Cant Sell So Renting Out Instead.

[JBFTB]

I was assuming it was similar to the situation a friend of mine has had.

First off, he bought a place years back when it was dirt cheap and run down. He did it up bit by bit and then property went off like a rocket.

After that, he met someone, they also had a place, so they decided to move in together. The plan was to sell each of their respective houses and move into a bigger/better/nicer one.

His partner succeeded in selling.

He, on the other hand, took a more complex route. He decided to extend the house in order to increase its value and then sell it. The extension bit went fine. The sale, on the other hand, did not. It must be about 3 years now since he first tried to sell it, and he's been trying the entire time.

Now, since they couldn't afford the mortgage on his old place and their new place, there was only one option to achieve what they wanted - buy the new place anyway, and rent out the old place.

Unfortunately the increase in the mortgage caused by the extension (and whatever other financial jiggery-pokery involved in buying the new place) combined with fairly static rents to result in him barely breaking even most months.

On the other hand what else could he do? Having mortgaged up to the hilt, they couldn't afford to drop the price, but they had to pay for it somehow. Hence forced rent at a low price.

[GBdamo]

I really have tried to talk a friend out of this.

Got a house and a 100% mortgage in about 2005.

Now they have a baby and are thinking of another the two bd house they paid loads for is a bit small now.

So they want to move up, there house has been on the market for ages and no viewings at all. (There's a point here guys, it means it's well over priced for the current market).

So the new new idea, get a 'Let to Buy' mortgage, so they can let he house out they currently own and go and buy another one.

You can see why I tried to talk them out of it. But they weren't intrested. Turns out housing will rebound soon and everything will be like it was before, 10% rises per year and all that.

It's going to be a hard hard lesson for some people. I just wish I could make them listen, they are my friends and I have tried. There is nothing else I can do.

People have to learn from their own mistakes.

Guy I know has toyed with this idea of renting his house out.

His story is a bit of a shame tbh. Him and his sister inherited £10,000 each. His sitster pissed it up the wall, went traveling, bought designer cloths etc.. He on the other hand did the 'sensible thing' of using his money as a deposit on a house, only he couldn't afford one on his own so bought with a freind. Now the house is worth £20,000 less than he paid for it, him and his housemate haven't been talking all year.

I had a chat with him a the begining of the year and suggested they sould slash the price and get it sold, even if that did mean losing his deposit. As you can imagine this didn't go down too well.

There are so many personal stories out there. We find it very easy to offer advice, struggle to understand why people don't take it and then deride them for it.

At lot of young people have been mind wan*ed into believing in the housing market and as a result I think were going to have a generation of very disgruntled people. They will then learn the lesson and try to advise some one else who will ingnore them and so the circle continues.

D

[dellboy]

I really have tried to talk a friend out of this.

Got a house and a 100% mortgage in about 2005.

Now they have a baby and are thinking of another the two bd house they paid loads for is a bit small now.

So they want to move up, there house has been on the market for ages and no viewings at all. (There's a point here guys, it means it's well over priced for the current market).

So the new new idea, get a 'Let to Buy' mortgage, so they can let he house out they currently own and go and buy another one.

You can see why I tried to talk them out of it. But they weren't intrested. Turns out housing will rebound soon and everything will be like it was before, 10% rises per year and all that.

It's going to be a hard hard lesson for some people. I just wish I could make them listen, they are my friends and I have tried. There is nothing else I can do.

I have exactly the same situation with some friends. If they can't afford to sell and HAVE to move then at least rent the new place. I'm constantly baffled by people's assumption that "things will get better" when logic and history show, in no uncertain terms, that things sometimes get worse. They were even followers of the "soft landing" theory. I attempted to point out that inflation was therefore eroding their investment at a startling rate and that renting out to just cover the mortgage interest resulted in losses.

By the way, has the point been reached where the following is no longer true?

Even those who bought at the height of the market in 1989 have still made money.

I am dying to be able to say "As of last month, they have started losing money when you take inflation into account." I doubt we'll ever be able to say "Prices are the same as they were in 1989".

[dances with sheeple]

I have exactly the same situation with some friends. If they can't afford to sell and HAVE to move then at least rent the new place. I'm constantly baffled by people's assumption that "things will get better" when logic and history show, in no uncertain terms, that things sometimes get worse. They were even followers of the "soft landing" theory. I attempted to point out that inflation was therefore eroding their investment at a startling rate and that renting out to just cover the mortgage interest resulted in losses.

By the way, has the point been reached where the following is no longer true?

Even those who bought at the height of the market in 1989 have still made money.

I am dying to be able to say "As of last month, they have started losing money when you take inflation into account." I doubt we'll ever be able to say "Prices are the same as they were in 1989".

Question is, have those who bought in`97 and still not sold made money?

[munro]

People have to learn from their own mistakes.

Guy I know has toyed with this idea of renting his house out.

His story is a bit of a shame tbh. Him and his sister inherited £10,000 each. His sitster pissed it up the wall, went traveling, bought designer cloths etc.. He on the other hand did the 'sensible thing' of using his money as a deposit on a house, only he couldn't afford one on his own so bought with a freind. Now the house is worth £20,000 less than he paid for it, him and his housemate haven't been talking all year.

I had a chat with him a the begining of the year and suggested they sould slash the price and get it sold, even if that did mean losing his deposit. As you can imagine this didn't go down too well.

Why "pissed it up the wall" - sounds like she made a far more constructive use of the money than he did! And I bet she's had far more pleasure out of it.

[notthereyet]

I really have tried to talk a friend out of this.

Got a house and a 100% mortgage in about 2005.

Now they have a baby and are thinking of another the two bd house they paid loads for is a bit small now.

So they want to move up, there house has been on the market for ages and no viewings at all. (There's a point here guys, it means it's well over priced for the current market).

So the new new idea, get a 'Let to Buy' mortgage, so they can let he house out they currently own and go and buy another one.

You can see why I tried to talk them out of it. But they weren't intrested. Turns out housing will rebound soon and everything will be like it was before, 10% rises per year and all that.

It's going to be a hard hard lesson for some people. I just wish I could make them listen, they are my friends and I have tried. There is nothing else I can do.

If they won't listen; its a case of let them learn the hard way.

Don't they realise that a large percentage of properties which are for sale now are propertys of BTLs who cannot rent or sell.

Anyway most lenders will not lend on this basis as they know what a mess the current BTL market is in, falling property prices.

Edited August 19, 2008 by WAITFORNOW

[Agentimmo]

We thought it was the last throw of the dice when no FTBs could buy anywhere @3.5x salary repayment.

We thought it was the last throw of the dice when no FTBs could buy anywhere @5x salary IO.

We thought it was the last throw of the dice when noone could buy anything without lying about their income and shackling themselves to a mortgage that even immortal beings would regard as taking too long to pay off.

We thought it was the last throw of the dice when banks were refusing to lend any mortgages, half the country was in negative equity, and prices were collapsing.

But nooo.. they managed to come up with the 'double or quits..' can't sell your house - try not being able to sell two houses!

That Sir, Madam is post of the day and made me laugh out loud when I read it

[Telometer]

What the papers haven't pointed out is the tax-inefficiency of being a landlord and tenant simultaneously.

Consider a higher rate taxpayer who owns his home outright (mortgage paid off) which he plans to let out and rent somewhere similar.

Currently living in his house, paying no rent: Housing costs zero.

Assuming he lets his house for £1000/month and rents a similar house for £1000/month.

Net rental income = £600/month after 40% tax. Rental outgoings = £1000/month

Net Housing costs: £400/month

True... but just as true is that if he owns his house, and sells it, he will end up with a wodge of cash that will be earning interest in the bank; probably not a million miles different from £1,000 per month - upon which he will have to pay tax.

So living in the money, housing costs free; STR, housing costs rise by £400 pm.

[roadtoruin]

Question is, have those who bought in`97 and still not sold made money?

In most parts of the South East rent exceeded repayment mortgage cost in 1997. OK you have maintenance to pay as well, but the average total cost was probably still slightly undercutting renting.

Take till 2008 and even with no HPI at all the gain is 11 years of capital repayments vs zilch with renting. Even in the most HPC-hit areas I'd say you'd be hard put not to have made money unless you've been upgrading kitchens etc unnecessarily or MEWing like crazy.

[SarahBell]

renting out and buying a new one is a replacement for bridging loans?

[Its time to buy]

Just seen a house bought about a year ago - was a bit gutted when it sold.

A To Let sign went up, and then it let out.

Today just seen a eviction sign on the window, telling the tennant to get all their belongings out - challets or something?

A For Sale sign has been put up

[Mr Yogi]

They are under no obligation to, however, where there are a glut of rental properties on the market, in order to secure a tennant a landlord might have to consent to a credit check from the tennant to secure a let.

After all, the tennant would be essentially extending the landlord a line of credit by giving him a deposit and last months rent up front etc.

Today just seen a eviction sign on the window, telling the tennant to get all their belongings out - challets or something?

I can only assume we've got a lot of strong lager drinkers here today!

[Guest X-QUORK]

I can only assume we've got a lot of strong lager drinkers here today!

I believe Fred West used to keep his Tennants cool in the cellar.