Discussion
Hi, I'm thinking about getting a buy to let. We currently have a mortgage of £144k and a house value of £230k We have a combined income of £50k
I understand all the pitfalls of having a BTL but having that equity just sat there is annoying me.
There are places I have seen for around £190k to £200k which would rent for around £1100-£1200 per month. This would obviously cover the mortgage on the BTL and part of my current mortgage.
Seem's like a no brainer to me. What am I missing. Is it something a lender would do. Or are the finances to tight?
I understand all the pitfalls of having a BTL but having that equity just sat there is annoying me.
There are places I have seen for around £190k to £200k which would rent for around £1100-£1200 per month. This would obviously cover the mortgage on the BTL and part of my current mortgage.
Seem's like a no brainer to me. What am I missing. Is it something a lender would do. Or are the finances to tight?
Mr Pointy said:
Tax? Voids? Damage? Stamp Duty?
Even after tax I think it would still give me a good return.Voids would be minimal, if any. The area is a high student area and houses in short supply.
Yes would have to account for stamp duty.
I still think it would be better earning some money on it rather than it just sat there doing nothing.
Guv10 said:
Even after tax I think it would still give me a good return.
Have a read:https://www.telegraph.co.uk/investing/buy-to-let/l...
https://www.telegraph.co.uk/investing/buy-to-let/l...
Guv10 said:
Even after tax I think it would still give me a good return.
Voids would be minimal, if any. The area is a high student area and houses in short supply.
Yes would have to account for stamp duty.
I still think it would be better earning some money on it rather than it just sat there doing nothing.
If it's in a student area I'm assuming you would be looking to rent to students, I have 3 student BTL's , if the property you're looking at is not already a student rental check that the local authority will allow you to turn it into one, many won't if the area is already highly populated with students. Also bear in mind that only a limited number of lenders will lend on a student rental, and at slightly higher rates.Voids would be minimal, if any. The area is a high student area and houses in short supply.
Yes would have to account for stamp duty.
I still think it would be better earning some money on it rather than it just sat there doing nothing.
On the positive side the yields are very good, and at a uni with a housing shortage voids just don't happen. My houses are always contracted by the end of February for the new tenancies to start on 1st July. With a good agent who specialises in student property you will find that the rent always gets paid, because of the parental guarantee they take, as does any damage that occurs.
I get virtually no problems with my student houses, unfortunately I can't say the same for the ordinary BTL's.
red_slr said:
Can you stomach a £20k repair bill if someone trashes your house?
I dont think that 's a reasonable comment to someone looking into btl. I do know of 20k bills but they are very easily avoidable. However, i would say if you are not the kind of person who wants to protect investment property and maintain them as you would any other home, you could be unexpectedly hit with large bills at some point. It's often not the easy money people presume. But for periods of time it can be. BTL ship has sailed really. 6.6% yield before costs is not a great investment. I think you might struggle on affordability as well as all the good banks have tightened right up on lending criteria. Taxation and red tape is pushing smaller landlords out. We have ad done but selling off as Ts come out just one left now. We are looking more towards having commercial/ industrial units. Slower capital growth but unregulated and strong rents.
soupdragon1 said:
Guv10 said:
Voids would be minimal, if any. The area is a high student area and houses in short supply.
What could possibly go wrong! Students don't even rent for the whole year, as away during the summer. Plenty of time to get the builders in.
We rent out a property with around a 70k mortgage on a 200k value and it works ok. However, after we've paid the taxman, maintained the property, insured it etc etc we don't make a lot out of it (couple of hundred quid a month after the mortgage).. Essentially the tenants are paying the mortgage off for us which means you have to be in it for the long term and treat it as a saving vehicle. We bought the property to live in and paid too much for it back in 2007, renting it out when we moved out in 2010 was the best way of avoiding making a 30-40k loss.
My parents rent out quite a few properties (owned outright) and do alright, however it's very easy to end up with bills that can wipe out years of profit. They had one property where the couple in it split up and the woman moved out, the guy lost his job and started drinking heavily. It was a court bailiff job to get him out. The lost rent alone totalled 8k, on top of the costs to have him removed and the damage he'd done to the property my parents were around 25k out of pocket. Another property that has recently come free after the tenant had been in it for 12 years has needed over 10k spending on it to get it back to a rentable standard - new kitchen and white goods, new bathroom, decorate and new carpets (nice tenants but they weren't overly fussy about keeping the place clean).
You might get lucky, but you would probably do well to make sure you have enough money to stand 3-6 months mortgage and a fund to refurbish the place if you have a bad tenant or the house decides to s
t itself (boiler/roof/etc etc). The guy that wrecked my parents rental and defaulted on the rent seemed a nice guy. He had a good job, him and his other half looked after the place, paid the rent on time, mowed the lawn etc. Then the wheels fell off.
Do your sums based on a worst case scenario (refurbishment, new boiler, new roof, 6 months empty) and see how you feel about it then.
My parents rent out quite a few properties (owned outright) and do alright, however it's very easy to end up with bills that can wipe out years of profit. They had one property where the couple in it split up and the woman moved out, the guy lost his job and started drinking heavily. It was a court bailiff job to get him out. The lost rent alone totalled 8k, on top of the costs to have him removed and the damage he'd done to the property my parents were around 25k out of pocket. Another property that has recently come free after the tenant had been in it for 12 years has needed over 10k spending on it to get it back to a rentable standard - new kitchen and white goods, new bathroom, decorate and new carpets (nice tenants but they weren't overly fussy about keeping the place clean).
You might get lucky, but you would probably do well to make sure you have enough money to stand 3-6 months mortgage and a fund to refurbish the place if you have a bad tenant or the house decides to s
t itself (boiler/roof/etc etc). The guy that wrecked my parents rental and defaulted on the rent seemed a nice guy. He had a good job, him and his other half looked after the place, paid the rent on time, mowed the lawn etc. Then the wheels fell off. Do your sums based on a worst case scenario (refurbishment, new boiler, new roof, 6 months empty) and see how you feel about it then.
If you have cash then owning property is still a great way to generate an income - as always. Wealthy people have been investing and developing property for hundreds of years.
If you need to borrow most of the money to get into a BTL then I dont think there is much in it and too risky that you make a loss/not worth the hassle. The government rules and bank rates are not within your control.
I have acquaintances up north who bought into the BTL frenzy towards the end of the last property boom in 2007, paid a premium on some sure fire "investments" and now 10 years later are still sat in negative equity, being grateful for a the few percent yield they make each year.
If you need to borrow most of the money to get into a BTL then I dont think there is much in it and too risky that you make a loss/not worth the hassle. The government rules and bank rates are not within your control.
I have acquaintances up north who bought into the BTL frenzy towards the end of the last property boom in 2007, paid a premium on some sure fire "investments" and now 10 years later are still sat in negative equity, being grateful for a the few percent yield they make each year.
Edited by bogie on Thursday 9th May 10:42
If you can buy for cash and in it for the long term, fine. Personally, I wouldn’t leverage up for a BTL, too much to go wrong, Corbyn for a start. If you haven’t got the liquidity and reserves to ride out a hostile environment, you’ll put yourself in a world of pain. Typically, costs all come at once, voids, repairs, tax bills etc. If you have spare money and are in it for the long term, it’s a lot less hassle to put it in a decent global equity fund. You need a large amount of cash to get into BTL now, the game has changed.
soad said:
Students don't even rent for the whole year, as away during the summer. Plenty of time to get the builders in.
My student rentals are all 52 week contracts. As for students trashing houses, in 8 years any damage I've incurred has been entirely paid for by the student or their parent's as the parental guarantee in their contract is fairly watertight. Ordinary BTL's on the other hand.....
Mr Pointy said:
Guv10 said:
Even after tax I think it would still give me a good return.
Have a read:https://www.telegraph.co.uk/investing/buy-to-let/l...
https://www.telegraph.co.uk/investing/buy-to-let/l...
Greens and the Vince Cable Club probably aren't keen either.
Conservative party used to be pro-business, pro-investment, but consider the theory of homeowners *generally* voting Tory and renters *generally* not voting Tory and there's reasoning behind the recent tax changes etc.
Add in the tenant fee ban, Section 21 changes, licencing, and I really wouldn't borrow to invest in BTL - the whole world seems to be against it.
I recently read there are measurable increases in homelessness in some areas, due to the number of LLs packing it in. Anybody who started BTL-ing 10+ years ago and bought well will be thinking about cashing in now I would imagine.
On the flip side RICS are forecasting annual rent increases of 3% due to lack of supply going forward.
Paying cash for something that isn't at "bottom of the market/steal the boiler/trash the place" level to which you can add value cheaply, get decent tenants and then be a hands-on manager still works - but for how long? I'd say BTL has still got potential for some, but otherwise I think there's better safer more passive options elsewhere.
eta
https://moneyweek.com/505721/the-death-of-buy-to-l...
Edited by andy43 on Friday 10th May 08:36
red_slr said:
Can you stomach a £20k repair bill if someone trashes your house?
Incredibly unlikely what are they going to do? Remove the kitchen and bathroom? Ignore comments like this OP there is insurance and in reality it’s very unlikely even for students to totally trash a house they usually have parents as guarantors.
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