buy to let or holiday let?
Poll: buy to let or holiday let?
Total Members Polled: 80
Discussion
Worth being careful as there are lots of other things that can cost.
For example your list needs to cover (and I may have missed some):
Any provisions for empty periods
Charges the agent will levy for finding new tenants
Initial fitout (if including curtain poles, lampshades, replacement locks etc)
Smoke alarms
Gas safety check
EICR (+ possibly new consumer unit)
To put into context, for a 3 bed semi a new boiler will cost £2500. With that surplus of £270/mth, the year you need a new boiler you'll see a net cash outflow. If you need to pay someone to redecorate or re-carpet it then you could drop a couple of £k on that too.
For example your list needs to cover (and I may have missed some):
Any provisions for empty periods
Charges the agent will levy for finding new tenants
Initial fitout (if including curtain poles, lampshades, replacement locks etc)
Smoke alarms
Gas safety check
EICR (+ possibly new consumer unit)
To put into context, for a 3 bed semi a new boiler will cost £2500. With that surplus of £270/mth, the year you need a new boiler you'll see a net cash outflow. If you need to pay someone to redecorate or re-carpet it then you could drop a couple of £k on that too.
Pixelpeep 135 said:
Welshbeef said:
Pixelpeep 135 said:
cost £140,000.00
deposit £35,000.00
LTV 75%
mortgage £105,000.00
based on rate 2.2%
period 25 years
cost £456.00 pm
rent £795.00
difference £339.00 pm
Mgmt Fees 20%
cost for mgmt £67.80 pm
END FIGURE £271.20 pm surplus
Spent 10 mins on right move, found a place for sale and then found a place the same, in the same street which is up for rent, did some sums.
What am i missing ?
Where are you seeing BTL rates at 2.2% in todays market?deposit £35,000.00
LTV 75%
mortgage £105,000.00
based on rate 2.2%
period 25 years
cost £456.00 pm
rent £795.00
difference £339.00 pm
Mgmt Fees 20%
cost for mgmt £67.80 pm
END FIGURE £271.20 pm surplus
Spent 10 mins on right move, found a place for sale and then found a place the same, in the same street which is up for rent, did some sums.
What am i missing ?
Oh and what about unexpected costs?
Welshbeef said:
Pixelpeep 135 said:
Welshbeef said:
Pixelpeep 135 said:
cost £140,000.00
deposit £35,000.00
LTV 75%
mortgage £105,000.00
based on rate 2.2%
period 25 years
cost £456.00 pm
rent £795.00
difference £339.00 pm
Mgmt Fees 20%
cost for mgmt £67.80 pm
END FIGURE £271.20 pm surplus
Spent 10 mins on right move, found a place for sale and then found a place the same, in the same street which is up for rent, did some sums.
What am i missing ?
Where are you seeing BTL rates at 2.2% in todays market?deposit £35,000.00
LTV 75%
mortgage £105,000.00
based on rate 2.2%
period 25 years
cost £456.00 pm
rent £795.00
difference £339.00 pm
Mgmt Fees 20%
cost for mgmt £67.80 pm
END FIGURE £271.20 pm surplus
Spent 10 mins on right move, found a place for sale and then found a place the same, in the same street which is up for rent, did some sums.
What am i missing ?
Oh and what about unexpected costs?
Pixelpeep 135 said:
cost £456.00 pm
rent £795.00
difference £339.00 pm
[b]Mgmt Fees 20%
cost for mgmt £67.80 pm[/b]
END FIGURE £271.20 pm surplus
You've put in 20% here - presumably based on "full management" figures generally shown online - but calculated it based on your surplus rather than the monthly rental figure?rent £795.00
difference £339.00 pm
[b]Mgmt Fees 20%
cost for mgmt £67.80 pm[/b]
END FIGURE £271.20 pm surplus
LooneyTunes said:
Pixelpeep 135 said:
cost £456.00 pm
rent £795.00
difference £339.00 pm
[b]Mgmt Fees 20%
cost for mgmt £67.80 pm[/b]
END FIGURE £271.20 pm surplus
You've put in 20% here - presumably based on "full management" figures generally shown online - but calculated it based on your surplus rather than the monthly rental figure?rent £795.00
difference £339.00 pm
[b]Mgmt Fees 20%
cost for mgmt £67.80 pm[/b]
END FIGURE £271.20 pm surplus
thank you
cost for mgmt £159.00
END FIGURE £180.00
Pixelpeep 135 said:
cost £140,000.00
deposit £35,000.00
LTV 75%
mortgage £105,000.00
based on rate 2.2%
period 25 years
cost £456.00 pm
rent £795.00
difference £339.00 pm
Mgmt Fees 20%
cost for mgmt £67.80 pm
END FIGURE £271.20 pm surplus
Spent 10 mins on right move, found a place for sale and then found a place the same, in the same street which is up for rent, did some sums.
Other than insurance and stuff is that basically it?
You need to look at % rather than £ to compare to other solutions for your cash, and depending on your objectives (which I don't really understand). Based on £795 rent minus £68 fees, that's probably a yield of around 5% net of 20% tax (or are you a 40% tax payer) but before any maintenance/repairs/misc cost on the assumption that the £140k property will be £150k by the time it is rented. You need to account for gaps in tenancy and future CGT. deposit £35,000.00
LTV 75%
mortgage £105,000.00
based on rate 2.2%
period 25 years
cost £456.00 pm
rent £795.00
difference £339.00 pm
Mgmt Fees 20%
cost for mgmt £67.80 pm
END FIGURE £271.20 pm surplus
Spent 10 mins on right move, found a place for sale and then found a place the same, in the same street which is up for rent, did some sums.
Other than insurance and stuff is that basically it?
If you're absolutely adamant that you want to buy a property without exploring other more fiscally efficient avenues which may be less time consuming and better financial choices then it's not great but you could do worse.
Edited by nickfrog on Thursday 21st April 17:12
Interest only mortgage?
Mmmm, figures just work. It's a bet on capital appreciation - and if that is on your side then you'll come out ok. I think they used to say houses double in value roughly every 10yrs?
Just do it, wish I had of many years ago but kept putting it off thinking houses were due a correction... now look where we are... could still do it today but a 25yr mortgage is might be a stretch (for me).
Mmmm, figures just work. It's a bet on capital appreciation - and if that is on your side then you'll come out ok. I think they used to say houses double in value roughly every 10yrs?
Just do it, wish I had of many years ago but kept putting it off thinking houses were due a correction... now look where we are... could still do it today but a 25yr mortgage is might be a stretch (for me).
Pixelpeep 135 said:
Welshbeef said:
Pixelpeep 135 said:
Welshbeef said:
Pixelpeep 135 said:
cost £140,000.00
deposit £35,000.00
LTV 75%
mortgage £105,000.00
based on rate 2.2%
period 25 years
cost £456.00 pm
rent £795.00
difference £339.00 pm
Mgmt Fees 20%
cost for mgmt £67.80 pm
END FIGURE £271.20 pm surplus
Spent 10 mins on right move, found a place for sale and then found a place the same, in the same street which is up for rent, did some sums.
What am i missing ?
Where are you seeing BTL rates at 2.2% in todays market?deposit £35,000.00
LTV 75%
mortgage £105,000.00
based on rate 2.2%
period 25 years
cost £456.00 pm
rent £795.00
difference £339.00 pm
Mgmt Fees 20%
cost for mgmt £67.80 pm
END FIGURE £271.20 pm surplus
Spent 10 mins on right move, found a place for sale and then found a place the same, in the same street which is up for rent, did some sums.
What am i missing ?
Oh and what about unexpected costs?
Since that current deal taken out rent has increased year on year, my salary has increased and don’t have debts. Mortgage % is broadly similar, they wouldn’t even remotely offer me a mortgage loan value close to what I have. What a farce.
Pixelpeep 135 said:
Shops with flats above?
No I wouldn't go near a shop!gotoPzero said:
Evoluzione said:
Commercial buy to let is where i'd be going. Workshops, units etc.
Good luck finding anything for sale. Stuff that is for sale is insane money.Then tenants will want a raft of work doing before they take the lease.
Rents have sky rocketed in the last year but so have the expectations of the tennants.
I have been watching a large 20k sq ft unit being prepped for a new client out my window all week. So far they must have spent £50k on it. I reckon another 50-75k to go.
Its been sat empty for the last 2 years after the last tenant was in there for 18 months. I suspect its 8-10k a month rent. So the owner is probably eating the first 3 years rent in getting it ready plus the voids.
Again there are always exceptions but in the whole I dont think its anywhere as good as it was.
The advantage of buying is they are very much WYSIWYG. No hidden damp patches, filler and paint covering over god knows what.
Phooey said:
Interest only mortgage?
Mmmm, figures just work. It's a bet on capital appreciation - and if that is on your side then you'll come out ok. I think they used to say houses double in value roughly every 10yrs?
Just do it, wish I had of many years ago but kept putting it off thinking houses were due a correction... now look where we are... could still do it today but a 25yr mortgage is might be a stretch (for me).
In some ways it is, but the other way to look at it is that in ~25 years he’ll have a house paid for (and an ongoing income stream). Mmmm, figures just work. It's a bet on capital appreciation - and if that is on your side then you'll come out ok. I think they used to say houses double in value roughly every 10yrs?
Just do it, wish I had of many years ago but kept putting it off thinking houses were due a correction... now look where we are... could still do it today but a 25yr mortgage is might be a stretch (for me).
The other factor to consider is that rental income generally broadly tracks house prices. Those with properties bought 25 years ago will usually be charging rent based on today’s market. Of course that does make house price an appreciation important part of the equation but to reach a view on that you need to go a step further and consider the impact a period of inflation could have (and how that impacts any repayment or income strategy).
Those management fees also hammer the amount of free cash the asset throws off initially. Unless there’s a reason to be that hands off then the return could look better by taking a less comprehensive service.
As mentioned in earlier post, the biggest risk factor is really around the ability to deal with costs associated with ongoing maintenance or a bad tenant. If you’re only banking £200/mth from a property then you don’t need to be a genius to see that even a new boiler will,wipe out a long period of cash flow and it could take years to recoup the cost of a tenant from hell.
Pixelpeep 135 said:
cost £140,000.00
deposit £35,000.00
LTV 75%
mortgage £105,000.00
based on rate 2.2%
period 25 years
cost £456.00 pm
rent £795.00
difference £339.00 pm
Mgmt Fees 20%
cost for mgmt £67.80 pm
END FIGURE £271.20 pm surplus
Spent 10 mins on right move, found a place for sale and then found a place the same, in the same street which is up for rent, did some sums.
Other than insurance and stuff is that basically it?
To measure the return better use I/o mortgage and 10% management fee. This will double surplus / yield.deposit £35,000.00
LTV 75%
mortgage £105,000.00
based on rate 2.2%
period 25 years
cost £456.00 pm
rent £795.00
difference £339.00 pm
Mgmt Fees 20%
cost for mgmt £67.80 pm
END FIGURE £271.20 pm surplus
Spent 10 mins on right move, found a place for sale and then found a place the same, in the same street which is up for rent, did some sums.
Other than insurance and stuff is that basically it?
Edited by Pixelpeep 135 on Thursday 21st April 16:11
Note you will pay tax in all rental income hower, although on fhl the interest costs can be offset.
LooneyTunes said:
Phooey said:
Interest only mortgage?
Mmmm, figures just work. It's a bet on capital appreciation - and if that is on your side then you'll come out ok. I think they used to say houses double in value roughly every 10yrs?
Just do it, wish I had of many years ago but kept putting it off thinking houses were due a correction... now look where we are... could still do it today but a 25yr mortgage is might be a stretch (for me).
In some ways it is, but the other way to look at it is that in ~25 years he’ll have a house paid for (and an ongoing income stream). Mmmm, figures just work. It's a bet on capital appreciation - and if that is on your side then you'll come out ok. I think they used to say houses double in value roughly every 10yrs?
Just do it, wish I had of many years ago but kept putting it off thinking houses were due a correction... now look where we are... could still do it today but a 25yr mortgage is might be a stretch (for me).
The other factor to consider is that rental income generally broadly tracks house prices. Those with properties bought 25 years ago will usually be charging rent based on today’s market. Of course that does make house price an appreciation important part of the equation but to reach a view on that you need to go a step further and consider the impact a period of inflation could have (and how that impacts any repayment or income strategy).
Those management fees also hammer the amount of free cash the asset throws off initially. Unless there’s a reason to be that hands off then the return could look better by taking a less comprehensive service.
As mentioned in earlier post, the biggest risk factor is really around the ability to deal with costs associated with ongoing maintenance or a bad tenant. If you’re only banking £200/mth from a property then you don’t need to be a genius to see that even a new boiler will,wipe out a long period of cash flow and it could take years to recoup the cost of a tenant from hell.
Pay off the mortgage = pay more tax.
Welshbeef said:
LooneyTunes said:
Phooey said:
Interest only mortgage?
Mmmm, figures just work. It's a bet on capital appreciation - and if that is on your side then you'll come out ok. I think they used to say houses double in value roughly every 10yrs?
Just do it, wish I had of many years ago but kept putting it off thinking houses were due a correction... now look where we are... could still do it today but a 25yr mortgage is might be a stretch (for me).
In some ways it is, but the other way to look at it is that in ~25 years he’ll have a house paid for (and an ongoing income stream). Mmmm, figures just work. It's a bet on capital appreciation - and if that is on your side then you'll come out ok. I think they used to say houses double in value roughly every 10yrs?
Just do it, wish I had of many years ago but kept putting it off thinking houses were due a correction... now look where we are... could still do it today but a 25yr mortgage is might be a stretch (for me).
The other factor to consider is that rental income generally broadly tracks house prices. Those with properties bought 25 years ago will usually be charging rent based on today’s market. Of course that does make house price an appreciation important part of the equation but to reach a view on that you need to go a step further and consider the impact a period of inflation could have (and how that impacts any repayment or income strategy).
Those management fees also hammer the amount of free cash the asset throws off initially. Unless there’s a reason to be that hands off then the return could look better by taking a less comprehensive service.
As mentioned in earlier post, the biggest risk factor is really around the ability to deal with costs associated with ongoing maintenance or a bad tenant. If you’re only banking £200/mth from a property then you don’t need to be a genius to see that even a new boiler will,wipe out a long period of cash flow and it could take years to recoup the cost of a tenant from hell.
Pay off the mortgage = pay more tax.
LooneyTunes said:
To put into context, for a 3 bed semi a new boiler will cost £2500. .
Eh?Maybe in Harrods.
https://www.cityplumbing.co.uk/Product/Heating/Boi...
Groat said:
Good catch. Just checked and had forgotten that the most recent one had the H/W was electric, gas CH, so all removed and new pipe work to put it all on a new combi. Straight swaps a grand or so cheaper but will still make a big dent in £180/mth cash surplus. Apologies to all for any confusion. I’ve got numerous buy to let apartments. Two bed flats for me are the sweet spot for less risk / maintenance and maximum profits.
Most were bought outright, but for the few with BTL mortgages, the general figures (excluding stamp duty and solicitors fees in the first year) are generally:
Purchase price £120,000
Investment Deposit £40,000
Mortgage £80,000 interest only £148/month, £1776/year
Service charge £70/month, £840/year
Property Owners Liability Insurance £85/year
Total costs £2,701
Rent received £650/month, £7800/year
Net profit £5099
Tax credit on mortgage interest @20% £355.20
Excludes any internal repairs / maintenance of course.
Currently looking for two holiday let properties. The problem is that all the nice places have shot up massively in price and the sums are tight.
Taking into consideration:
Air BnB fees
Cleaning / changeover costs
Maintenance
Council Taxes
Insurance
Furnishing
Void periods (assume 50% occupancy rate)
Energy costs (anyones guess where these will go)
With all of the above, they can still make a profit, however the current running costs and high sale prices have squeezed the gap massively..
Still appeals though as we do fancy somewhere to bolt off to on a regular basis, so a second home in a nice area would be great. Would save on our holiday costs also.
Gut feeling though is that I’ll end up getting more apartments. The rental market in our area is very good for these type of properties and I’ve a proven track record so can easily fund the additional ones.
Capital appreciation over 5 years has also seen a very healthy sum added to the asset value as well as the monthly income.
As always, the key to it all is getting good tenants and not having any void periods.
It’s not for everyone, but it’s worked for me and is mostly passive income, but you do need to know what you’re doing. Being in the property business all my life has helped in this respect.
Most were bought outright, but for the few with BTL mortgages, the general figures (excluding stamp duty and solicitors fees in the first year) are generally:
Purchase price £120,000
Investment Deposit £40,000
Mortgage £80,000 interest only £148/month, £1776/year
Service charge £70/month, £840/year
Property Owners Liability Insurance £85/year
Total costs £2,701
Rent received £650/month, £7800/year
Net profit £5099
Tax credit on mortgage interest @20% £355.20
Excludes any internal repairs / maintenance of course.
Currently looking for two holiday let properties. The problem is that all the nice places have shot up massively in price and the sums are tight.
Taking into consideration:
Air BnB fees
Cleaning / changeover costs
Maintenance
Council Taxes
Insurance
Furnishing
Void periods (assume 50% occupancy rate)
Energy costs (anyones guess where these will go)
With all of the above, they can still make a profit, however the current running costs and high sale prices have squeezed the gap massively..
Still appeals though as we do fancy somewhere to bolt off to on a regular basis, so a second home in a nice area would be great. Would save on our holiday costs also.
Gut feeling though is that I’ll end up getting more apartments. The rental market in our area is very good for these type of properties and I’ve a proven track record so can easily fund the additional ones.
Capital appreciation over 5 years has also seen a very healthy sum added to the asset value as well as the monthly income.
As always, the key to it all is getting good tenants and not having any void periods.
It’s not for everyone, but it’s worked for me and is mostly passive income, but you do need to know what you’re doing. Being in the property business all my life has helped in this respect.
AAAARGH!! Just missed this!
https://www.rightmove.co.uk/properties/122614052#/...
My mate manages it. £400pcm rent. Advertised on 20/4/22, lasted exactly 1 day on the market.
Oh s
t! I forgot! These don't really exist....
https://www.rightmove.co.uk/properties/122614052#/...
My mate manages it. £400pcm rent. Advertised on 20/4/22, lasted exactly 1 day on the market.
Oh s
t! I forgot! These don't really exist....LooneyTunes said:
Phooey said:
Interest only mortgage?
Mmmm, figures just work. It's a bet on capital appreciation - and if that is on your side then you'll come out ok. I think they used to say houses double in value roughly every 10yrs?
Just do it, wish I had of many years ago but kept putting it off thinking houses were due a correction... now look where we are... could still do it today but a 25yr mortgage is might be a stretch (for me).
In some ways it is, but the other way to look at it is that in ~25 years he’ll have a house paid for (and an ongoing income stream).Mmmm, figures just work. It's a bet on capital appreciation - and if that is on your side then you'll come out ok. I think they used to say houses double in value roughly every 10yrs?
Just do it, wish I had of many years ago but kept putting it off thinking houses were due a correction... now look where we are... could still do it today but a 25yr mortgage is might be a stretch (for me).
The other factor to consider is that rental income generally broadly tracks house prices. Those with properties bought 25 years ago will usually be charging rent based on today’s market. Of course that does make house price an appreciation important part of the equation but to reach a view on that you need to go a step further and consider the impact a period of inflation could have (and how that impacts any repayment or income strategy).
Those management fees also hammer the amount of free cash the asset throws off initially. Unless there’s a reason to be that hands off then the return could look better by taking a less comprehensive service.
As mentioned in earlier post, the biggest risk factor is really around the ability to deal with costs associated with ongoing maintenance or a bad tenant. If you’re only banking £200/mth from a property then you don’t need to be a genius to see that even a new boiler will,wipe out a long period of cash flow and it could take years to recoup the cost of a tenant from hell.
But yes, I would hope the worst case scenario would be property eventually paid off - owned outright (repayment mortgage) and a steady income stream. The bonus would the capital appreciation - which history tells us is quite likely.
Groat said:
AAAARGH!! Just missed this!
https://www.rightmove.co.uk/properties/122614052#/...
My mate manages it. £400pcm rent. Advertised on 20/4/22, lasted exactly 1 day on the market.
Oh st! I forgot! These don't really exist....
Is that in a nice area? https://www.rightmove.co.uk/properties/122614052#/...
My mate manages it. £400pcm rent. Advertised on 20/4/22, lasted exactly 1 day on the market.
Oh s
t! I forgot! These don't really exist....Are you buying it outright or mortgage ?
LooneyTunes said:
The other factor to consider is that rental income generally broadly tracks house prices. Those with properties bought 25 years ago will usually be charging rent based on today’s market.
https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2019/uk-house-prices-and-three-decades-of-decline-in-the-risk-free-real-interest-rate.pdfFigure 5 shows yields of ~12% 25 years ago vs ~6% in 2018
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