Buy to let and the best way to do it?
Discussion
Hello all
I've recently got a job i've been after for quite some time and it is giving me the oppertunity to play with some expendable income. I currently owe a reasonable amount on a loan and credit cards which I will get rid of first but this should not take me long at all, 6 months at most.
My intention originally was to just save for a house, putting away as much money as possible and then returning to the UK with no MOrtgage and working here again. After some thinking though I believe if I work it right I could make a good living from just property alone for the standard of living I want allowing me more freedom to do a job I really love in the future, regardless of what it pays.
Now, I will be working overseas, no expenses at all while i'm away and incredibly minimal expenses back at home, probably average only a couple of hundred a month.
I was shown this website....
www.bankrate.com/brm/mortgage-calculator.asp?unroundedPayment=1013.421313213612&loanAmount=85000&nrOfYears=9&nrOfMonths=108&interestRate=6.00&startMonth=0&startDay=25&startYear=2007&monthlyPayment=+++++%3D%3D%3D%3E&monthlyAdditional=100&yearlyAdditional=0&yearlyAdditionalMonth=0&oneAdditional=0&oneAdditionalMonth=0&oneAdditionalYear=2007&paidOffDate=Feb+25%2C+2020&showAmort=Show%2FRecalculate+Amortization+Table
Which I used to see how much overpayments affected the total you pay and length of the term, which surprised me a lot.
What i'm wondering is what would be the best way to use the extra money with regard to buying houses to rent?
Is it best to get 1 place and then overpaying the mortgage until the rent is comfortably more than the mortgage, then buying another letting the rent take care of paying for the house?
Is it best to do a interest only mortgage? I intend for this to be a long term commitment from me and am not expeecting to make money quickly.
From how I understand it, if you have a rental income over that of the mortgage then the bank will let you borrow far more than you would if you had no rental income from it?
Is it better to concentrate on paying off one house at a time and when this is paid off in full use the income from rent to pay for most of a mortgage on another property?
Lets presume I Have £4,000 expendable income per month (Actual will be more, but I want a little comfort zone) and as it stands at the minute i'd be looking at spending about 110/120k on the houses after getting them up to a good condition (Friend is a builder and has gone through prices etc with me).
Also, if the numbers in my head are right, how much of this will then be removed by tax etc? I'd like to think I would be in a position where the houses would need no extra income from me if I were to say move jobs or decide to not work for an extended period of time.
I realise there are a lot of questions in here but it is a very different area i'm looking at at the minute and it's a bit overwhelming and any advice is very greatfully received.
Dave!
I've recently got a job i've been after for quite some time and it is giving me the oppertunity to play with some expendable income. I currently owe a reasonable amount on a loan and credit cards which I will get rid of first but this should not take me long at all, 6 months at most.
My intention originally was to just save for a house, putting away as much money as possible and then returning to the UK with no MOrtgage and working here again. After some thinking though I believe if I work it right I could make a good living from just property alone for the standard of living I want allowing me more freedom to do a job I really love in the future, regardless of what it pays.
Now, I will be working overseas, no expenses at all while i'm away and incredibly minimal expenses back at home, probably average only a couple of hundred a month.
I was shown this website....
www.bankrate.com/brm/mortgage-calculator.asp?unroundedPayment=1013.421313213612&loanAmount=85000&nrOfYears=9&nrOfMonths=108&interestRate=6.00&startMonth=0&startDay=25&startYear=2007&monthlyPayment=+++++%3D%3D%3D%3E&monthlyAdditional=100&yearlyAdditional=0&yearlyAdditionalMonth=0&oneAdditional=0&oneAdditionalMonth=0&oneAdditionalYear=2007&paidOffDate=Feb+25%2C+2020&showAmort=Show%2FRecalculate+Amortization+Table
Which I used to see how much overpayments affected the total you pay and length of the term, which surprised me a lot.
What i'm wondering is what would be the best way to use the extra money with regard to buying houses to rent?
Is it best to get 1 place and then overpaying the mortgage until the rent is comfortably more than the mortgage, then buying another letting the rent take care of paying for the house?
Is it best to do a interest only mortgage? I intend for this to be a long term commitment from me and am not expeecting to make money quickly.
From how I understand it, if you have a rental income over that of the mortgage then the bank will let you borrow far more than you would if you had no rental income from it?
Is it better to concentrate on paying off one house at a time and when this is paid off in full use the income from rent to pay for most of a mortgage on another property?
Lets presume I Have £4,000 expendable income per month (Actual will be more, but I want a little comfort zone) and as it stands at the minute i'd be looking at spending about 110/120k on the houses after getting them up to a good condition (Friend is a builder and has gone through prices etc with me).
Also, if the numbers in my head are right, how much of this will then be removed by tax etc? I'd like to think I would be in a position where the houses would need no extra income from me if I were to say move jobs or decide to not work for an extended period of time.
I realise there are a lot of questions in here but it is a very different area i'm looking at at the minute and it's a bit overwhelming and any advice is very greatfully received.
Dave!
I haven't got the time to go into too much detail. Besides there are some members of PH that know an awful lot about BTL.
All I will say is try to yield >5% to make it worth your while. As you increase rent over the years, your yield will also increase. But i'd personally want a decent yield from the offset.
But if you are in it for the long run, perhaps you can afford to get less of a return.It is a gamble though. One which I have won myself so don't be put off by those that think BTL is no longer viable.
All I will say is try to yield >5% to make it worth your while. As you increase rent over the years, your yield will also increase. But i'd personally want a decent yield from the offset.
But if you are in it for the long run, perhaps you can afford to get less of a return.It is a gamble though. One which I have won myself so don't be put off by those that think BTL is no longer viable.
The way I see it is this, if I can gradually pay off say 4 houses over my time working abroad, then if they pull in just £500 a month after I pay them off fully that's an extra 2K a month in my pocket, which is a fair amount of extra income.
This is how i've done my sums. This is at 6% over 25 years, only rough numbers.
Mortgage = 700
Rent = 500
Overpayment = 1000 (500 of which is rent)
So for 1200 a month I'm now going to be able to pay off that house in 6 years.
Now during that term I could make bigger payments as I get a yearly tax rebate and also whenever I have the odd extra bit of money I would take be very tempted to take it off the mortgage aswell.
So if I did this for 2 or 3 properties then I could use the rent to cover most of the mortgage cost and add a little to cover any shortfall and then overpay just one mortgage by 2000 etc, then with now an extra 500 coming in per month the other mortgages get paid off quicker and quicker.
I realise this isn't the work of a weekend but will that not bring in a reasonably safe extra income for me in the future? I do know very little about the tax i'd need to pay on any earnings from it though, if they can even be taxed if I plough them right back into the mortgage?
Also (It's ok, I shut up in a minute haha) does a 200K house yield twice as much rental income as a 100K house or is it all pretty much size for size?
Dave!
This is how i've done my sums. This is at 6% over 25 years, only rough numbers.
Mortgage = 700
Rent = 500
Overpayment = 1000 (500 of which is rent)
So for 1200 a month I'm now going to be able to pay off that house in 6 years.
Now during that term I could make bigger payments as I get a yearly tax rebate and also whenever I have the odd extra bit of money I would take be very tempted to take it off the mortgage aswell.
So if I did this for 2 or 3 properties then I could use the rent to cover most of the mortgage cost and add a little to cover any shortfall and then overpay just one mortgage by 2000 etc, then with now an extra 500 coming in per month the other mortgages get paid off quicker and quicker.
I realise this isn't the work of a weekend but will that not bring in a reasonably safe extra income for me in the future? I do know very little about the tax i'd need to pay on any earnings from it though, if they can even be taxed if I plough them right back into the mortgage?
Also (It's ok, I shut up in a minute haha) does a 200K house yield twice as much rental income as a 100K house or is it all pretty much size for size?
Dave!
Dave
Have you looked at how you might finance this? I'm sure Minimax and others who do mortgages will be a long, but you will struggle to get a rea 'BTL' mortgage product if the proposed rent is less than the interest on the loans. Old BLT products often wanted a 130% factor between interest and achievable rent.
However, you can probably now get some much cleverer, self cert mortgage product.
Don't let us put you off - long term property owning is a pretty good bet IMHO.
Have you looked at how you might finance this? I'm sure Minimax and others who do mortgages will be a long, but you will struggle to get a rea 'BTL' mortgage product if the proposed rent is less than the interest on the loans. Old BLT products often wanted a 130% factor between interest and achievable rent.
However, you can probably now get some much cleverer, self cert mortgage product.
Don't let us put you off - long term property owning is a pretty good bet IMHO.
The main problems for most new investors are deposit size and rental yield. As property values have risen so dramatically you need a large amount of money to cover the 10-15% deposit required by lenders. Loan amounts are dependant on the rent covering the payment and as rental levels haven't risen inline with property values you often find a short-fall, so may need to put down a much larger deposit than the 10-15%.
I work for an indpendant Buy to Let mortgage specialist. Feel free to email me through my profile if you want further advice.
I work for an indpendant Buy to Let mortgage specialist. Feel free to email me through my profile if you want further advice.
Ahh, this I wasn't aware of? I was under the impression that a buy to let mortgage was mainly for tax purposes as it was classed as an extra income?
I'll write a PM.
Any other opinions gladly received, i'm mainly after a solid extra income for me so if there are other ways to get these that I could manage myself that would be great.
Dave!
I'll write a PM.
Any other opinions gladly received, i'm mainly after a solid extra income for me so if there are other ways to get these that I could manage myself that would be great.
Dave!
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