Advice needed - buying property, 100k.

[jenzo]

All

Your input and advice needed please, esp. from those in the property / rental market – who have experience and can give some good advice..

What would you do if you had 100k in cash, in terms of buying a property (not to live in), focusing on:

- How many would you / can you buy with 100k ?
- What would YOU be looking for / your intention (number of years to keep, yield etc)?
- Mortgage type you would go for
- Any other points that are worthwile / you would consider ?

[Sarnie]

You could buy four 100k properties with 25% deposits on each.......

[98elise]

100k will get you 400k worth of spending power, how many houses you will get for that is down to your preferences, ie what type of house you buy.

I'd be looking for 6-7% yield, which gives a 10-14% return on investment. If house prices keep up with inflation, you original capital will also grow, but much faster than inflation (a 25% rise in inflation would see 100% growth in your capital). I would be looking long term as a pension, but start paying them down as soon as possible as interest rates are only going to go one way.

A 25 year interest only mortgage is normal for a BTL.

The only other advice I can give is do it

[BoRED S2upid]

With 100k I would personally look at two 100k properties with 50% LTV on each, nice and safe get them both paid off ASAP and look for another.

[jenzo]

Thank you all for yoour input and advice on this.

I am going to have a sit down with a friend over the weekend also. I have never bought a property, under 30 and still live at home and will continue to do this. Like Elise said - its something I just have to do !

[jenzo]

If anyone else has any more advice or how they would approach this, with what their intention would be as a plan / strategy, feel free to post please..

[Perec]

jenzo said:

If anyone else has any more advice or how they would approach this, with what their intention would be as a plan / strategy, feel free to post please..

The advice above about gearing, i.e. using the 100k as deposits to secure loans, is sensible. You need a good finance broker, having considered the following:

Why are you doing this? Is it a pension, is it for income? If it's the former I would look for property in historically stronger areas that has always been and will always be worth something. These properties, however, won't be the best earners in terms of income. The technical term is yield, the income they generate as a percentage of the value of the property will be relatively low. If you want a higher income you need a higher yield which typically will involve buying properties in less good areas or which are higher risk. The rent may be similar but the property will be cheaper, hence the yield is higher.

Higher risk could be properties most suitable for letting to claimants of Housing Benefit, bedsits or houses in multiple occupation (rented by the room).

So you need to decide what your appetite for risk is. Would you prefer to be renting properties to white collar professional tenants who will probably look after them (but who can also be quite demanding) or would you prefer to rent to blue collar, the unemployed etc. Generally speaking the cheaper the rent the more you'll need to get your hands dirty.

You need also to consider whether you are happy to manage the properties yourself. If you use a letting agent they will take a fee for everything they do and charge you a management fee which is on average about 10%. This is of your gross rent. So if your net profit (i.e. the gross rent less mortgage and running costs) is 30% the agent is taking a whopping 1/3 of your profit. For this reason many people choose to manage their own properties. This isn't in itself particularly difficult, but you need to be prepared for phone calls from tenants at inconvenient times and concerning trivia. You also need to have a portfolio of good tradesmen to hand if you aren't capable of doing repairs yourself.

There is also the matter of complying with the law. As with most things in this country there are plenty of complex legal considerations, from the basics like ensuring that the property is safe (including annual gas safety certificate) to protecting tenants' deposits (if you take them) to having a legally enforceable tenancy agreement.

Property investing can be fun, but more usually it isn't and it's not as lucrative as people think. You should assume that you'll earn half what you imagine and get twice the hassle. You are also buying into a fairly illiquid asset, so you need to be sure you can stay in it for the long term.