Buy to Let

[croyde]

So if I had £80k sitting in my normal bank account, one of those offset ones so it's currently saving me 1.5% divided by 12 a month off my interest only mortgage, would I be a lot better off getting a buy to let.

2 beds around here are £400k upwards so would anyone lend to me? Is it worked out on potential rent or my earnings after my current mortgage and expenses? A 2 bed new build apartment tends to go for £1700+ a month so what would my likely repayments be and profit after tax?

Are those ones when a management company, usually the same company that built the flats in the first place, deals with everything, worth pursuing?

Sorry for the questions but there has to be something sensible and reasonably safe to do with the cash apart from using it to fund maybe 4 years in an apartment of my own or get a flash car

[Sarnie]

At 80% LTV the rates aren't going to be favorable, especially as a First Time Landlord.
You'd be looking at circa 4.6%-5% and around £1,300 a month on Interest Only.

So £400 a month gross profit based on £1700 rental.......you would need to then work back the costs (tax, agents fees, property costs) to see if it's worth it over keeping the money in the bank....

[Slagathore]

Never worth it with those numbers.

[croyde]

Thanks chaps. It's what I suspected. Seems crazy to have that sort of money lying around and apart from sticking it on Mummys Boy running in the 1330 at Kempton, there's not a lot to do

Been looking at Stratford, East London. 1 beds around £280k so £200k to finance, rent around the £1300/month mark. Figures still bad?

Property ISAs? Some money in now and some after April?

The money sitting in the bank is saving me £112 a month off my mortgage payments.

Edited by croyde on Tuesday 17th December 23:01

[Sarnie]

If you could get to 75% LTV the rate would be more like 3.3% and £820 per month on IO....

[Froomee]

Probably better off buying a house for cheaper.

Say anywhere between £120-£250k and getting a capital repayment mortgage with a better LTV= lower interest rates.

I'd imagine you would be able to make what your saving (1.5%) as instant profit + however much your paying off the capital each month on top if you do your research and manage it yourself

From experience allow a bit for maintenance, breakages, etc although it's a lot cheaper if you can do it your self or have friends who work in the trade.

Edited by Froomee on Tuesday 17th December 23:05

[simonej]

£80k northern terraced house, purchased outright, let out for £420 per month? No interest to pay at with that method (ignoring the upkeep costs and letting a fees etc...)

Less chance of capital gains, I expect?

[croyde]

simonej said:

£80k northern terraced house, purchased outright, let out for £420 per month? No interest to pay at with that method (ignoring the upkeep costs and letting a fees etc...)

Less chance of capital gains, I expect?

No but somewhere to retire to in 20 years or less

[eldar]

simonej said:

£80k northern terraced house, purchased outright, let out for £420 per month? No interest to pay at with that method (ignoring the upkeep costs and letting a fees etc...)

Less chance of capital gains, I expect?

Pretty much this. Bottom end of the market, slimmer profits but less exposure on dead periods.

[DSLiverpool]

I've put an offer in for a 3 bed terrace in bebington Wirral , it's up for £110k I put in a cheeky £85k that after a stand off they accepted, needs £10k spending on it then I will rent it for (they say) £650. My accountant says its worth it.

So look north and the figures make more sense I guess.

[croyde]

Sarnie said:

At 80% LTV the rates aren't going to be favorable, especially as a First Time Landlord.
You'd be looking at circa 4.6%-5% and around £1,300 a month on Interest Only.

So £400 a month gross profit based on £1700 rental.......you would need to then work back the costs (tax, agents fees, property costs) to see if it's worth it over keeping the money in the bank....

So on those figures it's fingers crossed that the capital will increase over time.

I moved to SW London in '98 after having my fingers burned with a flat bought in '88 for £50k near Croydon and a long time selling to get £50k in '98. I survived the 15% mortgage and losing my job twice so was very cautious.

They were selling flats off plan, overlooking the Thames at Wandsworth Bridge for £150,000, these were 2 bedroomed. £5k deposit until built. Back then I thought prices just could not keep going up so I chickened out. My Fil took over the paperwork and sold the flat when built a year later, for £250,000. £100k profit, before tax, in a year.

They now go for £600k+.

Can prices go any higher

[Sarnie]

croyde said:

So on those figures it's fingers crossed that the capital will increase over time.

I moved to SW London in '98 after having my fingers burned with a flat bought in '88 for £50k near Croydon and a long time selling to get £50k in '98. I survived the 15% mortgage and losing my job twice so was very cautious.

They were selling flats off plan, overlooking the Thames at Wandsworth Bridge for £150,000, these were 2 bedroomed. £5k deposit until built. Back then I thought prices just could not keep going up so I chickened out. My Fil took over the paperwork and sold the flat when built a year later, for £250,000. £100k profit, before tax, in a year.

They now go for £600k+.

Can prices go any higher

Correct, although as per my other post, another 5% deposit makes all the difference and brings the payment down by c£500 a month......the issue is you being a First Time Landlord and only having a 20% deposit.

[irocfan]

why not try the "buy a snotty house and get a local builder to refurb" and once refurbed sell on?

[pacoryan]

An outright purchase is all well and good but watch your tax position, not much point in paying 40% on the rental profit.

[croyde]

Sarnie said:

Correct, although as per my other post, another 5% deposit makes all the difference and brings the payment down by c£500 a month......the issue is you being a First Time Landlord and only having a 20% deposit.

Thanks for answering. So if I can make a higher deposit, say 30%, it should put me in a better place with the lenders. Who does one tend to approach? I bank with First Direct, would they be any good?

[98elise]

croyde said:

Sarnie said:

Correct, although as per my other post, another 5% deposit makes all the difference and brings the payment down by c£500 a month......the issue is you being a First Time Landlord and only having a 20% deposit.

Thanks for answering. So if I can make a higher deposit, say 30%, it should put me in a better place with the lenders. Who does one tend to approach? I bank with First Direct, would they be any good?

Just approach an independent broker. They will sort out all the available deals for you. I can recommend one, but PH has a resident one (Sarnie?)

[Sarnie]

croyde said:

Thanks for answering. So if I can make a higher deposit, say 30%, it should put me in a better place with the lenders. Who does one tend to approach? I bank with First Direct, would they be any good?

You could PM me, I'm a Mortgage Broker

Last time I looked FD don't do BTL mortgages....

[lewisf182]

I really don't think those numbers make sense at all TBH and would be looking somewhere in the north as said previously.

For example my flat was bought for £85k with 25% deposit, it rents at £625 unfurnished and the mortgage is £220 a month interest only. You could buy it outright and get a nice % return or you could buy 2 or 3 and be doing very nicely instantly. The area is under going a good amount of regeneration at the moment too and has a brilliant river side location very close to town and some nice fashionable pubs & bars.

If I had £80k this is what I'd be doing, if only....

[croyde]

Cheers. What area are you suggesting. Ta.

[lewisf182]

The area where I bought mine is Sheffield S3 Kelham Island.
There are areas in every city the same though, particularly Manchester and Leeds, although for £85k I doubt you'd get a flat anywhere like the one I have so close to town with such a good view/location due to sheffield being generally smaller and less "young professional" as it were.