Buying to let -- any advice please?

SailorSam · 29 November 2009 at 4:19PM

If you're not working at the moment would spending £60k affect any benefits you try and claim, what do they call it when you make yourself poor on purpose.

I'm sure i've posted this before, i became a LL by buying a house for my sister and her b/f who were both unemployed. I lost thousands, not just in paying back loans but when i had to sell for less than i paid and waited for ever to get any rent from the Dhss. Even relatives can be bad tenants.
I'd never do it again.

zzzLazyDaisy · 29 November 2009 at 4:19PM

bundly wrote: »

Daisy - THANK you for your time. If I bought a flat for £60k I would not even need a mortgage at all. The largest amount I am thinking of borrowing is £20,000. How would I meet the £25pw repayments if the flat was empty? I have enough income to cover that. I get IB plus I have a lodger (RAR scheme, not taxed), and I make some money from my small business. Yes I would have to pay tax on the rental income from the new flat, but surely any service charges, ground rent etc would be offset?

I said you'd have to pay tax on £400, based on your estimate of rent at £500 and charges at £100, so that expenditure is already taken into account.

As far as the repayments are concerned - tell it to the lenders. I doubt that they'd lend on those income sources (apart maybe from the money from your small business, if you can produce accounts)

bundly · 29 November 2009 at 4:27PM

Brock. I was merely asking if yours was the view of the majority, or a tiny minority. I have no idea. What I am after here is a broad range of opinion, both for and against.

You are quite, quite wrong in trying to include Nationwide as being negative to the idea of buy-to-let. That was NOT the reason they turned me down. If I had a job, they were perfectly happy to lend me in order that I could buy a flat with the intention of letting it.

You talk of my not having a "guaranteed income stream". I held the same job for over 20 years then wham bam, I had an accident at work and was out on my ear, and have never been employed since, so --- anything can happen to anyone, and not even a job held for 20+ years is guaranteed.

I am happy for people to point out the pitfalls, indeed that is a VERY valuable thing to do for me, and I am grateful. But you talk not just as though there are potential problems that have to be planned for, but as though the whole scheme is absolutely 100% guaranteed to end in utter disaster.

Ten years ago when I announced that I intended to advertise for a lodger, every single person I told was horrified and issued dire warnings to me that almost made my blood run cold. But stupidly I took the punge and I've had altogether about 30 lodgers over the ten years, and I've never had the slightest problem with any of them, and have made about £40,000 from it.

bundly · 29 November 2009 at 4:30PM

So, Daisy, is it now the case that lenders won't take a £200k house as security against a £20k loan? Wow I have been out of the borrowing life for so long I am well out of touch. I would have thought they'd jump at the chance, and rub their hands together hoping that I could not find that £25 per week so they could whip my lovely house off me!

Tax on £400 a month would be about £100, is that right? Leaving me with £300.

Currently I am getting about £150 per month from my £60k savings.

bundly · 29 November 2009 at 4:36PM

SailorSam wrote: »

If you're not working at the moment would spending £60k affect any benefits you try and claim,

No, Incapacity Benefit is not means tested in any way. I get £90 pw. I had an interview with them and asked specfically about (a) income from my lodgers and (b) income from my business and (c) income from property rentals and (d) income from savings and (e) savings that I have, and they confirmed that NONE of these affect my benefits in any way whatsoever, except that I must not work for more than 16 hours a week, which I never do. I work as a freelance but in a very overcrowded profession and only get a few commissions a year, earning anything from £50 to £500 pounds each time.

I'm sorry to hear what happened to you Mr Sailor, but I have been a landlady a long time ago and made a good return, enough to allow me to pay off the mortgage on the house I currently live in, just 7 years into my 25 yr mortgage.

poppysarah · 29 November 2009 at 4:56PM

You're not working. So where will you get the monthly repayments from when your tenant doesn't pay, you have a void, or need to do repairs?

HAMISH_MCTAVISH · 29 November 2009 at 4:56PM

This thread has been linked to from hpc.co.uk, a vehemently anti-BTL site. Expect most comments to be negative therefore.

Contrary to earlier remarks, Buy to Let is alive and well, and provided you get a decent yield, just as good an investment as ever.

For a more objective and factual take on it than you've seen so far in this thread, read this article in The Times....

In the darkest days of the credit crunch, one claim was made so regularly, you might have believed it. This was that buy-to-let was dead, a victim of a housing boom that had turned to bust. “Bye-bye, buy-to-let” was an irresistible headline.

We now know reports of its death were exaggerated.

Cluttons estate agency reports a 40% increase in demand for property — concentrated around the £500,000 mark — from professionals such as solicitors, accountants and doctors investing for the first time.

This will displease the moaners, but a functioning private rental sector is necessary for a healthy housing market. Private landlords took a battering and faced funding difficulties as severe as anybody. They appear to have weathered the storm.

Figures from the Council of Mortgage Lenders (CML) showed gross buy-to-let lending grew in the third quarter, its first rise for two years, with a rise from 21,600 to 23,700 in the number of loans and an increase to just over 1.2m in the number of outstanding mortgages.

Admittedly, the rise was from a low base, but this was a clear sign of life. “The figures show buy-to-let is here to stay,” says Michael Coogan, director-general of the CML. “Future demand for housing in all tenures supported by lenders will remain strong, despite mortgage funding constraints and low construction rates. With funding for social housing under pressure, the private rented sector has a strong future.”

The other buy-to-let story — the expectation of a flood of arrears and repossessions as landlords faced grim reality — is not going according to plan either. The number of buy-to-let mortgages with arrears of more than 1.5% of the balance has fallen for the third quarter in a row and stands at just 20,500.

http://property.timesonline.co.uk/tol/life_and_style/property/buying_and_selling/article6935556.ece

Fire_Fox · 29 November 2009 at 5:01PM

bundly wrote: »

Firefox - the highest service charge of any of the properties I have looked at so far was £1500 a year (just over £120p,) and that was for a place with lifts and 24-hour porterage, and that included hot water. This is very unusual, most places dont have lifts and staff, and so the SC are much lower.

There won't be any letting agents' fees, as I would handle the letting myself. I used letting agents once many years ago on a flat I let, and the tenants stopped paying, then trashed the place when I got them evicted. When I handled the letting myself, I had no problems at all.

IMO if you pay a low service charge you will get a low standard of service and probably a low standard of tenant - I am an active member of a city centre community group, almost all our members live in flats (some owner occupiers, some rental). The 'quality' of tenant in different blocks is notable - my block is almost all BTL and we have had at least two moonlight flits from just fifteen flats.

A block around the corner was converted by the same developer - so the flats are virtually identical inside. The block is now partially self managed and have a security guard, the flats are worth substantially more both for sale and to let. As I said earlier it's not just service charge "out of the rental income you will have to pay service charges and ground rent, buildings and landlords insurance, income tax, repairs and safety certificates ... voids and non-payers." Have you priced all these up?

Deadman_2 · 29 November 2009 at 5:27PM

IMO there's never been a better time to buy property.

Ignore all the negative comments on here bundly, they're just jealous that you've got £60k to invest in bricks and mortar.

You should pursue every avenue to get a mortgage and secure a nice little flat. A new build 1 bedder will do you nicely I'd say.

Good luck. You certainly sound savvy and unlike most you're thinking outside the box. Get in there before the market booms again!

:money: :money: :money:

bundly · 29 November 2009 at 5:35PM

The monthly repayments IF I get a mortgage, will only be £100. I could easily find that from my current income.

Buying to let -- any advice please?

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