Advice for Potential Letter

tusk

Hi There,

Hoping you guys can give me some advice on what I could expect if I decided to start letting out my house.

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Some Background...

Myself and my Girlfriend bought our house in 2018 and moved in that September. It's a new build and we availed of the HTB scheme.

Unfortunately we've had some serious family changes due to a bereavement, and we absolutely have to move closer to her parents' house. (Short term we'll plan to live with them, but longer term, plan to buy close by).

I understand that if we sell or rent our house out, we'll be liable to pay off revenue, due to the HTB scheme and its 5-year rule, but not worried about that.

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My options are to just go ahead and sell the house outright, or rent it out. Initially I was very sure I didn't want the hassle of renting, and would rather just sell up and wipe my hands of it, but after talking to some friends and neighbors, the idea of renting it out seems more interesting to me.

I have seen similar local properties (though there aren't many available right now) going for just under 2 times my monthly mortgage - hence the newfound interest. I'm not sure of the demand in the area though, so was thinking of chatting with local estate agents.

Would it be worth my while renting it out? Could I actually make a profit on it, if i needed someone else to manage the letting etc?

Honestly I haven't a clue what I'd be getting into, so any info and advice would be fantastic!

Cheers

Dav010

If you lived in it, it probably has nice stuff in, so be prepared for the fact that a renter may not have the same mass on as you have.

Be aware, removing a tenant so that you can live in it again may not be as easy as you expect, if they over hold, it may take you 12 months to remove them.

Consider if you will be able to pay the mortgage if the tenant stops paying rent.

Inform yourself of the pitfalls of renting to HAP tenants, you cannot discriminate against them if they apply.

On the plus side, as this is a first time rental, you can charge market rate.

Consider this carefully, do you want to live again in the house, long term. If you don’t and you can get all the money you put into it back, sell.

tusk

Thanks. We won't be able to live in it again unfortunately. Going price at the moment is about 30k more than we bought it for, so not sure how that works out in terms of paying off the mortgage in full tbh. Like would we actually see any of the 30k after the sale...

You touch on a bunch of points that had me leaning to selling there too tbh.

Dav010

tusk wrote: »

Thanks. We won't be able to live in it again unfortunately. Going price at the moment is about 30k more than we bought it for, so not sure how that works out in terms of paying off the mortgage in full tbh. Like would we actually see any of the 30k after the sale...

You touch on a bunch of points that had me leaning to selling there too tbh.

As you don’t pay CGT on family home, if you make €30k over pp, that will cover solicitor and EA fees. If you fixed your mortgage, you will need to ask bank for early exit penalty fees.

If you are not going to live there again, sell, LLs are exiting the sector in large numbers due to problems associated with renting.

SteM

You've no ties to the place and won't live there again so sell it and move on with your life. There's a reason that people who have been small time landlords for years are getting out right now.

tusk

Thanks Lads. Nice to know my gut was likely right

Xterminator

Would you be able to rent to friends/family members?

the problem with renting is the risk & hassle. if the risk can be mitigated, then it is a more attractive proposition.

Im making the assumption you can cover mortgage payments from net rental income to make it past the 5 year claw back rule, eg 2023. with the amount of people looking for someone to rent these days, you should explore this before taking the loss on your equity.

you don't need to be a landlord forever, but you might come out of this better, and be able to help a friend /family member get a reasonable place to live.

SozBbz

Few questions;

1. Do you need to sell to finance purchasing a new property?

I wouldnt entertain renting unless it was something you planned to do for a reasonably long period of time. If you'll ultimately need to sell anyway, I'd just sell.

Once a property has been rented at all, things like CGT come into play. There'd be no point in renting it for a year etc, as you'd change your tax position etc and you'll probably have tenants putting wear and tear on it in that time.

2. Can you get another mortgage whilst keeping this property?

Do you need to release the equity? Would you pass a stress test on this mortgage + another mortgage in your new area.

3. Do you understand the tax on rental income?

IE, if you're a higher rate tax payer, that this income (less deductions and expenses) is going to be taxed at your marginal rate.

4. Are you financially resilient enough to withstand any negative scenarios, such as over holding tenants?

the_syco

tusk wrote: »

I have seen similar local properties (though there aren't many available right now) going for just under 2 times my monthly mortgage - hence the newfound interest.

Minus the tax, and it'll probably be under your monthly mortgage. Add to that an things that break, you'll need to spend money to repair.

tusk wrote: »

Would it be worth my while renting it out?

No. Especially as you said you don't plan on coming back to the house.

tusk wrote: »

Could I actually make a profit on it, if i needed someone else to manage the letting etc?

The person managing it can just get anyone in, and not care if your place goes to hell.

tusk wrote: »

Going price at the moment is about 30k more than we bought it for

Sell. Sell sell sell sell.

If you rent it, you will probably not be able to afford to sell it at a later stage, as what you may get, minus the Capital Gains Tax, may mean that you'll be in negative equity. And then you'll be stuck renting where you are now, as well as spending money topping up the mortgage to a house you never plan to live in again.

tusk

Thanks all. Mind is made up.

Appreciate the advice.