New landlord asks re BTL mge/agent/insurance

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    New landlord asks re BTL mge/agent/insurance

    Silly silly me!
    I decided to jump on the property developing ladder just at the wrong time... I've invested almost all my savings and spent the last 6 months doing up a house. I've had 2 estate agents round yesterday, telling me I should get around 140k for it. I need 148k to break even, so I move to option 2, which is letting it. Now I don't know anything about being a landlord, other than from having been a tenant in the past, so I need some advice!
    I have a few problems/questions though:
    First of all, if I change to a BTL mortgage, I think the interest rates would go up by about 1% from what I have now (tracker at 5.77% at the moment, no early redemption charge). I think I would also need 25% deposit, but with all my savings spent on the house, I can't really put up any more. The increase in value from when I bought it doesn't give me 25% equity.
    So what are the implications of keeping my mortgage but having tenants in?
    Second big question is about using an agent or not. Tenant find service? Full management? Ideally I'd want full management, just because I have no experience of being a landlord. But it all comes down to the money... If I pay the agency 10%+VAT (which seems to be the norm), the rent just covers the agent's fee and the mortgage payments, with no allowance for wear and tear, void periods or interest rates going up!
    Thirdly, insurance? I have buildings insurance at the moment but not as a landlord. Surely if I get landlord insurance, they'll inform the mortgage company, so I come back to question 1. If I keep it as it is and there's a problem, surely the insurer can refuse to pay out...
    I feel like I'm going round in circles and that whatever I do, I'm going to lose a fortune!

    Any advice anyone? Other than tell me I was stupid to buy 9 months ago... I know that now...Hindsight, if only...

    #2
    Originally posted by ysatiss View Post
    First of all, if I change to a BTL mortgage, I think the interest rates would go up..

    So what are the implications of keeping my mortgage but having tenants in?
    You can sublet only if mortgagee (lender) consents, no matter what type of mortgage you have created, so request its consent.
    JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
    1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
    2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
    3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
    4. *- Contact info: click on my name (blue-highlight link).

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      #3
      Originally posted by ysatiss View Post
      Thirdly, insurance? I have buildings insurance at the moment but not as a landlord. Surely if I get landlord insurance, they'll inform the mortgage company, so I come back to question 1. If I keep it as it is and there's a problem, surely the insurer can refuse to pay out.
      Is it a house or a flat? If the latter, there ought to be a single policy for all the block's flats- so fewer problems for you.

      If you insure your own property, whether house or flat, you must notify insurer that you wish to sublet. Failure to do so will usually invalidate your policy, as you surmise- so you would not only breach the mortgage conditions (again) but be totally unprotected in the event of any claim no matter how small. Why court potential bankruptcy? Notify!
      JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
      1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
      2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
      3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
      4. *- Contact info: click on my name (blue-highlight link).

      Comment


        #4
        Originally posted by jeffrey View Post
        Is it a house or a flat? If the latter, there ought to be a single policy for all the block's flats- so fewer problems for you.
        All sound advice from Jeffers, but I should also add that if your property is a flat, then you will almost certainly also need to obtain "consent to sublet" from your freeholder. Also check your lease for prohibitions against subletting - some Housing Association and Guinness Trust developments and similar "social housing" projects have these sort of prohibitions in their leases in order to preserve the character of their developments. I don't know how enforceable such covenants are (having never litigated one), but I do know for certain that you will not want to find out at your own expense and inconvenience.

        At least you are aware of the pitfalls, and you realise that you should put the property into the hands of experienced professionals, but don't necessarily be seduced by an NAEA/ARLA sticker on the window - whilst these agents should be more knowledgable and more ethical than unregulated ones, that is not always the case. You could always check the depth of their knowledge by asking them a few testing questions and gauge the confidence of their response yourself, and you could also test the correctness of the answers themselves by posting the responses on here for a 2nd opinion.

        Good luck.
        Health Warning


        I try my best to be accurate, but please bear in mind that some posts are written in a matter of seconds and often cannot be edited later on.

        All information contained in my posts is given without any assumption of responsibility on my part. This means that if you rely on my advice but it turns out to be wrong and you suffer losses (of any kind) as a result, then you cannot sue me.

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          #5
          You have taken a very important step to becoming an experienced and knowledgeable landlord by joining this forum. Read it's contents carefully particularly in the matter of agents, tenant selection and potential tenant problems. If, after taking due account of what you learn your figures stack up then I am sure it will be by the tightest of margins and you cannot afford an extended period of no rental income while the slow wheels of justice turn to evict your "professional" non paying tenant.

          P.P.
          Any information given in this post is based on my personal experience as a landlord, what I have learned from this and other boards and elsewhere. It is not to be relied on. Definitive advice is only available from a Solicitor or other appropriately qualified person.

          Comment


            #6
            Thanks to all of you for your advice. I will take on board all your comments and not take the chance of not having the proper mortgage or insurance.
            (Just for info, it is a house not a flat)

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