Is BTL still possible?
Discussion
Hi guys
I’ve been considering buying a small 2nd house or flat in my local area to rent out, ideally on a repayment mortgage plus deposit. The ultimate goal isn’t an income but to have a 2nd property purchased and paid off in X years as a future investment. Eg sell off.
Is there still a market for mortgages for this sort of thing? What killed the old BTL market? Was it just people trying to unsuccessfully make monthly income
I’ve been considering buying a small 2nd house or flat in my local area to rent out, ideally on a repayment mortgage plus deposit. The ultimate goal isn’t an income but to have a 2nd property purchased and paid off in X years as a future investment. Eg sell off.
Is there still a market for mortgages for this sort of thing? What killed the old BTL market? Was it just people trying to unsuccessfully make monthly income
These threads usually descend into a slanging match between the property and equity index tracking crowds.
All I would say is do your homework on what you expect your net monthly cashflow to be when you take into account rent, voids, fees, maintenance, mortgage payments and taxes. If you are buying an expensive property in areas with low rental yields, and are a higher rate tax payer, that number might be negative.
If you like the idea of a long-term option on property price appreciation, that's great, but for most people in the UK their primary house is already an outsized component of their net worth, so diversifying could be a better option than doubling down.
All I would say is do your homework on what you expect your net monthly cashflow to be when you take into account rent, voids, fees, maintenance, mortgage payments and taxes. If you are buying an expensive property in areas with low rental yields, and are a higher rate tax payer, that number might be negative.
If you like the idea of a long-term option on property price appreciation, that's great, but for most people in the UK their primary house is already an outsized component of their net worth, so diversifying could be a better option than doubling down.
Yes it is, but depending on the rent you will require a deposit between 25% and 35%.
It is also highly dependent on how lucky you are with tenants and how many issues they report. It's great if the money just comes in and you never hear from the tenants, not so much when the heating breaks in the middle of winter and you are looking at a £1K bill.
It is also highly dependent on how lucky you are with tenants and how many issues they report. It's great if the money just comes in and you never hear from the tenants, not so much when the heating breaks in the middle of winter and you are looking at a £1K bill.
Joey Deacon said:
Yes it is, but depending on the rent you will require a deposit between 25% and 35%.
It is also highly dependent on how lucky you are with tenants and how many issues they report. It's great if the money just comes in and you never hear from the tenants, not so much when the heating breaks in the middle of winter and you are looking at a £1K bill.
.... or they stop paying, never leave, and smash the place to bitsIt is also highly dependent on how lucky you are with tenants and how many issues they report. It's great if the money just comes in and you never hear from the tenants, not so much when the heating breaks in the middle of winter and you are looking at a £1K bill.
NickCQ said:
These threads usually descend into a slanging match between the property and equity index tracking crowds.
All I would say is do your homework on what you expect your net monthly cashflow to be when you take into account rent, voids, fees, maintenance, mortgage payments and taxes. If you are buying an expensive property in areas with low rental yields, and are a higher rate tax payer, that number might be negative.
If you like the idea of a long-term option on property price appreciation, that's great, but for most people in the UK their primary house is already an outsized component of their net worth, so diversifying could be a better option than doubling down.
OP - loads on here already - have a search.All I would say is do your homework on what you expect your net monthly cashflow to be when you take into account rent, voids, fees, maintenance, mortgage payments and taxes. If you are buying an expensive property in areas with low rental yields, and are a higher rate tax payer, that number might be negative.
If you like the idea of a long-term option on property price appreciation, that's great, but for most people in the UK their primary house is already an outsized component of their net worth, so diversifying could be a better option than doubling down.
Off the top of my head as well as doing the numbers as above there are the recent tax changes, you’re potentially buying at the top of the market, I wouldn’t touch a flat based on maintenance charges and insulation worries, then all older properties are going to get hit harder with EPC requirements, plus there’s potential for interest rates to go up medium term, plus politicians of every persuasion really seem to hate landlords at the moment, plus, plus, boiler exploding, damage, voids etc..
On the flip side it’s a landlords market as availability is at an all time low - I relet recently and had five pretty solid enquiries in 24 hours. Re let with a void period measured in hours and at a much higher (but still market) rent. Enquiries were mostly polite essays trying to convince me why I should choose them over other tenants - house prices are crazy so many LLs are taking the money and running, meaning decent 3 bed rentals are non existent (NW England). Uplift from 750 to 950 rent in two years is about right here.
It’s the overall cost to get into it and operate it that doesn’t add up now compared to ISAs, investing in funds etc. Buy knackered, add value, rent out, might still work - all depends on the area.
andy43 said:
On the flip side it’s a landlords market as availability is at an all time low - I relet recently and had five pretty solid enquiries in 24 hours. Re let with a void period measured in hours and at a much higher (but still market) rent. Enquiries were mostly polite essays trying to convince me why I should choose them over other tenants - house prices are crazy so many LLs are taking the money and running, meaning decent 3 bed rentals are non existent (NW England). Uplift from 750 to 950 rent in two years is about right here.
This, I have a 3 bedroom BTL house in Hampshire and there is literally no houses for rent. The last one I saw, the advert stated "DUE TO HIGH VOLUME OF ENQUIRIES WE CANNOT ACCEPT FURTHER VIEWINGS ON THIS PROPERTY", they then put the price up another £100 and it was gone the next day.It now means my tenants are probably paying £150/£200 under market value which means we are probably going to have to have an awkward conversation in the near future.
Massive shortage on rental properties at the moment.
The numbers still work IMO. Tax liabilities and capital appreciation aside for many, it's better to achieve £XXX per month than have six figures sat in the bank or NS&I earning 0.1%. It's still a great long term investment.
Providing you're putting down a sizeable deposit, there are some cracking fixed rate BTL mortgage deals available.
The numbers still work IMO. Tax liabilities and capital appreciation aside for many, it's better to achieve £XXX per month than have six figures sat in the bank or NS&I earning 0.1%. It's still a great long term investment.
Providing you're putting down a sizeable deposit, there are some cracking fixed rate BTL mortgage deals available.
Candellara said:
Massive shortage on rental properties at the moment.
The numbers still work IMO. Tax liabilities and capital appreciation aside for many, it's better to achieve £XXX per month than have six figures sat in the bank or NS&I earning 0.1%. It's still a great long term investment.
Providing you're putting down a sizeable deposit, there are some cracking fixed rate BTL mortgage deals available.
Agreed, I renewed just before Christmas and got a rate of 1.6% interest only which I suspect you could probably better now. According to Zoopla the value of the property has increased by 20% since I have owned it, and looking at Rightmove I think it worth more than their estimate.The numbers still work IMO. Tax liabilities and capital appreciation aside for many, it's better to achieve £XXX per month than have six figures sat in the bank or NS&I earning 0.1%. It's still a great long term investment.
Providing you're putting down a sizeable deposit, there are some cracking fixed rate BTL mortgage deals available.
Plus as you say, if I had the deposit in a Marcus account I would be getting less than 10% of the money I am getting a month. I am actually putting this money into a Vanguard Lifestrategy account in the hope that it will outperform the 1.6% it is costing me to borrow the money.
Joey Deacon said:
Agreed, I renewed just before Christmas and got a rate of 1.6% interest only which I suspect you could probably better now. According to Zoopla the value of the property has increased by 20% since I have owned it, and looking at Rightmove I think it worth more than their estimate.
Plus as you say, if I had the deposit in a Marcus account I would be getting less than 10% of the money I am getting a month. I am actually putting this money into a Vanguard Lifestrategy account in the hope that it will outperform the 1.6% it is costing me to borrow the money.
Yep, we've just been offered 1.25% Santander - fixed for 2. I think it largely depends on your overall strategy. For us, it's pensions and 15 year+. Properties are a mixture of 3 / 4 bed houses + 2 bed apartments. Deposits are 40% + and all rental yields are paid back off the mortgages - so come retirement time, we can either sell up a selection or just continue with the rental incomes. Ultimately, they'll all get passed to the children so whatever happens in their lives, they'll always have a roof over their heads. Plus as you say, if I had the deposit in a Marcus account I would be getting less than 10% of the money I am getting a month. I am actually putting this money into a Vanguard Lifestrategy account in the hope that it will outperform the 1.6% it is costing me to borrow the money.
andy43 said:
On the flip side it’s a landlords market as availability is at an all time low - I relet recently and had five pretty solid enquiries in 24 hours.
We routinely get 20+ inquiries on ours, and usually at least 5 through our pre-screening to view. There just isn't the rental stock out there... either to rent or to buy! (the number of properties for sale has really dried up in the past few weeks)andy43 said:
It’s the overall cost to get into it and operate it that doesn’t add up now compared to ISAs, investing in funds etc. Buy knackered, add value, rent out, might still work - all depends on the area.
Depends where you are, how much cash you're putting in, how much time you can devote, etc, etc, etc.We have some that, at purchase, have ranged from recently refurbished, through needing a lick of paint, to now taking on a total wreck that I am very confident I can see a healthy return on.
The hardest ones to buy are those that are cared for but dated/faded (the owners don't recognise the decline and price as if they're perfect). By the time you've paid fees and higher rate SDLT it's still usually a 5%+ return. One just let is nudging 6% even taking into account refurb costs (although we managed to buy well on that one as were we to relist it'd be on the market 20% higher than we bought it for).
The ones most likely to cause pain? Amateur refurbs.
Here's the thing though. The agents I speak to are seeing lots of one/two unit landlords getting out, with most of the purchasing being done by people with a lot more units. We're continuing to add, but all into a Ltd structure. I'd have no interest in only one or two as you don't build the same relationships with trades or get on top of compliance the same.
Bearing in mind the potential downside, my risk (in)tolerance is such that I wouldn't do it if I couldn't afford to put at risk 1 year of rent plus a full refurb.
This topic has come up a few times, my reply on another topic is below, ive been checking, researching, re-checking, and maybe 2 years ago when I remortgaged I should have taken some cash out my place and done it, but im happy with the way things have gone, im nowhere near being a higher rate taxpayer and it doesnt work for me, and would be worse as a higher rate payer,
Round my area (Milton Keynes) rentals have gone crazy, 3 beds arent even making it online, a friend needs to move (3 kids in a 2 bed flat) and was phoning about 15 different estate agents daily, it has taken him 3 months and he has finally got sorted with a decent place on a nice estate. As above, the estate agents said prices were high so most landlords with 1-2 houses were selling up,
I’ve looked at this on and off for years, I don’t plan on working until late 60’s so looking at all options, with the tax changes, tenancy rules changes, I couldn’t make it stack up. I decided a mix of mortgage overpayments, premium bonds and S&S ISA was right for me.
It’s a sitting duck for more tax, and is politically ‘safe’ so who knows what will happen.
Research and planning is key, start at what you want to achieve and look at your options to get there, rather than seeing it as the way to make money. I’m nearing 40, don’t want to be working long term, everyone is different, put together a business and personal finance plan and see if it works for you.
Round my area (Milton Keynes) rentals have gone crazy, 3 beds arent even making it online, a friend needs to move (3 kids in a 2 bed flat) and was phoning about 15 different estate agents daily, it has taken him 3 months and he has finally got sorted with a decent place on a nice estate. As above, the estate agents said prices were high so most landlords with 1-2 houses were selling up,
I’ve looked at this on and off for years, I don’t plan on working until late 60’s so looking at all options, with the tax changes, tenancy rules changes, I couldn’t make it stack up. I decided a mix of mortgage overpayments, premium bonds and S&S ISA was right for me.
It’s a sitting duck for more tax, and is politically ‘safe’ so who knows what will happen.
Research and planning is key, start at what you want to achieve and look at your options to get there, rather than seeing it as the way to make money. I’m nearing 40, don’t want to be working long term, everyone is different, put together a business and personal finance plan and see if it works for you.
Boom78 said:
Hi guys
I’ve been considering buying a small 2nd house or flat in my local area to rent out, ideally on a repayment mortgage plus deposit. The ultimate goal isn’t an income but to have a 2nd property purchased and paid off in X years as a future investment. Eg sell off.
Is there still a market for mortgages for this sort of thing? What killed the old BTL market? Was it just people trying to unsuccessfully make monthly income
What % gross yield are you expecting (annual rent/purchase price x100). What % deposit do you have?I’ve been considering buying a small 2nd house or flat in my local area to rent out, ideally on a repayment mortgage plus deposit. The ultimate goal isn’t an income but to have a 2nd property purchased and paid off in X years as a future investment. Eg sell off.
Is there still a market for mortgages for this sort of thing? What killed the old BTL market? Was it just people trying to unsuccessfully make monthly income
My BTL's work and give me a decent monthly income, but my similar sized investment in Funds is less hassle and returns more.
If you already have some stocks/funds investments (say a pension), then BTL is a good way to diversify if the figures stack up.
Like every industry on the planet, some are getting into it, others leaving.
Right now there are more entering/expanding than reducing/leaving.
How well you do depends on how well your plan works out.
Comparing btl (a business) to investing (not share trading, which is also a business) is silly.
I do btl for income, which I can pretty accurately both predict and control, because I cannot tell what capital gains it will generate any more than someone can tell what their funds will be worth next week/month/year.
But there are lots of businesses, so why choose btl especially if you are uncertain about it ?
Right now there are more entering/expanding than reducing/leaving.
How well you do depends on how well your plan works out.
Comparing btl (a business) to investing (not share trading, which is also a business) is silly.
I do btl for income, which I can pretty accurately both predict and control, because I cannot tell what capital gains it will generate any more than someone can tell what their funds will be worth next week/month/year.
But there are lots of businesses, so why choose btl especially if you are uncertain about it ?
I'm coming out of BTL, it's worked for me but then I've seen substantial capital appreciation being in the SE plus I've not suffered from the now punitive tax treatment if my portfolio had been funded.
My yields were generally 3% nett, a pal has a portfolio in the North of England and calculates his are 7%-8%+.
I had a particularly difficult tenant last year - refused access, didn't accept our subsequent notice to vacate, stopped paying rent and left the house in a very poor state and I just thought at my age it was hassle I didn't need, if I'd had a larger portfolio I would have employed a property manager.
As part of your investments I still think BTL works - put in a relatively small amount of equity, borrow as much as you can and let your tenant service your debt for the next 25-30 years, you should turn say £40k into £200-£300k just don't expect too much of an income along the way.
My yields were generally 3% nett, a pal has a portfolio in the North of England and calculates his are 7%-8%+.
I had a particularly difficult tenant last year - refused access, didn't accept our subsequent notice to vacate, stopped paying rent and left the house in a very poor state and I just thought at my age it was hassle I didn't need, if I'd had a larger portfolio I would have employed a property manager.
As part of your investments I still think BTL works - put in a relatively small amount of equity, borrow as much as you can and let your tenant service your debt for the next 25-30 years, you should turn say £40k into £200-£300k just don't expect too much of an income along the way.
Boom78 said:
Hi guys
I’ve been considering buying a small 2nd house or flat in my local area to rent out, ideally on a repayment mortgage plus deposit. The ultimate goal isn’t an income but to have a 2nd property purchased and paid off in X years as a future investment. Eg sell off.
Is there still a market for mortgages for this sort of thing? What killed the old BTL market? Was it just people trying to unsuccessfully make monthly income
I've got a BTL. I'll cut through the jargon:I’ve been considering buying a small 2nd house or flat in my local area to rent out, ideally on a repayment mortgage plus deposit. The ultimate goal isn’t an income but to have a 2nd property purchased and paid off in X years as a future investment. Eg sell off.
Is there still a market for mortgages for this sort of thing? What killed the old BTL market? Was it just people trying to unsuccessfully make monthly income
Consider the location and amenities (schools, transport, shops etc), as that can affect it's appeal and whether it will be easy to let. Even if it's in a rougher part, the amenities and availability of prospective tenants will make things easier.
Is the house already let? Easier to convince the lender if it is.
Get a broker who is well-priced. A few hundred quid max to get you an agreement in principal.
Are you wanting to keep it as an asset? Will it appreciate much in the time you own it? If you want to make more money but throw the house away after a period of time then interest only is usually the way it's done. However, bear in mind you'd need to stump up the balance at the end so ensure you've got a plan or take steps to sell it sooner. They'll contact you nearer the end to invite you to discuss options. Otherwise, no guarantee you'll get a buyer!
Consider income tax and expenditure (insurance may be compulsory, agency fees etc). How much will you be left with at the end of the month? Can you handle the aggro of repairs, agencies letting you down, going it solo etc? Will you be in profit in the long run or would it have just been better to just keep your cash and spend it wisely?
Lastly, never look at the headline rate. If you're looking to remortgage especially, a deal without a product fee but a higher monthly payment would actually be cheaper than a lower monthly payment but a product fee (which when you divide by the months in the initial period of the deal could actually amount to a lot, on top of a waste of brokerage fees).
Consider how long you want fixed or variable - fixed for peace of mind and variable if you want to take a punt but also make massive overpayments and not be penalised.
I'm not sure what happened to the old BTL market to be honest. I wouldn't worry too much as there's no one way to approach a BTL.
captain.scarlet said:
Lastly, never look at the headline rate. If you're looking to remortgage especially, a deal without a product fee but a higher monthly payment would actually be cheaper than a lower monthly payment but a product fee (which when you divide by the months in the initial period of the deal could actually amount to a lot, on top of a waste of brokerage fees).
Depends how much you are borrowing. Usually the crossover is around £250-300k so if borrowing above this level not worth accepting a higher interest rate to save on product fees. APRs are usually distorted by the reversionary rate after the 2-5 year period so agree hard to get a single number to compare multiple deals (that's deliberate 
).In two posts, two very different ways of looking at it:
Personally I like the combination of income along with a degree of indexation that I do not feel can reliably delivered by funds (at a level that would exceed what I can put into ISAs etc).
Groat said:
I do btl for income, which I can pretty accurately both predict and control, because I cannot tell what capital gains it will generate any more than someone can tell what their funds will be worth next week/month/year.
Tresco said:
As part of your investments I still think BTL works - put in a relatively small amount of equity, borrow as much as you can and let your tenant service your debt for the next 25-30 years, you should turn say £40k into £200-£300k just don't expect too much of an income along the way.
Just shows how versatile it can be if you know why you’re doing it and can get comfortable with the relevant risk profile. Personally I like the combination of income along with a degree of indexation that I do not feel can reliably delivered by funds (at a level that would exceed what I can put into ISAs etc).
LooneyTunes said:
In two posts, two very different ways of looking at it:
Personally I like the combination of income along with a degree of indexation that I do not feel can reliably delivered by funds (at a level that would exceed what I can put into ISAs etc).
The two ways of looking at it are probably geographical as the income is largely dependant on where you're investing, generally in the SE, (excluding deprived areas), because the initial yields are so low the income will be minimal and possibly zero or worse if you are leveraged and a higher rate taxpayer, the flip side is a good capital gain.Groat said:
I do btl for income, which I can pretty accurately both predict and control, because I cannot tell what capital gains it will generate any more than someone can tell what their funds will be worth next week/month/year.
Tresco said:
As part of your investments I still think BTL works - put in a relatively small amount of equity, borrow as much as you can and let your tenant service your debt for the next 25-30 years, you should turn say £40k into £200-£300k just don't expect too much of an income along the way.
Just shows how versatile it can be if you know why you’re doing it and can get comfortable with the relevant risk profile. Personally I like the combination of income along with a degree of indexation that I do not feel can reliably delivered by funds (at a level that would exceed what I can put into ISAs etc).
Groat enjoys income as his entry cost North of the border is considerably lower - I guess he buys 2 bedders for sub £100k, in NW London they're £400k and they don't rent for 4 times as much.
There really is no one size fits all.
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