Buying to let at 24 - worth it?

[dionbee93]

Good morning PH - I'll firstly explain where I'm at..

I'm 24 years old and quite fortunate at the moment to have bought my own house in January this year (roughly £80k with a 5% deposit) and should be moving into it following a full refurb in the next 2 months. I'm a teacher so my yearly wage is roughly about £26k a year before taxes etc.

My mortgage on my own house is £300 a month over 30 years and at the moment whilst paying that and ploughing about £600 a month plus into renovating the house I can still live quite nicely on my £1600 (after taxes) monthly wage. My idea is that when I move in, some of the £600 a month i'm currently spending on renovations will go to cover council tax, water, leccy, food and internet etc. and I should hopefully be able to save a little bit of it.

So basically in my head I've two options:
1 - Put the extra cash I'll have towards my mortgage to pay it off earlier than planned.
or, 2. Use the money 'left over' to save and get another 5-10% deposit on another 70-80k 2 bed house and rent it out to cover the mortgage on itself and a little in a pot for keeping the house in good condition etc. and have it as a freestanding/self running house that could be sold on when I'm older as a kind of pension pot.

Am I being unrealistic? (Some will say enjoy the money now etc. but to be honest I like my life, expensive holidays abroad do nothing for me)

Any opinions are welcomed. I'd especially like to hear from someone that's 'been there and done that'.

Dion

[alorotom]

Not unrealistic but I would say have some caution as the salary won't stretch as far as you may hope

We built a small portfolio of 11 properties (1 we occupied) in a similar fashion but when a big bill hits unexpectedly it can be a struggle esp if one (or more) of the houses isn't tenanted at that point

[Sarnie]

You will need a 25% for a BTL property.....

[dionbee93]

alorotom said:

Not unrealistic but I would say have some caution as the salary won't stretch as far as you may hope

We built a small portfolio of 11 properties (1 we occupied) in a similar fashion but when a big bill hits unexpectedly it can be a struggle esp if one (or more) of the houses isn't tenanted at that point

That's what I'm a little scared of.. Buying a ready-to-go property was my plan but like with anything else I guess there can be setbacks. Did you always have a little 'pot' set back ready? I have no plan to build a large portfolio as I know I can't stretch that much.. But my wages will be going up by £100 a month this september which should help a little. (I know it's not much)

Dion

[dionbee93]

Sarnie said:

You will need a 25% for a BTL property.....

That's true actually! It shouldn't be too much of a pain with a 70-80k house hopefully. Joys of living in North Wales I guess. where that can get you a fairly nice 2 bed terraced house with a garden and parking space.

thank you

[Shaoxter]

Sarnie said:

You will need a 25% for a BTL property.....

^^^Listen to the mortgage broker!

Even if you could get a mortgage I wouldn't bother in your situation, unless there's big potential for captial gains. As mentioned, something like a boiler or washing machine breaking is going to wipe out any gains, as well as furnishing the property. Also the BTL environment is much less favourable now and prices/rents are falling where I am.

I can recommend travelling and exploring the world before you settle down and have kids, doesn't have to be an expensive resort!

[dionbee93]

Shaoxter said:

^^^Listen to the mortgage broker!

Even if you could get a mortgage I wouldn't bother in your situation, unless there's big potential for captial gains. As mentioned, something like a boiler or washing machine breaking is going to wipe out any gains, as well as furnishing the property. Also the BTL environment is much less favourable now and prices/rents are falling where I am.

I can recommend travelling and exploring the world before you settle down and have kids, doesn't have to be an expensive resort!

It's good to have other peoples' views on it. I know it would be tight but taking all this into consideration it might be a little 'too' tight maybe?

Dion

[Dan_M5]

And the additional stamp duty you'll need due to be an additional property

[chrisb92]

Dan_M5 said:

And the additional stamp duty you'll need due to be an additional property

£2500 on an £80k house. Quite a big expense if you're tight on budget.

[red_slr]

I would live in your new house for a few months first. See how the money works out. Then look at investments etc. In the mean time look at what rents you can get in the area, how quickly property is selling and being let out. All that stuff.

[anonymous-user]

Don't forget you can rent your current house out, legally, by getting a consent to let from your mortgage provider, that is what I did at your age and moved back in with my parents to save up for another house and whilst I finished my apprenticeship + studies.

£300 mortgage, you will get at least £550 in rent in N.Wales, so leave that ticking over.

If you are paying £300 mortgage and can afford £600 renovation plus savings, then in two years you should be in a position to buy another at 20-25% deposit?

Or overpay for two years and look to remortage and take some equity out for a rental, if you can get enough... if it was me, I would overpay for two years then look to move up the ladder and do the same as you have just done, buy a property renovate and move on in 2-3 years.

[NickCQ]

Trexthedinosaur said:

Don't forget you can rent your current house out, legally, by getting a consent to let from your mortgage provider, that is what I did at your age and moved back in with my parents to save up for another house and whilst I finished my apprenticeship + studies.

£300 mortgage, you will get at least £550 in rent in N.Wales, so leave that ticking over.

You'd have some amount loaded onto the interest rate though, maybe 1% extra, which could increase your payment by £50 - 100 per month (lost my calculator...)

[S10GTA]

£26k doesn't stretch far when running a house full time...I know, as thats my situation!

[BoRED S2upid]

I did something similar in my early 20's and in North Wales! Very similar figures to yours as well I rented a room out in the "home" he was paying £200 a month when my mortgage was £250ish which allowed me to save up for number 2 very quickly. Number 2 was rented to 4 students but I got scared when buying number 3 on my own.

If I were you it pay more off number 1 as a 5% deposit isn't much a slight depreciation in property and you could quickly get into negative equity and you don't want that! But long term your plan is sound enough you just need to save hard.

Where about a in NW?

[anonymous-user]

NickCQ said:

Trexthedinosaur said:

Don't forget you can rent your current house out, legally, by getting a consent to let from your mortgage provider, that is what I did at your age and moved back in with my parents to save up for another house and whilst I finished my apprenticeship + studies.

£300 mortgage, you will get at least £550 in rent in N.Wales, so leave that ticking over.

You'd have some amount loaded onto the interest rate though, maybe 1% extra, which could increase your payment by £50 - 100 per month (lost my calculator...)

I had nothing added on either, with my second mortgage I have a CTL and have just tied back in for 5 years on a residential rate, as we started renting after leaving for Germany.

[Alucidnation]

I thought BTL deposits were 40%?

Plus extra stamp duty at 3%?

Edited by Alucidnation on Tuesday 6th June 16:20

[Dan_M5]

Alucidnation said:

I thought BTL deposits were 40%?

Plus extra stamp duty at 3%?

Edited by Alucidnation on Tuesday 6th June 16:20

All depends on the mortgage company and what other assets you have

[Jon39]

dionbee93 said:

I'm 24 years old and quite fortunate at the moment to have bought my own house in January this year (roughly £80k with a 5% deposit) and should be moving into it following a full refurb in the next 2 months. I'm a teacher so my yearly wage is roughly about £26k a year before taxes etc.

My mortgage on my own house is £300 a month over 30 years . . .

Being age 24, you will not have experience of over 10% interest rates. It has usually happened during or following a Labour government, so perhaps best not to make your decision until after Thursday. With interest rates now at their lowest since seventeen hundred and something, it is possible that you might have to pay £600 a month for your present mortgage in the future. Rates moving from say 4% to 6% only sounds like a 2% increase, but of course the interest paid on a mortgage would increase by 50%.

Hopefully you already knew all this stuff, but surprisingly many people do not seem to realise. They might get quite a shock at some stage.

Edited by Jon39 on Tuesday 6th June 17:01

[Armitage.Shanks]

Enjoy life with the extra money whilst you've got it and before you settle down. Whilst I applaud your future planning the margins will be tight on your income and you could be worrying about all sorts of issues/repayments that will affect your quality of life.

I'm sure many have got regrets of things we should have done when younger and as we get older with more disposable income the responsibilities are higher and/or too old for the pursuits we had in mind. My girlfriend (now wife) and I spent our early years on long haul holidays to see the world before settling down and having a family. Best decision we ever made.

Plus my outlook changed as I'm no longer interested in making pot loads of money, we've got enough to have a comfortable lifestyle and retire early which fortunately my pension planning has assisted.

[AyBee]

£20k deposit and £2.5k stamp duty, that's £22.5k to save and a £26k gross salary, it's going to be a few years at least, and that's while living on bread and water and without taking into account any interest rises on your main house...