250K. How best to invest in property?

250K. How best to invest in property?

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Discussion

jenzo

Original Poster:

354 posts

240 months

Wednesday 19th August 2015
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Hi all

Some advice and thoughts please…

If you had 250K, in cash, how would you use this liquidity to buy a property?

The tyoe of mortgage you would go for?

How many would you/could you buy?

Could you set up an initial portfolio, to make a monthly income from it (even if it was minimal, after covering all costs*mortgage, maintenance etc.?

98elise

26,376 posts

160 months

Thursday 20th August 2015
quotequote all
jenzo said:
Hi all

Some advice and thoughts please…

If you had 250K, in cash, how would you use this liquidity to buy a property?

The tyoe of mortgage you would go for?

How many would you/could you buy?

Could you set up an initial portfolio, to make a monthly income from it (even if it was minimal, after covering all costs*mortgage, maintenance etc.?
It depends on your area (what you can buy for the money) and how your feel about leveraging.

I would split the money into as many decent freehold houses I could, on 70% LTV IO mortgages. If you can get 6-7% return on the property, then the ROI is between 10-14% at current interest rates.

I have 100k invested across 4 houses using this approach. I make about 12-13k gross profit per year, but my rents are below market. You should be looking at 25-30 gross profit.

Bear in mind the recent changes to rules mortgage offset though. If you are a high rate tax payer then it will hit you.

Mezger

370 posts

105 months

Thursday 20th August 2015
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interesting, where in the country are you managing to find properties sub £85k that rent for 500pm+?

BoRED S2upid

19,641 posts

239 months

Thursday 20th August 2015
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Yes you could set up an initial portfolio that would wipe it's face and give you a small reserve. What that looks like could be anything from one £700k home to a handful of cheaper £100 - 150k homes or anything inbetween.

Pros and cons of each, It all depends what you want, where you live, how much hassle you want etc...

Also don't forget you need to be able to cover mortgage repayments as well as any bills and council tax if you don't have tenants so it may not be possible to instantly become a slumlord and buy a street in Liverpool wink



Ade07

489 posts

166 months

Thursday 20th August 2015
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Mezger said:
interesting, where in the country are you managing to find properties sub £85k that rent for 500pm+?
Manchester and Liverpool.

daemon

35,724 posts

196 months

Sunday 23rd August 2015
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budfox

1,510 posts

128 months

Monday 24th August 2015
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https://www.introducertoday.co.uk/breaking-news/20...

Excellent stuff. Making an unproductive living off of the backs of those who were born at the wrong time is morally unjustified at best.

Leedssurveyor

72 posts

122 months

Thursday 27th August 2015
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There are a lot of areas that are great for BTL. My City Centre flat bought two years ago for £85k rents at £650... and these are young professionals not students or DSS...Should also see healthy cap val increases even against London etc. That market is so over bloated its ridiculous and ready to burst. A lot of commentators are calling the top of the market in London now as foreign money is slowing down.

For £250k I would buy 2 bedroom city center flats at 40% LTV. Sheffield, Leeds, Nottingham and Manchester. These locations are ideal as you can target students, professionals etc and are not limited to one target segment. 40% LTV hedges against any future drop while maximizing your ROI.

jenzo

Original Poster:

354 posts

240 months

Thursday 27th August 2015
quotequote all
Hi Leedssurveyor

Great to hear your thoughts, advice and precisely what I am thinking.

Would it be an issue for you, if you were being based in London and having a rental portfolio up North ?
How many properties with 250k liquid, at 40% LTV would you say/advise makes sense to go for ?

Ade07

489 posts

166 months

Thursday 27th August 2015
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Leedssurveyor said:
There are a lot of areas that are great for BTL. My City Centre flat bought two years ago for £85k rents at £650... and these are young professionals not students or DSS...Should also see healthy cap val increases even against London etc. That market is so over bloated its ridiculous and ready to burst. A lot of commentators are calling the top of the market in London now as foreign money is slowing down.

For £250k I would buy 2 bedroom city center flats at 40% LTV. Sheffield, Leeds, Nottingham and Manchester. These locations are ideal as you can target students, professionals etc and are not limited to one target segment. 40% LTV hedges against any future drop while maximizing your ROI.
Or, a 3 bed semi in a Liverpool suburb for 65k, that rents for £525 per month, also not students or DSS, but working families. There is a huge demand presently.

drainbrain

5,637 posts

110 months

Thursday 27th August 2015
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I just bought a wrecked 3 bed ex-council flat for £22k cash. Plus £2k finders fee. Another £10k will make it really nice. Then I'd like my agent to get the right DSS tenancy to occupy it. £550 every 4 weeks is the current rate.

Edited by drainbrain on Thursday 27th August 20:58

golfdsg

228 posts

126 months

Friday 28th August 2015
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drainbrain said:
I just bought a wrecked 3 bed ex-council flat for £22k cash. Plus £2k finders fee. Another £10k will make it really nice. Then I'd like my agent to get the right DSS tenancy to occupy it. £550 every 4 weeks is the current rate.

Edited by drainbrain on Thursday 27th August 20:58
What area is this in? and how did you source the property?

Leedssurveyor

72 posts

122 months

Friday 28th August 2015
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Ade07 said:
Or, a 3 bed semi in a Liverpool suburb for 65k, that rents for £525 per month, also not students or DSS, but working families. There is a huge demand presently.
I always find the issue with these type of properties are the maintenance and repair costs.. they are disproportionate to the rent you achieve. At least with a well managed and well let flat (check accounts of man co before purchase) there should be some maintenance and repair plans in place, sinking funds etc. and many of the typical BTL Landlords simply live month to month and an expensive roof repair would ruin them.

(FTR I am in insolvency/corporate recovery and deal with literally 100's of these type of properties/landlords...and the story is ALWAYS the same. £40-60k terraces in the NW/NE)

drainbrain

5,637 posts

110 months

Friday 28th August 2015
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golfdsg said:
What area is this in? and how did you source the property?
Scotland. Used a very good Glasgow based sourcer who has an email database of investors. Strangely enough it turned out I knew the seller. THEY bought it for £15k!!

daytona365

1,773 posts

163 months

Friday 28th August 2015
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I'd be thinking the opposite to one of those pokey leasehold flats where upstairs has a flood every 6 months. Ie a small well maintained freehold period terrace or cottage on the periphery of a major city with good transport connections for even nowadays around the 125 - 150k mark.....A place to be proud of and in turn see healthy capital growth.

Edited by daytona365 on Friday 28th August 12:15

Billsnemesis

817 posts

236 months

Friday 28th August 2015
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jenzo said:
Hi Leedssurveyor

Great to hear your thoughts, advice and precisely what I am thinking.

Would it be an issue for you, if you were being based in London and having a rental portfolio up North ?
How many properties with 250k liquid, at 40% LTV would you say/advise makes sense to go for ?
I have the option of buying up north as I live in London but have family in Lancashire. My worry has been that I know the local market like the back of my hand and am only five minutes walk from either of my BTL's so if anything goes wrong I can be there instantly. I have to rely on family or agents if I buy elsewhere.

Hence my investments are in London.

With £250k you could just about get a couple of flats, one or two bed depending on area, a little way out from the centre of London with more options elsewhere.

I would also suggest taking a long term view. Mine are pure investments and show little "profit" as we are reinvesting any surplus into upgtades for future capital return. BTL is not a get rich quick scheme unless you sweat the tenants for max rent and buy more properties by finding desparate sellers and offering 80% of market value for a quick sale. Not my moral comfort zone.

You may see suggestions about buying retails units but with the high street dying I don't see any attraction outside prime areas.

One option might be buying lock up garages. With that money you might find a site with medium term development potential and a reasonable income. Anything immediately developable will have been snapped up by similar minded investors or developers but there are always opportunities for those with a longer term perspective.