Is renting when self employed a problem?

by Readers Question

4 years ago

Is renting when self employed a problem?

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Is renting when self employed a problem?

I currently have a one bedroom maisonette in Peterborough which I own outright and I was hoping to start a property portfolio, but due to being made redundant again recently, I have no option but to sell it and then rent. I could do with more rooms anyway, so it’s not all negative 🙂 Is renting when self employed a problem

I have decided to go back to being self employed (as a sales/marketing consultant) and just wondered would it be a problem to rent?

Provided I can sell quickly, I’d be able to rent fairly quickly too and I’d be cash rich so could give say, 6 months rent upfront. Would this be advisable/acceptable. Also, what are the chances of seliing my maisonette to someone who could also rent a house to me?

Sorry if these are daft questions but I’ve lived in my own place for 27 years and have never rented.

Many thanks

Eddie

Comments

Mark Alexander

4 years ago

Hi Eddie

It may be difficult for you to pass referencing being newly self employed. 6 months rent up front may appeal to some landlords but many will be suspicious as this offer is commonly associated with cannabis factory operators who prey on naive new landlords and then convert the property to grow cannabis. Also, if you are unfortunate enough to find a bad landlord and there are problems with the property, paying 6 months rent in advance will not work in your favour either.

The best thing you can do is have a guarantor lined up, perhaps a brother or sister or a good friend and preferably a home-owner. You could give them the up-front money in exchange for the guarantee.

The more you can tell a landlord about your finances the better. Therefore, if you have just sold your property and have lots of cash why not show them your completion of sale statement and a copy of your bank statement for the account the money was transferred into?

With regards to selling, I suggest you don't over complicate that. Just put the property on the market with a good estate agent. The chances of selling your maisonette to a person who has the ideal property for you to rent are very slim indeed.
.

Rob

4 years ago

Why are you selling it, why dont you rent it out then use the rent you get to pay the rent on a place for you, then give it 12 months when you would have been working for a while and you can mortgage the property to release money to buy other properties.

4 years ago

I'm with Rob.

Why sell your asset?

There are costs associated with selling. You are stepping off the property ladder!

Rent out the property and use the rental income to pay for your rental home.

If you want to start building a property portfolio, you could then take out a mortgage on the masionette and use that money as a deposit for your next property.

Rather than arriving at your retirement with an oak tree that you have to cut down to fund later life, use equity release from the masionette as acorns to grow additional assets.

Arrive at retirement with an orchard! 🙂

Your little masionette is a great asset. Don't sell it is my advice.

DC

4 years ago

I go along with those that are saying keep your property and rent it out if you can afford to of course.

I own five 1 bed properties in Peterborough and they give me by far the best return on investments out of my portfolio.

If you do decide to sell though I go along with Mark's advice that you should find the best selling agent and not try to kill two birds with one stone by seeking out that perfect agent that will also line you up with the landlord that will rent to you.

There are a couple of estate agents in the City that specialise in investment properties/landlords but they possibly may not be the best ones to get you best money on your property sale so I would keep an open mind on the two different aspects of selling and renting.

Eddie Edwards

4 years ago

Reply to the comment left by "Mark Alexander" at "24/06/2014 - 08:22":

Hi Mark

Thank you for taking the time to leave such an informative comment.

I'd never thought of the cannabis factory view 🙂 Likewise, hadn't thought about bad lanlords either...

Using a friend as guarantor and giving them the money is a good idea.

I've spoken to an estate agent and they say there is currently a good market for proerties like mine (don't they always say this...), so probably need to re-evaluate my finances and see what I can do.

Eddie Edwards

4 years ago

Reply to the comment left by "Vanessa Warwick" at "24/06/2014 - 21:49":

Vanessa

Thank you so much, this is awesome advice and something I never even knew was possible.

If I move out and do a BTL for 75% of the value, this would help with both my short term and long term financial goals.

Brilliant 🙂

4 years ago

Well done Eddie.

A perfect example of tapping into the "hive mind" of knowledge.

Good luck with your next move! 🙂

matchmade

4 years ago

Reply to the comment left by "Eddie Edwards" at "27/06/2014 - 12:54":

Hang on Eddie: what are your chance of getting a BTL mortgage if you are newly self-employed? Most lenders demand to see an employed income of £25,000, on top of assessing whether the proposed rent will cover the mortgage interest (plus stress-testing whatever percentage increase in base rates their risk assessors demand), so you may well struggle to get a 75% BTL loan.

In my experience lenders are extremely wary of self-employed people and will need to see at least three years accounts and evidence of income before they will even consider a loan: they are obsessed to the point of mania with what they choose to call "income", completely ignoring savings, other rental income, other capital assets and so on. I would seek advice from a mortgage broker before plunging into BTL applications.

Perhaps it would be better to stick with your current lender and consider asking for permission to let, perhaps soft-pedalling the redundancy/self-employed background (unless asked direct) and presenting the situation as more of a case of you needing to rent temporarily elsewhere yourself for reasons of work, and therefore you would like to rent out your flat.

Mandy Thomson

4 years ago

I would first ask your current lender for consent to let, but someone told me recently that lenders are becoming much stricter about this now, whereas when I did this in the past it was practically a rubber stamping exercise. You might in any case get a better deal if you were to remortgage, as I did.

When I applied for my first BTL mortgage in 2011, I only had a small income from renting out my former home, and only savings aside from that. Back then, there were only about two lenders who were prepared to grant a mortgage without a minimum income, one being The Mortgage Works (TMW). I consulted a mortgage broker attached to the estate agent I was buying my second property from, who found them for me.

It's my understanding that now there are many more lenders who don't have minimum income requirements and are happy to accept projected rental income as the repayment vehicle, but I'm by no means an expert in this area - perhaps others can clarify?

Allan Wadsworth

4 years ago

So many choices.
How about this one. - I take over your mortgage and you continue to buy it but from me via a 3rd party.
Yes everyone who is reading this will say - That's illegal - Its not if done via the correct legal process and it might be just what you need.
Allan

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