These days it matters more than ever before that you pay attention to the finance side of things when renting your property.
The credit crunch has led to more reluctant landlords. Some will be profiting from renting others won’t. You could just be storing up problems for
later on.
The first question to ask yourself is can you afford to rent? To answer this question you need three sets of information.
i. how much rent can you achieve
ii. how much your mortgage payments will be
iii. your other outgoings and costs in relation to the property
Obviously these need to take into account your future plans.
To get an idea of how much you can rent you’ll get you need to speak to some letting agents and peruse adverts online and in the local papers. It’s worth knowing that
not all properties achieve their advertised rents. It’s not uncommon for an agent to knock off £10 or £20 to get the right tenant into a property.
You won’t be able to get a final view on your mortgage payments until you have spoken to your lender. But your current payments can act as a guide in the meantime.
Finally, work out your other costs including payments to agents and the cost of complying with the relevant regulations. You should also allow for voids
– don’t assume your property will be occupied 12 months of the year and repairs.
Eventually you should be able to get a picture of the profit you’re likely to make, if any.
What if the rent is lower than you were hoping for? Is it ever worth subsidising a rental property? It’s possible if you remain on a residential mortgage you won’t make much monthly profit.
It may be worth overlooking this if you can afford to and if you like the flexibility of remaining on a residential mortgage.
Moving to a BTL interest only mortgage will improve you cash flow short term but means you will have to remortage again if you want to move back into your property.
If house prices fall much further and your equity is limited this could be tricky.
Your current mortgage lender should be your first port of call but you’d be wise to speak to an independent mortgage broker as well.