We proceeded to rent the house out for several years to groups of four students on joint contracts.
- Asking price: £52,000.
- Initial agreed price: £50,000.
- Purchase price: £53,000.
- Initial monthly rent: £760 x 9 (plus £450 3-month summer retainer).
- Initial rental return: 13.7% (minus water bills and later, other bills as rents became inclusive of bills).
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As we had nearly always let the shared houses on joint tenancies, to people who knew each other and had decided to move in together, we were mostly shielded from their internal disputes and issues. We had a few rude students; people who wouldn’t offer the handyman a cup of tea while he worked there all day, and while making constant cups for themselves, but there were no earth-shattering issues during the initial few years of renting it out.
The boring bit, about rental returns for those interested (otherwise skip this):
What’s more, during those first few years, we received a good return; at best we were getting £195 x 4 per month, for 9 months of the year, and then a couple of hundred pounds as a ‘retainer’ over the summer months, which were interpreted as lasting from mid-June to mid-September in this small town (but only July to August in the city). We therefore grossed about £7,500 for a few years, which represented a 14% return on the £53,000.
In terms of our investment, we had put down a 15% deposit, that is, £7,950. Together with furniture, decoration and so on, we laid out about £12,000, initially, in order to be able to rent the house out. Mortgage interest rates were high at the time and we were paying about £600 a month at the peak. This meant that our annual gross profit (rent minus mortgage payments) was about £300 at one point, and the costs of insurance, maintenance and so on meant we were operating at a loss. The annual water bill alone, for which we assumed responsibility, came to £700. We weren’t perturbed, being mainly focussed on capital gain over the long term, and prices seemed to only go in one direction - up.
So we rented to groups of students until the town seemed to undergo some kind of crisis, with a disappearing populace. We just couldn’t find tenants to fill it and friends who rented out a house nearby went through the same thing, managing to get maybe two tenants at any one time for a four-bed house. It turned out that the reason for this inability to find students to rent the house was that unbeknown to us, many of the students at the former polytechnic were now being taught in large, new premises in the city and others had decided to save money by studying whilst they stayed in the family home.