BTL - teach me.
Discussion
Our Son has just entered into the BTL business, in a small way and at the entry point. He purchased his first Studio Apartment for a very low price last year and spent 3k on refurb'. The place, in Bury St Edmunds, went onto the rental market in competition with three other studio apartments in the same block. His was the highest priced monthly rental reflecting his refurb' cost. It was let within 48 hours to a tenant who requires long term rental, paying six months in advance.
Our Son is now looking to purchase another small property with a view to letting out,what options so far as raising the purchase cash for the next property are available/sensible? Pitfalls and general advise appreciated as neither of us have had previous experience in this type of business. Our Son also has full time employment as an sparky.Thanks.
Our Son is now looking to purchase another small property with a view to letting out,what options so far as raising the purchase cash for the next property are available/sensible? Pitfalls and general advise appreciated as neither of us have had previous experience in this type of business. Our Son also has full time employment as an sparky.Thanks.
Kudos said:
Rule 1 - does the rent cover the mortgage and give some headroom for voids and increased interest rates? If not, walk away
How is he funding them?
Yes the rental costs cover his mortgage and his letting agent fees, it hasn't left much as profit but his mortgage is only for nine years and he is hopeful that he will have a paid up property at the end of the mortgage period.How is he funding them?
His mortgage is to the bank of mum and dad which is set in a legal framework for avoidance of any 'misunderstanding' either way. He has a regular full time job as well, but is ambitious to build a BTL portfolio. Just need to make sure we don't further support this ambition as learning to walk before run.
Edited by crankedup on Sunday 29th January 19:40
30% deposit for BTL mortgage nowadays?
Sounds like he's on a repayment mortgage? Sometimes works out better off on interest only. Then you don't have to pay tax on the interest. Sounds like this studio isn't going to make him much money, just hopefully in 9 years time, it'll be worth £5-10k more?
Ahh, bank of mum and dad. ignore the repayment mortgage bit.
Sounds like he's on a repayment mortgage? Sometimes works out better off on interest only. Then you don't have to pay tax on the interest. Sounds like this studio isn't going to make him much money, just hopefully in 9 years time, it'll be worth £5-10k more?
Ahh, bank of mum and dad. ignore the repayment mortgage bit.
Thanks for tips so far, his ambition is fairly straight forward, on paper. To purchase more property at the entry/lower rental end of the market. I agree the potential for his capital investment to grow in terms of the value of this particular studio flat is very limited, but he purchased it at a very low price and his refurb' costs included he has little exposure to a calamity.
So if he wanted to raise another mortgage could he use his current flat as security or is there a better safer way?
So if he wanted to raise another mortgage could he use his current flat as security or is there a better safer way?
crankedup said:
Thanks for tips so far, his ambition is fairly straight forward, on paper. To purchase more property at the entry/lower rental end of the market. I agree the potential for his capital investment to grow in terms of the value of this particular studio flat is very limited, but he purchased it at a very low price and his refurb' costs included he has little exposure to a calamity.
So if he wanted to raise another mortgage could he use his current flat as security or is there a better safer way?
He will need a 25% deposit..................So if he wanted to raise another mortgage could he use his current flat as security or is there a better safer way?
Kudos said:
Rule 1 - does the rent cover the mortgage and give some headroom for voids and increased interest rates? If not, walk away
How is he funding them?
Immediate gain on market value obviously helps, but apart from the advice already posted, self management, including remedial repairs etc. etc. are another obvious advantage.How is he funding them?
Lastly, the tax rules for BTLs might be less flexible than for operating a business, but I claim a tax allowance for every single penny that I have to spend in order to manage my BTLs.
Of course, but you can't claim any Capital Allowances and you can only offset rental losses against rental profits - which is a lot more limited compared to what you can do with a trading activity loss.
One advantage of rental income is that rental profits are looked on as Investment Income, rather than Earned Income, so there is no National Insurance liability arising on rental profits.
One advantage of rental income is that rental profits are looked on as Investment Income, rather than Earned Income, so there is no National Insurance liability arising on rental profits.
Eric Mc said:
Of course, but you can't claim any Capital Allowances and you can only offset rental losses against rental profits - which is a lot more limited compared to what you can do with a trading activity loss.
One advantage of rental income is that rental profits are looked on as Investment Income, rather than Earned Income, so there is no National Insurance liability arising on rental profits.
Of course, but my advice to any owner of a BTL investment, is to claim every single expense incurred in the management of their investment. You quite rightly point out the common allowances, but there are also many other operating costs, that are so often overlooked, ie. vehicle fuel, a proportion of home and mobile telephone costs, stationery, printing, postage etc. etc. One advantage of rental income is that rental profits are looked on as Investment Income, rather than Earned Income, so there is no National Insurance liability arising on rental profits.
Edited by Wings on Monday 30th January 12:09
crankedup said:
It was let within 48 hours to a tenant who requires long term rental, paying six months in advance.
I will drag down the excellent financial tone; I have rented for nearly 10 years in various places but do normal tenants pay this far in advance without it being used as a "horticultural" centre? pharmvrs said:
crankedup said:
It was let within 48 hours to a tenant who requires long term rental, paying six months in advance.
I will drag down the excellent financial tone; I have rented for nearly 10 years in various places but do normal tenants pay this far in advance without it being used as a "horticultural" centre? pharmvrs said:
I will drag down the excellent financial tone; I have rented for nearly 10 years in various places but do normal tenants pay this far in advance without it being used as a "horticultural" centre?
The agency is carrying out the usual checks, hopefully everything is above board. The tenant is due to take up on Tuesday. My Son appears quite relaxed about how things are going whilst I am more cautious, hence requesting advise from others with experience.crankedup said:
The agency is carrying out the usual checks, hopefully everything is above board. The tenant is due to take up on Tuesday. My Son appears quite relaxed about how things are going whilst I am more cautious, hence requesting advise from others with experience.
it's not his money 
Gassing Station | Finance | Top of Page | What's New | My Stuff