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Thinking about Buy to Let

2

Comments

  • adrian66
    adrian66 Posts: 16 Forumite
    Pixie5740 wrote: »
    It's not for me to recommend investments to you. The point I was trying to make is that on a daily basis we see threads started by people who want to let property but haven't even done a modicum of research.....not even using the search function on the forum. If your serious about becoming a landlord you've got to crunch the numbers and do a lot more research.

    Hi Pixiee 5740, I appreciate that I don't know all there is to know and I have a lot to learn and I have said I am willing to learn.

    Is it reasonable for me to ask if my original assumptions are correct or flawed (even given the many other hypothetical problems and scenarios that I haven't realised, researched or considered)?
  • lovinituk
    lovinituk Posts: 5,711 Forumite
    Combo Breaker First Post
    Your biggest hurdle is going to be getting the equity out of your existing home to invest in property. It might be difficult for a BTL and nigh on impossible for a commercial property.
  • adrian66
    adrian66 Posts: 16 Forumite
    edited 16 June 2017 at 3:12PM
    Cakeguts wrote: »
    Can't telll because there is too much information missing. For example whether you could pay the buy to let mortgage and your home increased mortgage without any extra income.

    Hi Cakeguts
    Do you know for what period of time that would need to be covered?
    For example, I know we could do it for 8 months with savings.

    would that be enough of a timespan?

    What other information would you need to know do you think to say if it's viable or not?


    thanks for your replies
  • adrian66
    adrian66 Posts: 16 Forumite
    edited 16 June 2017 at 3:11PM
    lovinituk wrote: »
    Your biggest hurdle is going to be getting the equity out of your existing home to invest in property. It might be difficult for a BTL and nigh on impossible for a commercial property.

    Fair enough. Why would it be difficult to get equity out of my existing home for a BTL - apart from maybe needing for the rental income to cover up to 145% of the additional mortgage repayment and the increase in my 1st mortgage? What are the other difficulties that I need to consider?

    thanks for your responses
  • lovinituk
    lovinituk Posts: 5,711 Forumite
    Combo Breaker First Post
    adrian66 wrote: »

    Fair enough. Why would it be difficult to get equity out of my existing home for a BTL - apart from maybe needing for the rental income to cover up to 145% of the additional mortgage repayment and the increase in my 1st mortgage? What are the other difficulties that I need to consider?

    thanks for your responses
    I don't think lenders like lending against your home for the purposes of BTL. Gone are the days of them freely lending you money for whatever you want. You may have to find a specialist lender. Hopefully one of the mortgage advisors on here can clarify if they see this thread.

    Borrowing against your home for a commercial purchase is even harder if not impossible. Commercial mortgages are usually limited to a maximum of 15 years, generally can't be interest only and can only borrow a max of 75% with higher interest rates than personal mortgages.
  • adrian66
    adrian66 Posts: 16 Forumite
    lovinituk wrote: »
    I don't think lenders like lending against your home for the purposes of BTL. Gone are the days of them freely lending you money for whatever you want. You may have to find a specialist lender. Hopefully one of the mortgage advisors on here can clarify if they see this thread.

    OK. I'll set up an appointment with a broker and see what might be available further down the line, it's going to be a year before we take the plunge if and when we do.

    Assuming we can get the remortgage for the purposes of BTL, is my plan sound?

    Borrowing against your home for a commercial purchase is even harder if not impossible. Commercial mortgages are usually limited to a maximum of 15 years, generally can't be interest only and can only borrow a max of 75% with higher interest rates than personal mortgages.

    Ok, that sounds more complicated and difficult. I appreciate that.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Name Dropper Photogenic First Anniversary First Post
    adrian66 wrote: »
    At that point, I anticipate that we have another large load that would be finishing so we would have the extra income to cover the second buy to let equity release.

    Your current financial position is a major factor in any lending decision. You mention multiple loans. This may well impact your ability to release £40k of equity. Let alone convince a lender that you can service another £40k of debt plus on costs should the rental property be empty.
  • adrian66
    adrian66 Posts: 16 Forumite
    Thrugelmir wrote: »
    Your current financial position is a major factor in any lending decision. You mention multiple loans. This may well impact your ability to release £40k of equity. Let alone convince a lender that you can service another £40k of debt plus on costs should the rental property be empty.

    But assuming I can get the loans, are my original assumptions still valid?
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Name Dropper Photogenic First Anniversary First Post
    adrian66 wrote: »
    But assuming I can get the loans, are my original assumptions still valid?

    In an obstacle race the challenges need to be cleared one at a time.

    To validate your assumptions you need to crunch the numbers and fully cost the project. Running different what if scenarios, interest rates, void periods etc. Consider the exit strategy as well. What may seem go in principle may not be so profitable in reality.
  • lovinituk
    lovinituk Posts: 5,711 Forumite
    Combo Breaker First Post
    adrian66 wrote: »
    But assuming I can get the loans, are my original assumptions still valid?
    It's too simplistic. There is far more to consider than just a back-of-a-fag-packet calculation.

    If all the planets aligned on the correct day and all the gods were kind to you then maybe your assumptions are correct but its really not as simple as that.

    BTL is already being hammered harder by the current government. If you're already a higher tax payer, or the rental income will push you into the higher tax bracket then you have additional tax costs to worry about.

    And if a Labour government get in, it probably won't be a pretty place to be for landlords.

    I'm a landlord but I wouldn't recommend it to a beginner. I won't be investing in any more property although I'm not currently looking to exit from what I already have.
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