First time buyer - Buy to let property
Discussion
Me and my wife currently have a mortgaged house that we live in but we would like to buy a property to rent out as an investment. I had a stroke last year and are now unable to work. We have a limited company that my wife will be working through in the future. We have minimal information on this and wondered if anyone can point us in the right direction of someone who has knowledge on tax, deposits, vetting, paperwork, legal information etc. Any information/advice will be much appreciated.
Approx - £250,000
Thanks
John
Approx - £250,000
Thanks
John
aero93 said:
Me and my wife currently have a mortgaged house that we live in but we would like to buy a property to rent out as an investment. I had a stroke last year and are now unable to work. We have a limited company that my wife will be working through in the future. We have minimal information on this and wondered if anyone can point us in the right direction of someone who has knowledge on tax, deposits, vetting, paperwork, legal information etc. Any information/advice will be much appreciated.
Approx - £250,000
Thanks
John
John,Approx - £250,000
Thanks
John
I'm sorry to hear about your Stroke.
Tax - Speak to an Accountant
Deposits/Mortgage - I can help
Vetting/Paperwork/Legal info - Letting Agent
Liam
BoRED S2upid said:
Do you need to spend £250k on a BTL? It’s a business after all. It seems a bit high to me. How much rent will it achieve?
Sure, rental yield will usually be higher if you spend less, but a property at £250k has scope for some serious capital appreciation.As soon as you get past the usual “entry level” BTL properties there’s an absolute dearth of stock.
All depends on what you want to achieve from rentals.
I have many properties BTL properties so will give you my view.
There are lots of strategies and each will have their own risk and reward profile.
As you are beginner I would stick to the easy approach. Initially just stick to vanilla BTL i.e buy a new/newish property and rent it out to young professionals.
Stick with newish properties so you don't have to deal with the headache of repairs and regulations (e.g EPC requirements). Don't start with the cheap £50k properties up north as the clientele you will get will usually make your life more difficult. Try and cater for young professionals earning a good wage.
With £250k I would buy 2 x £300k to £350k properties at 75% LTV. In the south this would get you a new 2 bed flat in alot of areas (2 beds are much easier to rent out than 1 beds). More properties = greater total capital appreciation and less risk of zero cash flow during void periods.
Work out the numbers before committing to make sure they work for you. Rent - mortgage (interest only) - service charges (if leasehold) - other month costs - tax = a decent suitable cash flow for you. Treat the capital appreciation that normally comes with the properties as a bonus in the future. You can refinance to take this money out at a later stage.
BTL is a long term game. Don't enter it if you have a short term horizon. Ideally, you never sell the properties you buy but instead gift them to your children to benefit from the cashflows. Selling a property is expensive.
Manage and advertise the property yourself. It costs me £45 to advertise each of my properties with online EA's e.g Openrent. There is no need to use an EA who will charge 1 months+ rent. Likewise there is no need to get an EA to manage the property if it is a newish property.
One important thing to do before taking on a tenant is to vett them carefully. Have a list of 20+ questions they must answer e.g their salary, their employment etc before even considering a viewing. This will get rid of the time wasters and the people who could never afford to rent your properties. I amazed at the number of folks who want to rent out a £2k per month property but only earn £35k.
BTL is still possible and profitable even in todays market.
There are lots of strategies and each will have their own risk and reward profile.
As you are beginner I would stick to the easy approach. Initially just stick to vanilla BTL i.e buy a new/newish property and rent it out to young professionals.
Stick with newish properties so you don't have to deal with the headache of repairs and regulations (e.g EPC requirements). Don't start with the cheap £50k properties up north as the clientele you will get will usually make your life more difficult. Try and cater for young professionals earning a good wage.
With £250k I would buy 2 x £300k to £350k properties at 75% LTV. In the south this would get you a new 2 bed flat in alot of areas (2 beds are much easier to rent out than 1 beds). More properties = greater total capital appreciation and less risk of zero cash flow during void periods.
Work out the numbers before committing to make sure they work for you. Rent - mortgage (interest only) - service charges (if leasehold) - other month costs - tax = a decent suitable cash flow for you. Treat the capital appreciation that normally comes with the properties as a bonus in the future. You can refinance to take this money out at a later stage.
BTL is a long term game. Don't enter it if you have a short term horizon. Ideally, you never sell the properties you buy but instead gift them to your children to benefit from the cashflows. Selling a property is expensive.
Manage and advertise the property yourself. It costs me £45 to advertise each of my properties with online EA's e.g Openrent. There is no need to use an EA who will charge 1 months+ rent. Likewise there is no need to get an EA to manage the property if it is a newish property.
One important thing to do before taking on a tenant is to vett them carefully. Have a list of 20+ questions they must answer e.g their salary, their employment etc before even considering a viewing. This will get rid of the time wasters and the people who could never afford to rent your properties. I amazed at the number of folks who want to rent out a £2k per month property but only earn £35k.
BTL is still possible and profitable even in todays market.
Edited by Ethera on Friday 11th February 16:33
I'm the fixer arranging the sale of a portfolio of 4 x 2 beds in Coatbridge and 1 x 1 bed property in Cambuslang which are satellite towns of Glasgow.
I sold them to the owner some 15 years ago and he gifted them to his mother 10 years ago and she's now died so he's got them back.
I've now resold them to a guy from HK who will never set foot in them. They earn £3100 pcm gross and have had hardly an empty week since the current owner first acquired them. They are also in decent order with no major issues and all running issues dealt with by the management agency who take 10% + VAT of rent received for full management.
The new owner will pay £325k for them, and a further £13k in ADS to the Scottish Government. Legal fees will be +/- £4k and he will pay me £15k for my services.
So for +/- £360k he will gross +/- £37kpa and from the 15 year history at the agency he will receive +/- £30kpa from the agent following all costs.
That's a pretty average deal as deals go so gives you an idea of what is fairly straightforward to achieve in the Glasgow area just now.
I sold them to the owner some 15 years ago and he gifted them to his mother 10 years ago and she's now died so he's got them back.
I've now resold them to a guy from HK who will never set foot in them. They earn £3100 pcm gross and have had hardly an empty week since the current owner first acquired them. They are also in decent order with no major issues and all running issues dealt with by the management agency who take 10% + VAT of rent received for full management.
The new owner will pay £325k for them, and a further £13k in ADS to the Scottish Government. Legal fees will be +/- £4k and he will pay me £15k for my services.
So for +/- £360k he will gross +/- £37kpa and from the 15 year history at the agency he will receive +/- £30kpa from the agent following all costs.
That's a pretty average deal as deals go so gives you an idea of what is fairly straightforward to achieve in the Glasgow area just now.
Groat said:
I'm the fixer arranging the sale of a portfolio of 4 x 2 beds in Coatbridge and 1 x 1 bed property in Cambuslang which are satellite towns of Glasgow.
I sold them to the owner some 15 years ago and he gifted them to his mother 10 years ago and she's now died so he's got them back.
I've now resold them to a guy from HK who will never set foot in them. They earn £3100 pcm gross and have had hardly an empty week since the current owner first acquired them. They are also in decent order with no major issues and all running issues dealt with by the management agency who take 10% + VAT of rent received for full management.
The new owner will pay £325k for them, and a further £13k in ADS to the Scottish Government. Legal fees will be +/- £4k and he will pay me £15k for my services.
So for +/- £360k he will gross +/- £37kpa and from the 15 year history at the agency he will receive +/- £30kpa from the agent following all costs.
That's a pretty average deal as deals go so gives you an idea of what is fairly straightforward to achieve in the Glasgow area just now.
Is your role as a fixer something you do professionally?I sold them to the owner some 15 years ago and he gifted them to his mother 10 years ago and she's now died so he's got them back.
I've now resold them to a guy from HK who will never set foot in them. They earn £3100 pcm gross and have had hardly an empty week since the current owner first acquired them. They are also in decent order with no major issues and all running issues dealt with by the management agency who take 10% + VAT of rent received for full management.
The new owner will pay £325k for them, and a further £13k in ADS to the Scottish Government. Legal fees will be +/- £4k and he will pay me £15k for my services.
So for +/- £360k he will gross +/- £37kpa and from the 15 year history at the agency he will receive +/- £30kpa from the agent following all costs.
That's a pretty average deal as deals go so gives you an idea of what is fairly straightforward to achieve in the Glasgow area just now.
Groat said:
They earn £3100 pcm gross and have had hardly an empty week since the current owner first acquired them. They are also in decent order with no major issues and all running issues dealt with by the management agency who take 10% + VAT of rent received for full management.
The new owner will pay £325k for them, and a further £13k in ADS to the Scottish Government. Legal fees will be +/- £4k and he will pay me £15k for my services.
So for +/- £360k he will gross +/- £37kpa and from the 15 year history at the agency he will receive +/- £30kpa from the agent following all costs.
Let me know when you launch a Property portfolio. Sounds like you could do rather better than the established players who dropped the ball.The new owner will pay £325k for them, and a further £13k in ADS to the Scottish Government. Legal fees will be +/- £4k and he will pay me £15k for my services.
So for +/- £360k he will gross +/- £37kpa and from the 15 year history at the agency he will receive +/- £30kpa from the agent following all costs.
Ethera said:
I have many properties BTL properties so will give you my view.
There are lots of strategies and each will have their own risk and reward profile.
As you are beginner I would stick to the easy approach. Initially just stick to vanilla BTL i.e buy a new/newish property and rent it out to young professionals.
Stick with newish properties so you don't have to deal with the headache of repairs and regulations (e.g EPC requirements). Don't start with the cheap £50k properties up north as the clientele you will get will usually make your life more difficult. Try and cater for young professionals earning a good wage.
Appreciate you say that there are many strategies but, just to highlight this, young professionals are (for most of my portfolio at least) a really poor class of tenants. Very mobile, don’t stay long. Families make much better tenants for me. Limited rental stock at 3+ beds and few want to move school aged children. Huge demand for long term contracts as they want the security of knowing the place isn’t going to be sold from under them. Not quite as high in rental yield terms but fewer properties to manage for a return that becomes acceptable if you expect some capital appreciation. There are lots of strategies and each will have their own risk and reward profile.
As you are beginner I would stick to the easy approach. Initially just stick to vanilla BTL i.e buy a new/newish property and rent it out to young professionals.
Stick with newish properties so you don't have to deal with the headache of repairs and regulations (e.g EPC requirements). Don't start with the cheap £50k properties up north as the clientele you will get will usually make your life more difficult. Try and cater for young professionals earning a good wage.
EPC/EICR/repairs are easy to deal with, but easier still if you have enough properties to have trades that you push a decent level of business to them. If you don’t, then that’s where an agent can help.
WelshRich said:
That thread’s like a textbook on:1)How not to operate lower end property
2)How not to handle ‘challenging’ tenants
3)How not to handle DWP rent claims
4)How not to rectify things when they go awry
So to that end you’re right, it’s certainly worth reading.
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