I'm thinking about Letting Family Home ...

[i2008]

Evening People,

Just want to say this is a great site.

I bought an 2 Bedroom End Terraced House in 2004 for £68,500 with the intention of living in it for a few years & potentially selling it for a profit in the future.

Since, I have met my now fiance & we've been blessed with the arrival of our first baby girl.

The house is too small for the 3 of us & 1 dog so at the end of August 2008 I decided to market the property for sale. Estate Agents valued the property at £75,000, to which I asked for it to be offered on the market at £76,500.

The property has been on the market now for nearly 2 months without a single viewing, people have requested brochure's but nothing else. Receiving a letter just recently from the estate agent informing me of what I already asumed, with the recent events of the credit crunch & failing banks the property market has taken a big hit. They asked me if I would reconsider the value of my property to maybe £72,000 - £73,000, to which I agreed to re-market the property at £73,500 as a last ditch attempt to get rid of it before the property market crashes below the original price that I paid for it & fall into negative equity.

I've been looking at my options & am now interested in the potential future benefits I may be able to provide for my family with having this house as a property on my portfolio & look to provide a future investment.

I have contacted a local letting agent, who have valued my property at £375-395 per calender month. I have about 12 months left on a 5 year fix rate mortgage with Halifax, which I pay roughly £345 per calendar month for.

Now, with the property not being in the best of area's, I am understadably worried about a few things. 1 making sure that I have tenants in all the time paying me, as I would struggle if I had to pay this mortgage & another mortgage. 2 I want to protect myself against the potential of a bad tenant, who could reck a very nice house that I currently have.

I spoke to the estate agent & they offer a Full Managed Service for 10% of the rent acheived. Now if I acheived £375, then I would walk away with £337.50 per month (a £7.50 fee per month I would need to pay), if it acheived £395, then I would walk away with £355.50 per month & make £10.50 per month.

I'm not looking to let my property out to make an extra income each month, I am looking to have tenants in to pay for my mortgage over the term of my mortgage contract & then in the future sell it & potentially pay of some of my future house's mortgage.

Can anyone who is a bit more experienced in buy to let give me any good tips that I would need to look out for & how they themselves would approach this senario if they were in my situation?

Thank you so much for reading my long winded post.

Any help would be grately appreciated.

James

[brian]

To be honest, I think you need to look at renting in more detail - there are far more costs that just the management company, not least in terms of different insurances, repairs, other admin expenses, tax liabilities, etc - plus the fact that you cannot assume 100% occupancy - means that if your margin is just £10/month then you may find it is not worth it at all.

The housing market is really bad at present, so if you are looking to sell, you have to understand you are in a buyers market - and there are precious few buyers as it is.

A 2 bedroom house should easily accommodate all three of you - may not be ideal, but I've done it before in a tiny 2 bedroom with 5 of us (3 kids) - and feeling a little bit cramped for a while may work out much better for you financially than trying to jump into the property market at a time when it is in the worst condition possible, and with economic factors continuing to be depressed. Especially when you're looking at the option of being a landlord with little experience or understanding of your costs and liabilities.

2c.

[landlordinsurance]

Brian is right. A landlord insurance policy could easily be £120 p/a meaning your £10 a month is used up straight away leaving you nothing for all the other expenditures that will arise.

I hope you find the right solution but keeping this property will definitely cost you money. Just got to get all your figures together and work out how much it is going to cost you to keep the property and weigh up whether (1) you can afford the costs and (2) whether the market will pick up enough to cover your costs plus a profit for the hard work you will be putting in.

I will be happy to give you a rough quote for the insurance side of things and others here will be able to give you ideas on other costs involved if needs be so you can get an idea of what is involved.

Good luck