area would be double the cost, infact I dont think I could buy a flat near me for the price of a 3 bed house in that area.

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Here's a few pics I've dug out of my photos. This was the second bedroom that had a fresh laminate floor freshly painted with new furniture. When u got the keys back It was bare no furniture no flooring lights anything. They had been using it to put there rubbish instead of putting in the communal bins.











[Edited on 20/1/15 by mk85]

Yep, that happens from time to time, but well vetted tenants, guarantors etc usually mean that is rarely a major issue. The killer is dead time when the place is empty (which a bad tenant effectively causes)

As to buying/selling, remember selling a BTL means you pay CGT on all the increase in value, less any capital expendature. That means you cannot "roll over" the money to teh next place. To me that is a huge hurdle. I can't afford to sell any of my places as I would lose a vast amount of the capital. And that capital is what means a "better" house with more income. Yes, one day I will have to pay the CGT, but I am way better off delaying that time as long as possible and enjoying the income. After all, I see the BTL as income, and largely ignore the capital growth.
My parents are getting old and frail, but own (and have for 50+ years) some letting property. As far as we can make out, if they sell, they will pay 40% of the value straight to the govt. And then when they die, 40% of what is left will be nabbed as inheritance tax. ie they get to keep 36%. I need to check this, but they believe if they keep the houses, us kids will have to pay the IHT, but will inherit free of any CGT.

We are currently renting out a second house which was SWMBO's before we got together. Its in Corsham, so not far from Bath. Due to the distance, we let it through an agent and we do slightly resent the amount of money they get each month for what mostly appears to be not much work. On the other hand, they do vet the tenants, hold a security deposit, and do regular inspections. The lessons that we have learnt are:

I) If your letting a property a long way from where you live, budget more than you might first think for repairs. I'm sure most people on here do their own DIY so its really quite shocking to see what the labour costs are, for even simple work, if your not close enough to do it yourself.

ii) Keep on top of the agents and challenge repair costs. We've ended up insisting that they don't use one of the contractors on their list as the costs that they were charging for materials was more than what they would have cost even at B&Q. Also, keep a note of when repairs were done. We've had a couple of instances where work has failed within a year and the Agent would have quite happily charged us to fix it again had we not been on the ball.

iii) Keep evidence of all costs as you will need to do everything that you can to reduce your profit as you will be taxed on it. Be very careful about not paying the tax as the HMRC have a focus on getting tax out of landlords at the moment and are issuing fines if you get caught.

iv) If you're paying a mortgage, be aware that most mortgage companies will put up their interest rate if your letting the property

v) keep your tenants happy, not loosing the rental income for a couple of months when you have to change tenants covers a lot of good will in not arguing about minor stuff. But as Irony says, it is a business, so make those decisions on that basis.

quote:

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Originally posted by cliftyhanger
Yep, that happens from time to time, but well vetted tenants, guarantors etc usually mean that is rarely a major issue. The killer is dead time when the place is empty (which a bad tenant effectively causes)

As to buying/selling, remember selling a BTL means you pay CGT on all the increase in value, less any capital expendature. That means you cannot "roll over" the money to teh next place. To me that is a huge hurdle. I can't afford to sell any of my places as I would lose a vast amount of the capital. And that capital is what means a "better" house with more income. Yes, one day I will have to pay the CGT, but I am way better off delaying that time as long as possible and enjoying the income. After all, I see the BTL as income, and largely ignore the capital growth.
My parents are getting old and frail, but own (and have for 50+ years) some letting property. As far as we can make out, if they sell, they will pay 40% of the value straight to the govt. And then when they die, 40% of what is left will be nabbed as inheritance tax. ie they get to keep 36%. I need to check this, but they believe if they keep the houses, us kids will have to pay the IHT, but will inherit free of any CGT.

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Irony,

I believe that if parents sign over their property to their kids they need to pay the going rate in rental in order to continue staying in the property, or the kids have to move back in and have it as their main residence, that's way too easy a loophole just to sign it over and live for a further 7 years.

Quote from 'thisismoney.co.uk'

You also need to make sure that anything you give away really is a gift. If you sign your home over to your children but carry on living in it, HMRC won’t accept it was a gift, unless you pay your children a market rent. Read more: http://www.thisismoney.co.uk/money/pensions/article-2515494/How-help-family-avoid-overpaying-tax-inheritance.html#ixzz3PaamxAqF Follow us: @MailOnline on Twitter | DailyMail on Facebook