Buying Property As An Investment

[DSLiverpool]

Im a bit rusty on this but I fancy getting back into buy to let can I ask

Is it still 25% deposit ?

What sort of % rates are kicking about

Management fees still circa 9%

Im seeing the bank next week but I dont trust them so want to be a bit for armed so to speak

Cheers

[Manks]

DSLiverpool said:

Im a bit rusty on this but I fancy getting back into buy to let can I ask

Is it still 25% deposit ?

What sort of % rates are kicking about

Management fees still circa 9%

Im seeing the bank next week but I dont trust them so want to be a bit for armed so to speak

Cheers

The answers to your questions:

I believe there are 75% LTV BTL loans about, but you'll struggle to do better than 70% commercial finance. Fees can be anything between 1% and 3.5%.

You might get the odd attractive looking fix or tracker, but you'll need to keep a close eye on the fees and reversion rate. The "proper" cost of BTL loans, i.e. what a bank is likely to charge you without any fancy short-term deals is between 3.5% and 5% margin over base rate, perhaps slightly less over 3 months LIBOR.

You need to ask yourself why you are doing it though. It doesn't look like we're going to see much house price inflation for a while and unless you work very hard you'll struggle to see double digit yields on single occupancy properties. The agents fees will take a big bite out your profit and maintenance will cost you more than you think.

You really need to know what you are taking on and why you are doing it before getting involved with residential or commercial property right now. There is money to be made, but the unwary can easily come unstuck.

FWIW I think we are going to see cheaper finance about later this year and I don't anticipate that prices will be any higher (maybe lower) so you may do well to wait. Added to which we have just entered the strongest seasonal period for the housing market. You'll do better to buy when it is weaker - either when everyone is on holiday or around Christmas.

Best of luck

Manks

[DSLiverpool]

Great advice Manks and a realistic evaluation

I see interest rates going up at the tail end of the year or sooner, I see masses of people being made homeless as they are "just" affording the mortgage now ! I was looking at getting the cheapest terraces I can get, and as many as possible in a given deposit budget and possibly even taking in DHSS.

Right now I get 3.3% and pay 40% tax on that - its hardly worth having in the bank and I have used up all my ISA and Im risk adverse !

[M-J-B]

I own two commercial properties, one 2500 sq ft and one 1300 sq ft. My own company uses the largest of the two and I've recently spent a small fortune renovating the smaller. They are noth rural on a 1/2 acre site and Originally I had decided to use the smaller as storage but I had a change of mind half way through the build and I converted the build to very high spec offices.

Having now spoken to our local agent, I've increased the value of the smaller building by a factor of 125% and it's only cost 40% of that increase in value to get there so I'm very happy. I'm aiming to get circa £10 per sq ft and as the building is 'new' any costs I may have certainly won't include fixing problems! What has surprised me is the lack of small commercial property local to us. I live in West Sussex and even in Horsham/Crawley/Worthing/Littlehampton etc. there is virtually nothing of a similar size for sale..........anywhere. I've been told that even in this market, sellers can almost name their price as people want these buildings to act as pensions and are prepared to look at the long term, rather than short term gain.

I'd be happy to look at the moment as you are but I think the post above says it all, be careful and be aware that your purchase may stay empty for a while, and you still have bills to pay.

[DSLiverpool]

Commercial on merseyside is dead in the water, when I bought our brand new unit 5 years ago I was tempted to buy next door as well, glad I didnt its still empty !

I may dip my toe in the water with one terrace, on merseyside they dont cost that much !!! and it means I will not swap the car this year thats no hardship

[Manks]

DSLiverpool said:

Great advice Manks and a realistic evaluation

I see interest rates going up at the tail end of the year or sooner, I see masses of people being made homeless as they are "just" affording the mortgage now ! I was looking at getting the cheapest terraces I can get, and as many as possible in a given deposit budget and possibly even taking in DHSS.

Right now I get 3.3% and pay 40% tax on that - its hardly worth having in the bank and I have used up all my ISA and Im risk adverse !

None of us knows when base rate will rise, but FWIW I am now revising my opinion back - ie. I thought it would rise this year but now I am not so sure and if we do see a rise this year it will be a small one.

I also don't see masses of people being made homeless. The banks are reluctant to repossess at the moment. I suspect this is for a number of reasons: The properties are worth less than the loan secured, the banks are being told to support people and I suspect a few are still chasing people who handed back their keys in the 90s.

I'd say that buying a number of houses is better than buying one; you either need to do this or not and there are economies of scale. But it will eat capital in terms of deposits and fees.

A word on Housing Benefit. This has turned into a bit of a gravy train since Local Housing Allowance came in and many landlords have climbed aboard. As things stand it is possible to obtain way above private rents for HB tenants and this is unlikely to continue as the next cash strapped administration scrabbles to reduce costs. Also be aware that housing benefit is paid in arrears and that the administration of it can be inefficient. Oh, and HB tenants often don't have deposits, or home owning guarantors, they sometimes rely on government bond schemes that may or may not be worth the paper they are written on.

Manks

[DSLiverpool]

Manks it would cost hundreds for advice like that - thank you

Well plan B was to get a DBS Volante ......

Seriously plan B is to get into electric bikes and if the Government ride to work scheme is renewed when Cameron gets in I may well do it.

[Manks]

DSLiverpool said:

Manks it would cost hundreds for advice like that - thank you

Well plan B was to get a DBS Volante ......

Seriously plan B is to get into electric bikes and if the Government ride to work scheme is renewed when Cameron gets in I may well do it.

Electric bikes. Interesting you should have brought this up. This is an area I have meddled with in the past; them and motor scooters.

I convinced myself in about 2002 that we as a country were about to see an explosion in the use of two-wheeled transport in the form of scooters (like mainland Europe) and electric bikes. But we have a problem in the UK, the climate, which makes adoption of two-wheeled transport rather less attractive than in warmer countries. It may yet happen, but the need for cumbersome and uncomfortable wet weather gear for too much of the year does, in my opinion, present a hardship too far for many people.

Electric bikes - I am sure things have moved on a bit since the products we were evaluating back then, but for the most part we found that electric bikes were too impractical to see major adoption and we took the view that they would remain the preserve of the slightly eccentric wearer of facial hair.

I sympathise with your search for investment opportunities, I am struggling at present to think what to do. My main business is property but I am not seeing an attractive way to expand right now and I can see few other opportunities. I haven't seen anything for a while and thought it seemed like a good money making idea. Apart from money lending I suppose.

Manks

[DSLiverpool]

The bikes are spot on these days, 14mph easy for hours and 19mph off road (switch), I have an account with a manufacturer and am considering leasing, hiring and tourism as well as sales and servicing.

I know its April to August / september but as a sideline with tight overheads / shared overheads it can work.

I need to do more logistic research

[Manks]

DSLiverpool said:

The bikes are spot on these days, 14mph easy for hours and 19mph off road (switch), I have an account with a manufacturer and am considering leasing, hiring and tourism as well as sales and servicing.

I know its April to August / september but as a sideline with tight overheads / shared overheads it can work.

I need to do more logistic research

Sounds like things have moved on a bit and if they are reliable I am sure you could bolt the sale / hire onto an existing business successfully. I sense that you don't anticipate that we'll all be travelling by electric bike anytime soon. We thought (wrongly so far) that the shift to two wheel economical transport would be more significant than it has been.

Best of luck with it and I'd be interested to hear how you get on.

Manks

[Beardy10]

If you are looking at BTL you need to look at interest coverage and not just LTV, I know when I renewed the mortgage on my old flat I was surprised at how little room there was on the interest coverage calculation.

I still think property is a decent bet for the long term and it's historically proven to be a decent asset to own when we have inflation.....and that is something that we will have plenty of, cash in the bank will not be a good asset to have for the next five years or so.