BTL feasibility query

[dirky dirk]

hi,

i was just wondering something about BTLs
lets say for example you get left 150k

is it better to sink it into one BTL, not owe anhything, and then have the rent as an imcome


or is it better to get 3 BTL's and get themwith a deposit and on an interst only mortgage?
im jsut wondering how people do it, and what everyone elses opinons are

thanks

[JapanRed]

Depends on your attitude to risk. Buying 3 at £50k each is more risky but will provide a better return for that risk. You could buy 5-7 at £100k with a £20k deposit on each, for maximum return (but also maximum risk).

1 at £150k with no mortgage is least risk but least return.

[walamai]

You are essentially asking whether gearing is a good idea. Or with your specific example is it better to:

Invest £150k in BTL's (one property paid in full)
or
Invest £300k in BTL's (assuming 3 x 50% mortgages)
or
Invest £1.5m in BTL's (assuming 3 x 90% mortgages)


The answer is - it depends if you think BTL is a good investment (and there are plenty of threads on here already discussing that!).

But to illustrate a bit further, lets say property goes up by 10% or down by 10% (massive simplification, but illustrative of the 'risk' involved either way).

Example 1. You will make £15k or lose £15k.
Example 2. You will make £30k or lose £30k
Example 3. You will make £150k or lose £150k (all your investment!).

[anonymous-user]

The fact you are asking this question suggests you don't have much experience investing in property.

That itself isn't an issue - everyone has to start somewhere - but I would suggest proceeding carefully. If you are committed, get one, make it work, prove (to yourself) you like dealing with the problems that go with BTL before remortgaging and getting deeper in.

[Sir Bagalot]

EddieSteadyGo said:

The fact you are asking this question suggests you don't have much experience investing in property.

That itself isn't an issue - everyone has to start somewhere - but I would suggest proceeding carefully. If you are committed, get one, make it work, prove (to yourself) you like dealing with the problems that go with BTL before remortgaging and getting deeper in.

^^This

[dirky dirk]

EddieSteadyGo said:

The fact you are asking this question suggests you don't have much experience investing in property.

That itself isn't an issue - everyone has to start somewhere - but I would suggest proceeding carefully. If you are committed, get one, make it work, prove (to yourself) you like dealing with the problems that go with BTL before remortgaging and getting deeper in.

No I absolutely have none.
And it’s not as easy as HUTH make it look.
I’m not scared of the diy side and I wouldnt do it at the expense of my own house.
which is almost mortgage free.
I know a couple of people who do it and do nicely out of it.
They Keep their cards close to their
Chest though, so it got me thinking.
Its not on the cards at the moment, but maybe one day.

[NickCQ]

dirky dirk said:

I know a couple of people who do it and do nicely out of it.
They Keep their cards close to their
Chest though

Lots of smoke and mirrors in the property business. First rule is that almost no-one is making as much money off it as they tell you.

The glory days of BTL are over (not before their time)

[snorkel sucker]

I have a B2L but my advice would be that if you have no experience but an interest in property that your £150k would be better utilised being drip fed into an ISA wrapper and used to hold REIT funds (for exposure to property). I'd diversify the rest so you don't have all your eggs in one basket.

I think that the barriers to entry for new, smaller landlords are now too high (or not generally financially viable). For those who already have one, or more B2L, its not quite so bad, but not as good as it was.

[red_slr]

Bear in mind that stress testing is much harder now so the days of getting an 80% LTV are generally gone as the numbers don't stack up. IME you are talking 60-70%LTV to get the numbers to work, unless rental happens to be very high for some reason (there are a few places still like this).

The government are always meddling too, changing the goal posts of what is or not allowed for landlords and generally tenants only ever get the better end of the deal. The 3% extra stamp is a big one off cost.

Of course the most recent changes being the changes to taxation on the rental income and allowable deductions. Again made it not worth it for many.

Plus accountants fees, letting agents fees, insurance, minor repairs, major repairs and of course the possibility of house prices going down.

Add into all that you get just one bad apple and it could wipe out years of profits.

I would still consider BTL, in the right circumstances but I would go in with eyes wide open and TBH I wouldn't expect to make much profit from it so it would be an investment that I would make after I had exhausted other options such as SIPP or ISA. We sold our BTL over a year ago and honestly I have not missed it once. Yes its nice to see a big chunk of money coming in each month but its very much psychological in that you physically see that money coming into your account so you think great look I made £500 this month. If my pension did £500 a month I would be very disappointed but its not "real" money its just a number on a screen.

IYSWIM.