Renting out a property with a mortgage... is it really worth it?

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    Renting out a property with a mortgage... is it really worth it?

    I know my partner is thinking of selling.

    We have had a 1 bed flat in England rented out for 18 months after initially redecorating the entire flat and putting in new carpets throughout.

    The 1st tenants paid 1 months rent before we stopped getting money. It took a further 3 months for the agency to go into the property - until then they advised there was nothing we could do other than hope they responded to letters.

    The tenants had upsticks and moved out leaving food in the fridge and freezer with the power off - it was vile!. They moved abroad so nothing we could do.
    They had also made a mess of the furnishings and left a load of crud in there we had to get rid of.

    The 2nd tenants after a few months managed to flood the shop below the flat. We paid around £1000 to sort out the bathroom there was a small leak with water dripping down the back of the bath when they showered so had a full new enclosed shower and cubicle installed. The flood came when they used the shower mid work with no screen at all - despite the plumber telling them not to (they had a bath which was fine) until the work was finished - took 4 days i believe.

    And now we have an £800 + vat bill due to condensation damage AND they are asking for a new front door which is now draughty - after they asked for some wood to be plained off the door in a very wet spell - which the landlord agency did for them. it has now shrunk back in the hot weather - which is what wooden doors tend to do. This is an expensive fire door.

    at the best of times with no issues the rent we receive just about covers the mortgage so with all these issues it is a serious question.

    Is it worth it, or is letting a flat really for people with the money to buy outright?

    thanks and excuse the rant!.

    Mike.

    #2
    Can you tell us if your agent carried out proper referencing through a recognised source? Did they take a decent deposit? Were your tenants gainfully employed with proof of income? Was your agent regulated because if so and they failed you, you can make a formal complaint, and you might be able to claim compensation? Did you obtain written permission from your lender to let the property?
    The advice I give should not be construed as a definitive answer, and is without prejudice or liability. You are advised to consult a specialist solicitor or other person of equal legal standing.

    Comment


      #3
      Thanks for your message.

      The mortgage people were informed, when it comes up for renewal we need to change it, but they are happy to keep as is until that time.
      The 1st tenants were already living in one of the agencies places so they deemed that worthy of recommending them as ok. The current tenants were also previously renting from the company. They have never missed a payment and are employed as far as I know. The agency is regulated, the 1st tenant mess up is water under the bridge, however IF it transpires the door needs replacing, I will be looking for the agency to pay for that seeing as it was them who said we needed to allow them to send a joiner over to "fix" the door.

      Anyway this is kind of flooding over to my other post and so I guess I should leave that one at that.

      I guess I am just after confirmation that we have been unlucky, and that more often than not renting out a property does generally go smoothly.

      thanks

      M.

      Comment


        #4
        Most years I make a profit(**): But not every year...

        (**) - this may even line up with what my tax return says...
        I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

        Comment


          #5
          Originally posted by bigmike20vt View Post
          IF it transpires the door needs replacing, I will be looking for the agency to pay for that seeing as it was them who said we needed to allow them to send a joiner over to "fix" the door.
          The cause of the problem with the door: it won't have been sealed (ie with paint or varnish) around the edges, so when it's got wet/damp, it will have swelled. Once that's happened, in the winter, and your tenant can't open the door, there's probably not a lot that could have been done at that point other than taking a plane to it.

          FYI there a plenty of draught-proofing systems for badly leaking timber doors that will probably cure the current problem, such as this one.

          Comment


            #6
            thanks for the info guys as you can probably tell we are new to this!.

            Comment


              #7
              Is it worth it?

              If your rental is only just covering your mortgage interest repayments AND you have no reserves to cover (say) a 5 month period without rent, then you do not really have a workable business plan. This is a business, you have to think in a businesslike manner. It may work fine, and you get many years of your mortgage paid for you. However, one serious hiccough and you could be facing repossession and have your dreams shattered.

              Comment


                #8
                You were unlucky to start out with a bad tenant. I think the most important thing you have to do in this business, is to make sure you you identify and reject this type of person. Unfortunately the law is very weak in relation to protecting LLs against bad tenants and by the time you recover your property you are likely to have lost a great deal of money.
                Even with your present fairly normal tenants, it seems that you are doing no better than break even. I think that at the present time, with many types of property, this is not unusual. In the past we have been able to count on annual capital gain to make the sums add up but now of course we are more likely to be looking at annual capital losses.
                You may have to run at a break-even/loss level for quite some time. Really until the economy recovers and property prices start to rise again. You should look carefully at the rent you are charging - is there scope for an increase.
                If you can't afford to wait for better times you will have to sell, but you are selling on a depressed market and my guess is that in 2 or 3 years it will all look different and better.

                Comment


                  #9
                  thanks for your thoughts, the mortgage is a full repayment not interest only. I think Johnjw nailed it with why we are renting out. It was not done as a business as such, its just it did not seem a good time to sell the flat so we thought if we could get someone effectively paying off our mortgage with only a small amount of outlay for maintenance whilst the market recovered then it seemed a good idea at the time.

                  As both of us are people who rented for 10 years or so in various properties before buying and always leaving the place equivalent or better than when we moved in, we both (naively) assumed that most professional adults would be the same.

                  Thanks for your thoughts If the current tenants move out we may have a decision to make.

                  Comment


                    #10
                    Originally posted by bigmike20vt View Post
                    the flat so we thought if we could get someone effectively paying off our mortgage with only a small amount of outlay for maintenance
                    If you are not paying tax on the rental income - you should be

                    Mortgage interest is allowable against tax.

                    Comment

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