Experiences with buy to let
Discussion
This is occasionally discussed on the finance sub forum by my question is less about the numbers.
I’m thinking about buying a few flats to rent out to get some return on savings and diversify out of cash.
I wondered how have people’s experiences been doing this? Was it full of hassle and bad tenants, or did they generally tick along OK as a profitable exercise?
My aims are more to get out of cash and lock in a small return rather than chase yield aggressively. With this in mind I’m buying in a nice area and avoiding the bottom end of the market. I’m still concerned it’s going to bring a load of hassle into my life though.
I’m thinking about buying a few flats to rent out to get some return on savings and diversify out of cash.
I wondered how have people’s experiences been doing this? Was it full of hassle and bad tenants, or did they generally tick along OK as a profitable exercise?
My aims are more to get out of cash and lock in a small return rather than chase yield aggressively. With this in mind I’m buying in a nice area and avoiding the bottom end of the market. I’m still concerned it’s going to bring a load of hassle into my life though.
dmahon said:
I wondered how have people’s experiences been doing this? Was it full of hassle and bad tenants, or did they generally tick along OK as a profitable exercise?
With this in mind I’m buying in a nice area and avoiding the bottom end of the market. I’m still concerned it’s going to bring a load of hassle into my life though.
I have no personal experience of BTL, but over the years have known many who do. With this in mind I’m buying in a nice area and avoiding the bottom end of the market. I’m still concerned it’s going to bring a load of hassle into my life though.
Based on that I'd say that crappy tenants are an occasional risk of BTL and sooner or later you will get one (or the one that seemed great will turn into one).
If you have one property this can be financially disastrous - if you have many you are probably only going to have one "bad" one at a time so you can spread/reduce the risk. Doesn't change the aggravation of dealing with a
holes though.I went in the opposite direction last December and turned everything into cash. Two non paying tenants put me off completely and it was very difficult to get them out with High Court fees and bailffs getting involved.
I appreciate that you are only getting 1% return on cash and you will be paying tax on interest earned over £1000 but, for the time being, I can live with that.
I appreciate that you are only getting 1% return on cash and you will be paying tax on interest earned over £1000 but, for the time being, I can live with that.
I have one, and one only BTL flat.
Had it 13 years, mostly good tenants, and I have a great management company (who only charge 5%!), But occasionally you get:
A met police officer as a tenant, resulting in the essex police kicking the door in to arrest him
A tenant on housing benefit who asked if we could reduce their rent so they didn't have to pay their share (only £30 pcm), a week after she was telling us all about her brilliant holiday in spain.
A tenant disconnecting all the smoke alarms so they could smoke weed, then asking for a reduction in rent as they were skint
A tenant who managed to break all the white goods in 12 months
A tenant who got their father to guarantee their rent then stopped the payments. Their father was shocked when he found out what guarantor actually meant!
And a lot more.
If you can handle the grief it's a steady earner, but I wouldn't want the day to day hassle if my agent wasn't so cheap.
Had it 13 years, mostly good tenants, and I have a great management company (who only charge 5%!), But occasionally you get:
A met police officer as a tenant, resulting in the essex police kicking the door in to arrest him
A tenant on housing benefit who asked if we could reduce their rent so they didn't have to pay their share (only £30 pcm), a week after she was telling us all about her brilliant holiday in spain.
A tenant disconnecting all the smoke alarms so they could smoke weed, then asking for a reduction in rent as they were skint
A tenant who managed to break all the white goods in 12 months
A tenant who got their father to guarantee their rent then stopped the payments. Their father was shocked when he found out what guarantor actually meant!
And a lot more.
If you can handle the grief it's a steady earner, but I wouldn't want the day to day hassle if my agent wasn't so cheap.
Our experience over the last 15 years letting a 4 bed detached and a 3 bed barn conversion is that a good reliable agent is worth their weight in gold.
Over that time we've had the following issues, all resolved by deductions from the security deposits (in same cases the entire deposit):
A circular white bleach mark on a carpet (how? - my wife reckons cat pee being cleaned up, in a house where no pets were allowed...)
A broken toilet cistern (how?... I mean just how? - again my wife reckons they stood on it to open the Velux...)
Lack of cleaning on leaving - I can sort of understand that as its potentially easier to pay someone else.
Other than that, both properties have been a gold mine, although we are now divesting ourselves of the final one - we complete on it next week. The tax (income and CGT) and stamp duty (additional 3%, although offset by the stamp duty holiday at the moment) make it markedly less attractive than it was.
I guess we were operating towards the upper end of the market, but definitely have no regrets about doing so.
Over that time we've had the following issues, all resolved by deductions from the security deposits (in same cases the entire deposit):
A circular white bleach mark on a carpet (how? - my wife reckons cat pee being cleaned up, in a house where no pets were allowed...)
A broken toilet cistern (how?... I mean just how? - again my wife reckons they stood on it to open the Velux...)
Lack of cleaning on leaving - I can sort of understand that as its potentially easier to pay someone else.
Other than that, both properties have been a gold mine, although we are now divesting ourselves of the final one - we complete on it next week. The tax (income and CGT) and stamp duty (additional 3%, although offset by the stamp duty holiday at the moment) make it markedly less attractive than it was.
I guess we were operating towards the upper end of the market, but definitely have no regrets about doing so.
Most people are divesting from BTL as the returns have dropped significantly since the recent tax changes.
You will need to do a lot of research to get a decent return on investment.
I understand that a lot of people are trying to diversify their portfolio but there are other financial vehicles to do this that offer better returns and a higher level of flexibility if you want to invest in properties.
I used to have a couple of properties (one flat and one house) but have fully divested last year after renting them out for 25 years and 10 years respectively.
In both cases, I was an accidental landlord but had a very different experience.
The flat was rented through an agency and they were brilliant. Nearly 100% occupancy. No problems. Mainly professional tenants. No bad payers for 25 years!
The house was also rented through an agency and they were st (all 3 of them!). The occupancy was also very high but I had to do a lot of interventions to compensate for the poor services from the agencies (fake invoices for repair, give keys to tenants without a contract or deposit, use deposit in lieu of rent, don't inform me of damage to my property until I hear from the tenant solicitor!...the list goes on ). Mainly family tenants. A couple of issues to retrieve rent but mainly due to the agencies. In both cases, I manage to recover the money.
As was said above, either do the management yourself if you invest locally and have the time or select your agency very carefully.
You will need to do a lot of research to get a decent return on investment.
I understand that a lot of people are trying to diversify their portfolio but there are other financial vehicles to do this that offer better returns and a higher level of flexibility if you want to invest in properties.
I used to have a couple of properties (one flat and one house) but have fully divested last year after renting them out for 25 years and 10 years respectively.
In both cases, I was an accidental landlord but had a very different experience.
The flat was rented through an agency and they were brilliant. Nearly 100% occupancy. No problems. Mainly professional tenants. No bad payers for 25 years!
The house was also rented through an agency and they were s
t (all 3 of them!). The occupancy was also very high but I had to do a lot of interventions to compensate for the poor services from the agencies (fake invoices for repair, give keys to tenants without a contract or deposit, use deposit in lieu of rent, don't inform me of damage to my property until I hear from the tenant solicitor!...the list goes on ). Mainly family tenants. A couple of issues to retrieve rent but mainly due to the agencies. In both cases, I manage to recover the money.As was said above, either do the management yourself if you invest locally and have the time or select your agency very carefully.
I'm pondering this.
Do I sell my 1/2 a house. Or buy the other half, and get it managed by these:
https://www.wolverhamptonhomes.org.uk/landlords/ps...
3 year guarantee on rent after the first tenant moves in. Ok they will likely be bottom of the heap tenants. But it's in a just not the worst area of town...so private renter's might be tricky anyway.
Do I sell my 1/2 a house. Or buy the other half, and get it managed by these:
https://www.wolverhamptonhomes.org.uk/landlords/ps...
3 year guarantee on rent after the first tenant moves in. Ok they will likely be bottom of the heap tenants. But it's in a just not the worst area of town...so private renter's might be tricky anyway.
In answer to the OP it depends. On location, on the local rental market, on the managing agent etc.
Personally (and I've been doing this for 25 years) I won't touch flats, always small family two and three bedders. Less problems with neighbours and you are in control of maintenance issues, and no leases to worry about.
If you have a good agent who is strict with their letting criteria you'll be ok. I have a dozen properties and have not had a tenant move for over three years now. All rents are reviewed annually upwardly to keep in line with the market and returns net of everything are in the region of 3%.
Downside is the governments antipathy to the BTL market and there are a lot of financial negatives compared with even three years ago.
Now is a good time to buy, as the stamp duty holiday will help cost of entry (you will still have to pay the 3% premium, of course) and mortgages are relatively competitively priced.
Good luck, it's a mostly enjoyable thing to do.
Personally (and I've been doing this for 25 years) I won't touch flats, always small family two and three bedders. Less problems with neighbours and you are in control of maintenance issues, and no leases to worry about.
If you have a good agent who is strict with their letting criteria you'll be ok. I have a dozen properties and have not had a tenant move for over three years now. All rents are reviewed annually upwardly to keep in line with the market and returns net of everything are in the region of 3%.
Downside is the governments antipathy to the BTL market and there are a lot of financial negatives compared with even three years ago.
Now is a good time to buy, as the stamp duty holiday will help cost of entry (you will still have to pay the 3% premium, of course) and mortgages are relatively competitively priced.
Good luck, it's a mostly enjoyable thing to do.
Mr Pointy said:
Is it really worth it for a 3% return?
Not just the rental return but capital appreciation also is a huge bonus, I've had houses double in price in the last 8 years, so combined with the rental return (I get 9% as I buy wrecks, refurb and self manage) it's a no brainer.My last one bought back end of 2018, 2 bed end terrace in a okay-ish area of Leeds, bought for 65k, took 8k to refurb and 4k of fees so 77k all In, rents for 625pcm. Had it valued a few weeks back at 105k.
If you buy open market in already good condition, and use agents to manage that's when you are down at low single digit returns and a boiler change can destroy 6 months of profit.
I do alright out of it, with enough properties to spread risk of any bad tenants but it's not as plain sailing as it once was. Gov, and the likes of those b
ds at Shelter have it in for landlords. I have turned my attention now to buying plots of land and building to sell. Will see how the btl sector looks in a few years time before buying any more. Edited by dazwalsh on Wednesday 26th August 20:31
I have one flat which I rent out and had a mixed bag when it comes to tenants.
I have had 2 students who trashed the place and could afford the rent took me a month of two in order to get rid of them, I was lucky that they didn't play the system.
The next one I had was a single guy who never called me or complained, stayed a year and payed his rent on the button every month and the flat was immaculate when he left.
I then had two brothers who again trashed the place and stopped paying the rent lost immediately, 3 months later they were gone, again lucky that they didn't play the system.
Currently I have a young woman with a good job and she not only repairs small issues but pays her rent on the button too.
I refuse to pay an agent as I have friends who do the same with an agent and get the same if not worse problems.
My advice is just make sure you can afford it with no income coming in from it.
I have had 2 students who trashed the place and could afford the rent took me a month of two in order to get rid of them, I was lucky that they didn't play the system.
The next one I had was a single guy who never called me or complained, stayed a year and payed his rent on the button every month and the flat was immaculate when he left.
I then had two brothers who again trashed the place and stopped paying the rent lost immediately, 3 months later they were gone, again lucky that they didn't play the system.
Currently I have a young woman with a good job and she not only repairs small issues but pays her rent on the button too.
I refuse to pay an agent as I have friends who do the same with an agent and get the same if not worse problems.
My advice is just make sure you can afford it with no income coming in from it.
By the time you've paid income tax, repair bills, agents fees, stamp duty when buying and then CGT when selling it ends up being an easy way to pay a lot of tax with relatively little benefit to you the owner. Over the last 20 years people have done well by using the increasing house prices to leverage more borrowing, but that game has ended now I think. No doubt it is profitable in some circumstances - if you are in a 20% tax bracket, buy old/run down properties and renovate them yourself, and can do any DIY when required it's probably a good earner, of if you just want someone to pay off a mortgage for you as part of a retirement plan. If however you're expecting a regular monthly income without putting in much effort then that's unlikely.
It never ceases to amaze me what tenants are able to do to a place. Previous tenants of mine called me up to say that moths had eaten holes in the carpet, and when I went to look there was bare thread in the middle of a quite expensive woolen carpet. Apparently the same as clothes moths, but a new one to me.
It never ceases to amaze me what tenants are able to do to a place. Previous tenants of mine called me up to say that moths had eaten holes in the carpet, and when I went to look there was bare thread in the middle of a quite expensive woolen carpet. Apparently the same as clothes moths, but a new one to me.
Edited by Condi on Wednesday 26th August 21:00
I’m also looking at buying properties to rent out but totally clueless about it,
Is it best to do it and set it up as a ltd company or normal company? When it comes to tax you can only be taxed on profits? No? So whilst you’re building a portfolio and paying mortgages is there much tax to pay?
Is it best to do it and set it up as a ltd company or normal company? When it comes to tax you can only be taxed on profits? No? So whilst you’re building a portfolio and paying mortgages is there much tax to pay?
ghost83 said:
I’m also looking at buying properties to rent out but totally clueless about it,
Is it best to do it and set it up as a ltd company or normal company? When it comes to tax you can only be taxed on profits? No? So whilst you’re building a portfolio and paying mortgages is there much tax to pay?
I am also considering it and have spoken to my accountant and mortgage advisor both of which said ltd company. Mortgage bloke also told me that as long as i have enough deposit then getting the mortgage is easy. tax is on profit of which there wont be much.Is it best to do it and set it up as a ltd company or normal company? When it comes to tax you can only be taxed on profits? No? So whilst you’re building a portfolio and paying mortgages is there much tax to pay?
I want to do it for a pension, at 40 and with no pension i need to do something, i can't see how putting deposits down on 70k properties for the next few years and someone else paying off the mortgage is a bad idea. of course i know you won't get paid every month. fag packet calculation says i could have 5-10 in 10 years and all be paid up in 15-20 years.
I am looking at grimsby to buy. i will have to use an agent.
I know what to do its just having the bottle to do it iykwim. I need an astute uncle to push me in i think
I have residential and commercial.
The resi stuff is on good rents but with equally high capital values. Yield overall is about 3.5%. Capital appreciation is fine over the long term but no good over the last 5/6 years.
I do property backed lending -Lend invest - and get double that yield. No capital growth not liquid.
I am also into commercial property in a big way. Yield on decent assets with long leases is 6-7%. Stamp Duty is only 5%.
Get lower grade assets or shorter leases you can get 10-12 %. It’s all about balance. Commercial is great until the thing is empty and you pay the rates. There is no such thing as a free lunch. Resi - you can always find someone
The resi stuff is on good rents but with equally high capital values. Yield overall is about 3.5%. Capital appreciation is fine over the long term but no good over the last 5/6 years.
I do property backed lending -Lend invest - and get double that yield. No capital growth not liquid.
I am also into commercial property in a big way. Yield on decent assets with long leases is 6-7%. Stamp Duty is only 5%.
Get lower grade assets or shorter leases you can get 10-12 %. It’s all about balance. Commercial is great until the thing is empty and you pay the rates. There is no such thing as a free lunch. Resi - you can always find someone
Residential here, think a lot comes down to the type of property you have. Typically houses and families are a lot better to deal with for me personally.
.
BTL is good but personally depending on your surrounding income paying tax at the higher rate and your not making much more than the mortgage being paid after tax.
That coupled with additional stamp duty when buying and CGT when selling, it's a very long term investment.
.
BTL is good but personally depending on your surrounding income paying tax at the higher rate and your not making much more than the mortgage being paid after tax.
That coupled with additional stamp duty when buying and CGT when selling, it's a very long term investment.
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