Buy to let mortgage
Discussion
I think Workshy was talking about the interest you will pay annually on the mortgage...
You obviously have mortgage costs, but also consider fixing mechanical breakdowns (boiler/washing machine etc.) plus general redecoration every year. You will need to factor in things like new carpets every other year or so, plus painting walls regularly and even having a contingency fund for really horrible tenants who have been known to knock down walls or run off with all your furniture...
You obviously have mortgage costs, but also consider fixing mechanical breakdowns (boiler/washing machine etc.) plus general redecoration every year. You will need to factor in things like new carpets every other year or so, plus painting walls regularly and even having a contingency fund for really horrible tenants who have been known to knock down walls or run off with all your furniture...
Edited by wanty1974 on Tuesday 27th June 09:46
Paracetamol. Thanks but the letting agents have said between 600-650/month, so 7k is bottom end, I might have to live with this for a while, I can finance some of it myself.
Stupid question, but why interest only? isn't this an endowment type of mortgage, only I've been there done that, got stung, and don't want to revisit.
TIA
kevin
Stupid question, but why interest only? isn't this an endowment type of mortgage, only I've been there done that, got stung, and don't want to revisit.
TIA
kevin
Edited by warmfuzzies on Tuesday 27th June 14:34
in addition you'll have the monthly community costs associated with flats/apartments, plus either your agents fees 12.5%?? or your own advertising fees..
And don't forget the return you could get on your £25k by investing or paying it off your own mortgage... £1,000 p.a.
And don't forget the grief if you do let it out yourself...
Sorry, but unless your offering short term luxury to get a premium rent, buy to let at these figures seems a struggle. Depending on the area, the capital gain outlook seems grim for the next 3 years as well..
And don't forget the return you could get on your £25k by investing or paying it off your own mortgage... £1,000 p.a.
And don't forget the grief if you do let it out yourself...
Sorry, but unless your offering short term luxury to get a premium rent, buy to let at these figures seems a struggle. Depending on the area, the capital gain outlook seems grim for the next 3 years as well..
Powelly.
Investments on 25k are to put it mildly a joke, e.g. 15k over 5 years on a reasonably safe bet would only guarentee 16.5k fees are stupid, many places are capping the returns, and then taking a % out of the capital earned, some as high as 30% of capital earned, thats laughable compared to long term property investment, hence the question about it, this is long term, 10-20 years, not short trerm, so I figure that it might be a struggle for 2-3 years, but thats how I started out, this time I have capital in my residence....48k mortgage on a 240k house, 7years left costing 660/month.
Maintenance costs which include buildings insurance and water, with the usual ground maintenance and the like is 800/yr, with 150 for ground rent.
Lease is a brand new 125 yr job.
costs for the flats are roughly 166k.+1% duty, agents fees are roughly 450 for the mortgage.
Kevin
Investments on 25k are to put it mildly a joke, e.g. 15k over 5 years on a reasonably safe bet would only guarentee 16.5k fees are stupid, many places are capping the returns, and then taking a % out of the capital earned, some as high as 30% of capital earned, thats laughable compared to long term property investment, hence the question about it, this is long term, 10-20 years, not short trerm, so I figure that it might be a struggle for 2-3 years, but thats how I started out, this time I have capital in my residence....48k mortgage on a 240k house, 7years left costing 660/month.
Maintenance costs which include buildings insurance and water, with the usual ground maintenance and the like is 800/yr, with 150 for ground rent.
Lease is a brand new 125 yr job.
costs for the flats are roughly 166k.+1% duty, agents fees are roughly 450 for the mortgage.
Kevin
Edited by warmfuzzies on Tuesday 27th June 14:42
warmfuzzies said:
Paracetamol. Thanks but the letting agents have said between 600-650/month, so 7k is bottom end, I might have to live with this for a while, I can finance some of it myself.
Stupid question, but why interest only? isn't this an endowment type of mortgage, only I've been there done that, got stung, and don't want to revisit.
TIA
kevin
Stupid question, but why interest only? isn't this an endowment type of mortgage, only I've been there done that, got stung, and don't want to revisit.
TIA
kevin
Edited by warmfuzzies on Tuesday 27th June 14:34
Its not about whether you are willing to fill the monthly funding gap. Mortgage companies do a mechanical calculation that says that the rent must = 125% of the interest only part of the morgage. In this case if the rent was 7k then the most they will lend you is 112k. You will have to provide the balance as a cash deposit.
In terms of "interest only"-if its purely for long term rental then you should not pay back the capital as 20 years from now the outstanding capital should be a relatively small amount. Instead you should save the capital and put it toward another property as the money is "geared-up".
Also, income tax is payable on the difference between income recieved and interest paid. At this stage not an issue, but in the future the capital liable on a repayment mortgage has obviously reduced and tax burden therefore increased. Multiply this by the size of the portfolio you were looking to build = headache.
On the mortgage front, rental income not really an issue now from lenders point of view. I work in the industry and there are lenders who do not need to take rental into account. From an ethical and fiscal point of view, I would have to be convinced that the property was the right thing for you to be doing and that your income could supplement the rental.
Is this a property with a particular angle that you like - e.g. room for renovation, expansion, good location? A lot of people I see at the moment are getting increasingly desperate to join the multiple property owners club, and unfortunately the band wagon left town about 18 months ago for most!
On the mortgage front, rental income not really an issue now from lenders point of view. I work in the industry and there are lenders who do not need to take rental into account. From an ethical and fiscal point of view, I would have to be convinced that the property was the right thing for you to be doing and that your income could supplement the rental.
Is this a property with a particular angle that you like - e.g. room for renovation, expansion, good location? A lot of people I see at the moment are getting increasingly desperate to join the multiple property owners club, and unfortunately the band wagon left town about 18 months ago for most!
Rich,
It's purely an investment vehicle, wih the added bonus of having something concrete, as it were. I pay 40% tax, just and it's trying to make use of a sum of money I will be coming into when my comapny shares are compulsarily bought from me.
I'd looked at putting the whole lot (30k) in the wifes name for tax reasons, and I found it hilarious the rate of return....Hence bricks and mortar.
Kevin
It's purely an investment vehicle, wih the added bonus of having something concrete, as it were. I pay 40% tax, just and it's trying to make use of a sum of money I will be coming into when my comapny shares are compulsarily bought from me.
I'd looked at putting the whole lot (30k) in the wifes name for tax reasons, and I found it hilarious the rate of return....Hence bricks and mortar.
Kevin
Long term, the 'market will (if taken advantage of in a shrewd manner) provide a better rate of return than property, etc. The only way to switch that in favour of property is if you really make the most of leveraging someone elses money (i.e. the mortgage) to your best advantage. Hence getting the mortgage interest-only and not tying up any more capital than absolutely necessary.
Purely putting the money into the 'market, I'd expect to turn £25k into £45-50k (pre tax) over the next 5 years after any fund management fees, etc. Personally, I'd be tempted to re-mortgage the house, invest the lot, and work on the principle you'll get a better annualised rate of return over the next decade than 5% or so.
(My take on risk is slightly skewed due to a few experiences in life - appreciate if you've got kids/other's who're dependent this might not be an option!)
Purely putting the money into the 'market, I'd expect to turn £25k into £45-50k (pre tax) over the next 5 years after any fund management fees, etc. Personally, I'd be tempted to re-mortgage the house, invest the lot, and work on the principle you'll get a better annualised rate of return over the next decade than 5% or so.
(My take on risk is slightly skewed due to a few experiences in life - appreciate if you've got kids/other's who're dependent this might not be an option!)
warmfuzzies said:
Powelly.
Investments on 25k are to put it mildly a joke, e.g. 15k over 5 years on a reasonably safe bet would only guarentee 16.5k fees are stupid, many places are capping the returns, and then taking a % out of the capital earned, some as high as 30% of capital earned, thats laughable compared to long term property investment, hence the question about it, this is long term, 10-20 years, not short trerm, so I figure that it might be a struggle for 2-3 years, but thats how I started out, this time I have capital in my residence....48k mortgage on a 240k house, 7years left costing 660/month.
Maintenance costs which include buildings insurance and water, with the usual ground maintenance and the like is 800/yr, with 150 for ground rent.
Lease is a brand new 125 yr job.
costs for the flats are roughly 166k.+1% duty, agents fees are roughly 450 for the mortgage.
Kevin
Investments on 25k are to put it mildly a joke, e.g. 15k over 5 years on a reasonably safe bet would only guarentee 16.5k fees are stupid, many places are capping the returns, and then taking a % out of the capital earned, some as high as 30% of capital earned, thats laughable compared to long term property investment, hence the question about it, this is long term, 10-20 years, not short trerm, so I figure that it might be a struggle for 2-3 years, but thats how I started out, this time I have capital in my residence....48k mortgage on a 240k house, 7years left costing 660/month.
Maintenance costs which include buildings insurance and water, with the usual ground maintenance and the like is 800/yr, with 150 for ground rent.
Lease is a brand new 125 yr job.
costs for the flats are roughly 166k.+1% duty, agents fees are roughly 450 for the mortgage.
Kevin
Edited by warmfuzzies on Tuesday 27th June 14:42
Yes sorry to be doom and gloom... and your approach looks very methodical from a figures perspective.. Unfortunately I live, eat and breathe property on a daily basis.. and I don't spend much time on the figures, currently, I see a better short term return by offsetting the capital you have against your resi.. or indeed leaving it there. Pending on your rate, it should be worth as I say @ £1k per year to you??
The cyclical pattern of rent vs. values should swing back, when, depends on which proper advisor you speak to... and of course location. Areas where new builds are now being restricted should recover sooner..
Long term, if my opinion is worth anything for you, its not quite the right time to buy, unless you can steal somewhere from a vendor who wishes to release capital quickly.. however, if you do have a 10-20 year view, and if history follows its trends over the past 50 years, then indeed you will never lose.
Very best of luck in your endeavours.
paracetamol said:
warmfuzzies said:
Paracetamol. Thanks but the letting agents have said between 600-650/month, so 7k is bottom end, I might have to live with this for a while, I can finance some of it myself.
Stupid question, but why interest only? isn't this an endowment type of mortgage, only I've been there done that, got stung, and don't want to revisit.
TIA
kevin
Stupid question, but why interest only? isn't this an endowment type of mortgage, only I've been there done that, got stung, and don't want to revisit.
TIA
kevin
Edited by warmfuzzies on Tuesday 27th June 14:34
Its not about whether you are willing to fill the monthly funding gap. Mortgage companies do a mechanical calculation that says that the rent must = 125% of the interest only part of the morgage. In this case if the rent was 7k then the most they will lend you is 112k. You will have to provide the balance as a cash deposit.
In terms of "interest only"-if its purely for long term rental then you should not pay back the capital as 20 years from now the outstanding capital should be a relatively small amount. Instead you should save the capital and put it toward another property as the money is "geared-up".
Have to agree with paracetamol somewhat.
Your rental income is waaaaay too low & supplementing it for someone elses pleasure to live in your property is not good business sense, sorry to say
Just purchased another place @ £165,000 on a Buy2Let mortgage but I'm getting nearly £9K/year rental so I'm quids in & I know the capital growth in the area purchased will gain well.
That is the sort of rental you need when purchasing @ that level.
Hi I have also been looking at this and mostly overseas. The problem with overseas appear to be a general lack of people in those coutries renting, and oversupply from westerners buying property and trying to rent to cover some costs or at least breakeven on mortgage. I have started to look back at UK as because at least you know the system. In terms of areas to buy in the South East Reading and South greater London and maybe Bracknell (redevlopment)looks reasonable, I am a novice though.
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