Rent Your Home to Solve Housing Worries

Want to move, but trapped by the credit crunch?

Renting out your home may be an interesting solution to investigate, if you want to keep moving up the property ladder. And it’s not a crazy as it might sound at first…

Currently we’ve got a property market with low property sales, but high rental prices. Which make a good combination for shrewd investors. This could be a perfect way of side-stepping the market log-jam and moving on - rent out your current home; let the tenants cover the mortage; and buy again.

If you bought your property more than 4 or 5 years ago, it’s likely that the rent you could earn on your home could more than cover your monthly mortgage costs, because rents are currently high. At the same time, property prices are dropping, so it makes no sense to sell your property at the moment. Unless you’re willing to risk the capital appreciation that might have accrued up till late last year.

A recent letting report from RICS shows new instructions at letting agents are at an all-time high; and estate agents noting an increase in new landlords letting their own homes.

How to Capitalise on the Rental Market

Here are a few things to consider before you become a landlord:

Firstly, you need to understand your market. If you’ve got a three-bedroom house, well-maintained and well-located for schools, you’re in a good postion for a family or corporate let. If, on the other hand, it needs some tidying up and it’s not to such a high standard, then you’re better offering it to a younger family or flat-sharing.

Speak to local estate agents, who would know your area , and know what kind of rental prices your property could realistically achieve.

Don’t go out and buy furniture for tenants. It’s likely they have their own. But if someone does come along who wants to rent it furnished, then be prepared for a small outlay. Be flexible in other ways – if you don’t have a power-shower, but a prospective tenant says he’ll commit for a year if you install one, consider it might be worth spending the £300 to secure them.

If a tenant is willing to commit, but at a slightly lower rate than you’ve set, again consider if it makes sense to let your property out at the lower price, rather than run the risk of going a full month without any income. If you’ve got several prospective tenants, this won’t be an issue.

A few more things to consider before renting out your property.

You’ll probably need to convert your existing residential mortgage into a buy-to-let mortgage. At the very least, check the terms of your mortgage, and place a call to your mortgage company to let them know your intentions to rent out your property.

You’ll probably need at least a 10% deposit saved up to place as a deposit on your new property since it’s hard, if not impossible, to find 100% or even 95% mortgages any more.

What’s the Downside?

You’ll need a legally binding contract drawn up. Although a bit of searching on the web will turn up numerous law firms who specialise in downloadable legal documents - including short-term assured tenancy agreements.

Recognise or find out your legal responsibilities - in terms of the safety of your home. Particularly things like gas appliances that require annual inspections and certification by a Corgi-approved technician. If you do let your property out furnished, or partially-furnished, the furniture must meet or exceed any current fire regulations; and any electrical appliances must be checked for safety.

In your calculations, you need to factor in any costs you might have to cover when the tenants leave - from a little bit of re-decorating, to repairing fixtures and fittings, to replacing carpets.

Understand thaere is a lot of uncertainty in the market. There seems to be a glut in tenants right now; with rental prices very high. As teh property market stabilises, this could change, meaning a drop in possible rental incomes, or less tenants looking to rent your property. So you need to consider your possibilites and ability to cover tow mortages for a few months if need be.

What’s your first step?

Talk to someone who has done this. Or someone who can really help and guide you through all the different things you need to consider. After all, it’s a bit more than just decorating your house in a neutral shade throughout.

There are a number of property investment seminars that are held throughout the UK, which you could attend to hear more about becoming a landlord, and to ask questions - to see if this could be a viable way for you to move up the property ladder.

Find Out if You Would Benefit from a Free Property Investment Seminar