19 y/o, contemplating Buy-to-Let, opinions/experiences?
Discussion
Hiya, I must admit that this isn't an area of the forums I venture onto very often but I figured that this would be the best place for it. I wouldn't normally be so open about this, but when it comes to these matters (some 
) PH'ers seem to be very screwed on and so I figured that some decent advice might come of it 
I'm 19 and after much hard work am in a job now where I can save a solid £1,000 a month (at least, a couple of hundred per month more after overtime etc) if I continue living how I was anyway and didn't bring up my outgoings to match. As a result, I'm wondering whether or not it is worth getting onto the property ladder young. In my area it isn't particularly cheap; a 2 bedroom flat would be around £140,000 or £8-900 to rent the equivalent flat. This led to me wondering as to the feasibility of, whilst still living at home, buying a flat and letting it out. My mum wants minimal rent (and I've factored that into the net savings per month) so it seems to make sense that, since my outgoings are never going to be this low again, it might be worth saving for a deposit, getting a mortgage on the above example, letting it out whilst the mortgage is paid & I'm living at home, whilst putting every extra penny into the mortgage. The mortgage would be low enough that even if there was a period of it being without tenants, I would be able to afford the basic payments.
That's the bare bones of the idea, and I wondered whether anybody would be able to give me any thoughts as to the feasibility of this plan - whether there are any gaping holes in it, or whether it is (at least in principal) a sound idea. If it is, would anybody be able to give vague ideas regarding the cost of letting a flat out and the net income after these costs have been incurred?
Number one on my list was to just get something with a dirty great V8, but as I'm getting done hand-over-fist for insurance where we live right now, I couldn't bring myself to cough up any more for insurance than what I am now. Asides from cars, the only things I really want at this stage are nice holidays, which again have been factored into the net savings. If I can't have fun cars I might as well do something useful with the money
Cheers in advance for any replies
) PH'ers seem to be very screwed on and so I figured that some decent advice might come of it I'm 19 and after much hard work am in a job now where I can save a solid £1,000 a month (at least, a couple of hundred per month more after overtime etc) if I continue living how I was anyway and didn't bring up my outgoings to match. As a result, I'm wondering whether or not it is worth getting onto the property ladder young. In my area it isn't particularly cheap; a 2 bedroom flat would be around £140,000 or £8-900 to rent the equivalent flat. This led to me wondering as to the feasibility of, whilst still living at home, buying a flat and letting it out. My mum wants minimal rent (and I've factored that into the net savings per month) so it seems to make sense that, since my outgoings are never going to be this low again, it might be worth saving for a deposit, getting a mortgage on the above example, letting it out whilst the mortgage is paid & I'm living at home, whilst putting every extra penny into the mortgage. The mortgage would be low enough that even if there was a period of it being without tenants, I would be able to afford the basic payments.
That's the bare bones of the idea, and I wondered whether anybody would be able to give me any thoughts as to the feasibility of this plan - whether there are any gaping holes in it, or whether it is (at least in principal) a sound idea. If it is, would anybody be able to give vague ideas regarding the cost of letting a flat out and the net income after these costs have been incurred?
Number one on my list was to just get something with a dirty great V8, but as I'm getting done hand-over-fist for insurance where we live right now, I couldn't bring myself to cough up any more for insurance than what I am now. Asides from cars, the only things I really want at this stage are nice holidays, which again have been factored into the net savings. If I can't have fun cars I might as well do something useful with the money
Cheers in advance for any replies
Blackpuddin said:
Move out and give your mum a break
Agreed.Your ability to save is probably because you are not paying a commercial level of living costs just yet. At some point in the near futrure (within say three years) you may need to have sufficient income to cover your own personal accomodation costs - be they flat/house rental or even buying your own flat or house.
If that is the case, you might find it a bit tight trying to fund a buy to let property as well.
To give you an idea from a mortgage point of view;
- your going to need a 25% deposit.
- your going to struggle to get a BTL mortgage as a First Time Landlord and not having a residential mortgage. It's not an impossibility but it's not going to be anywhere near as easy as you may think. Criteria is very tight currently.
Why not save for a deposit for your own Place? Get that sorted and think about BTL's at a later date?
- your going to need a 25% deposit.
- your going to struggle to get a BTL mortgage as a First Time Landlord and not having a residential mortgage. It's not an impossibility but it's not going to be anywhere near as easy as you may think. Criteria is very tight currently.
Why not save for a deposit for your own Place? Get that sorted and think about BTL's at a later date?
Eric Mc said:
Agreed.
Your ability to save is probably because you are not paying a commercial level of living costs just yet. At some point in the near futrure (within say three years) you may need to have sufficient income to cover your own personal accomodation costs - be they flat/house rental or even buying your own flat or house.
If that is the case, you might find it a bit tight trying to fund a buy to let property as well.
This is a good point actually and not one I'd considered. I will say it is unlikely that I will need to move out though; me and my mum have a very good relationship, and financially the agreement is basically I pay for everything that I use, plus chuck her some housekeeping on top of it. I know it's actually helping her out financially too.Your ability to save is probably because you are not paying a commercial level of living costs just yet. At some point in the near futrure (within say three years) you may need to have sufficient income to cover your own personal accomodation costs - be they flat/house rental or even buying your own flat or house.
If that is the case, you might find it a bit tight trying to fund a buy to let property as well.
All that said, I definitely do not want to end up still at home in (arbitrary figure here) 5-6 years etc, and the thought of renting and getting trapped (IE not being able to save enough for a deposit to buy/not being able to be a bit lavish with cars & holidays etc
) is another big reason why I'm giving thought to buying ASAP. Once the flat was paid for, I don't have to find either rent or a mortgage until upgrade time I hope I've explained that alright, it reads a bit awkward 
vit4 said:
This is a good point actually and not one I'd considered. I will say it is unlikely that I will need to move out though; me and my mum have a very good relationship, and financially the agreement is basically I pay for everything that I use, plus chuck her some housekeeping on top of it. I know it's actually helping her out financially too.
All that said, I definitely do not want to end up still at home in (arbitrary figure here) 5-6 years etc, and the thought of renting and getting trapped (IE not being able to save enough for a deposit to buy/not being able to be a bit lavish with cars & holidays etc) is another big reason why I'm giving thought to buying ASAP. Once the flat was paid for, I don't have to find either rent or a mortgage until upgrade time I hope I've explained that alright, it reads a bit awkward
OK, so another option is to consider a BTL, with a view to moving in after 12 - 24 months. As per my previous comment, make sure it's two bed, and you still have the option of renting a room out when you move in.All that said, I definitely do not want to end up still at home in (arbitrary figure here) 5-6 years etc, and the thought of renting and getting trapped (IE not being able to save enough for a deposit to buy/not being able to be a bit lavish with cars & holidays etc
) is another big reason why I'm giving thought to buying ASAP. Once the flat was paid for, I don't have to find either rent or a mortgage until upgrade time I hope I've explained that alright, it reads a bit awkward Sarnie said:
To give you an idea from a mortgage point of view;
- your going to need a 25% deposit.
- your going to struggle to get a BTL mortgage as a First Time Landlord and not having a residential mortgage. It's not an impossibility but it's not going to be anywhere near as easy as you may think. Criteria is very tight currently.
Why not save for a deposit for your own Place? Get that sorted and think about BTL's at a later date?
Cheers for the figures - 25% is doable - your going to need a 25% deposit.
- your going to struggle to get a BTL mortgage as a First Time Landlord and not having a residential mortgage. It's not an impossibility but it's not going to be anywhere near as easy as you may think. Criteria is very tight currently.
Why not save for a deposit for your own Place? Get that sorted and think about BTL's at a later date?
Regarding why not saving for my own place, I probably didn't explain it very well, but I would let the flat out in the meantime with intent to live in it either once the mortgage had got down to a very low level or been paid off completely - it would simply be a tool for me to get it paid off quicker
I must admit I hadn't considered the different types of mortgage
Would I not be able to get a normal mortgage if I was planning on letting it out then?Podie said:
OK, so another option is to consider a BTL, with a view to moving in after 12 - 24 months. As per my previous comment, make sure it's two bed, and you still have the option of renting a room out when you move in.
Sorry, missed the first post of yours regarding a view to moving in after x months, see my above post Having a lodger is another thing that I hadn't considered actually. That ^^^ might actually be perfect, moving in once a large chunk of the mortgage had been caned with a lodger to 'top up'
Speeds up the time frame of moving in whilst still keeping extra income... Off to look at room rental prices.£140k does not sound cheap for a 2 bedroom flat.
I would like to bet that would not be worth anywhere near that in a couple of years time.
Stress test your income, in five years time interest rates may be a lot higher and your flat may be worth a lot less with a non paying tenant who you have to evict... it happens.
I would like to bet that would not be worth anywhere near that in a couple of years time.
Stress test your income, in five years time interest rates may be a lot higher and your flat may be worth a lot less with a non paying tenant who you have to evict... it happens.
Podie said:
There is an amount you can claim tax free - sure Eric can advise. Circa £380 IIRC.
If you take on a lodger in your own personal residence (in other words, it CANNOT be a buy to let), then, as long as the total rent received from the lodger is less than £2,125, you do not need to declare this renal income for tax purposes. It's called the "Rent a Room" Scheme.http://www.direct.gov.uk/en/moneytaxandbenefits/ta...
vit4 said:
Cheers for the figures - 25% is doable
Regarding why not saving for my own place, I probably didn't explain it very well, but I would let the flat out in the meantime with intent to live in it either once the mortgage had got down to a very low level or been paid off completely - it would simply be a tool for me to get it paid off quicker
I must admit I hadn't considered the different types of mortgage Would I not be able to get a normal mortgage if I was planning on letting it out then?
No offence but I am not sure you have thought about this in depth.Regarding why not saving for my own place, I probably didn't explain it very well, but I would let the flat out in the meantime with intent to live in it either once the mortgage had got down to a very low level or been paid off completely - it would simply be a tool for me to get it paid off quicker
I must admit I hadn't considered the different types of mortgage
Would I not be able to get a normal mortgage if I was planning on letting it out then?For instance, you will need 30% deposit on a buy to let mortgage. At your £1k a month thats 30 months, factor in another few grand for your solicitors fee's etc. 3 years before you can purchase. By then they might be £160k.
Getting a buy to let mortgage I think you will need the rent to cover 120% of your mortgage. And then you will have to pay tax on your earnings above.
You also need to budget for repairs etc
And, with all due respect you must be earning a fair whack to enable you to save a thousand a month. I recall earning 20k (not saying this is what you earn) a year and taking £1300 as a roundabout figure. Could you live on £300 a month for the next 3 years? Doubtful.
As I said earlier - he is probably not really "paying his way" properly at home. That may be fine - at the moment. And even though the OP doesn't envisage himself leaving home for another 6 to 8 years, at 19, anything can happen and plans can change very rapidly. Girlfriends, relationships, job changes etc tend to happen more frequently at 19 than 40 so what you thought you might be doing 6 to 8 years down the line can turn out very different.
Being saddled with a buy to let at 19 could be a real problem if your life changes dramatically at (say) 23.
Being saddled with a buy to let at 19 could be a real problem if your life changes dramatically at (say) 23.
Eric Mc said:
Podie said:
There is an amount you can claim tax free - sure Eric can advise. Circa £380 IIRC.
If you take on a lodger in your own personal residence (in other words, it CANNOT be a buy to let), then, as long as the total rent received from the lodger is less than £2,125, you do not need to declare this renal income for tax purposes. It's called the "Rent a Room" Scheme.http://www.direct.gov.uk/en/moneytaxandbenefits/ta...
Eric Mc said:
As I said earlier - he is probably not really "paying his way" properly at home. That may be fine - at the moment. And even though the OP doesn't envisage himself leaving home for another 6 to 8 years, at 19, anything can happen and plans can change very rapidly. Girlfriends, relationships, job changes etc tend to happen more frequently at 19 than 40 so what you thought you might be doing 6 to 8 years down the line can turn out very different.
Being saddled with a buy to let at 19 could be a real problem if your life changes dramatically at (say) 23.
Agreed and living at home at 25 would drive me mental. Being saddled with a buy to let at 19 could be a real problem if your life changes dramatically at (say) 23.
Also vit, I know Dagenham well, are you planning on buying there? If not what area are you thinking of?
Also when you said you wouldn't move out until a "decent" chunk of the mortgage had been paid, I have lived in my house for a year in two weeks and I think I have paid off a few hundred quid of the equity so I wouldn't expect to start paying much of the equity for around 10 years before you start making a "decent" dent in it.
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