Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

Search
  • FIRST POST
    • cns06
    • By cns06 8th Jun 17, 11:31 AM
    • 217Posts
    • 98Thanks
    cns06
    BTL Advice
    • #1
    • 8th Jun 17, 11:31 AM
    BTL Advice 8th Jun 17 at 11:31 AM
    Currently own 1 rental property. To keep things simple assume value is £200k. Rental income is £12kPA. No mortgage.


    I am considering refinancing it to release £120k. Then take out 2 more £120k mortgages to buy 2 more £200k properties.


    From my simple maths this equates back to around £1600 in interest per month leaving roughly £1100 before tax from the rent.


    I have asked a few people who have property and they are all saying its a good idea in the long run but I don't like the idea of having 3 mortgages hanging over me. However will I kick myself in 10-15 years time for not doing it?


    Property is pretty cheap round here and rents fairly high. (all 3 houses would be decent size 3/4 bed semis)


    Anyone care to offer their advice?!
Page 1
    • Linton
    • By Linton 8th Jun 17, 12:55 PM
    • 8,094 Posts
    • 7,916 Thanks
    Linton
    • #2
    • 8th Jun 17, 12:55 PM
    • #2
    • 8th Jun 17, 12:55 PM
    Unless you have a significant amount of wealth in other types of asset £360K of debt dependent on BTL is a serious unnecessary risk in my view. What happens if house prices drop and interest rates rise following a hard BREXIT?

    Do you have a mortgage on your home? Are the mortgages interest only or repayment?

    I suggest you start looking at other types of investment to reduce your risk. For example a range of overseas invested funds would provide protction against the effects of a further fall in the £.
    • cns06
    • By cns06 8th Jun 17, 1:38 PM
    • 217 Posts
    • 98 Thanks
    cns06
    • #3
    • 8th Jun 17, 1:38 PM
    • #3
    • 8th Jun 17, 1:38 PM
    I have other investments yes. Mixed globally in markets, funds, commodities etc.


    My own house is on capital repayment mortgage which is being overpaid.


    My other option is to buy a second BTL in cash but it would have to be smaller, probably c.£100-£120k. This would probably generate me £6-£7k a year. If I re-invest the rental incomes from both I could probably get that £100k back in 5 years.
    • adam81
    • By adam81 8th Jun 17, 2:32 PM
    • 209 Posts
    • 56 Thanks
    adam81
    • #4
    • 8th Jun 17, 2:32 PM
    • #4
    • 8th Jun 17, 2:32 PM
    People have done what you suggest in the past and made a lot of money. My folks for one! Others on this forum, although they mostly reside in the House, buying/rent/sell forum.

    Most on this forum will be against BTL. I have one accidentally from when we combined houses. I've thought about doing what you say but, with 3 small kids decided it could get messy if /when rates do go up.

    By gearing your investment, rather than buy in cash the rewards are higher. As Linton says there is of course risk involved.

    That being said the high risk investments, offer the greatest return in light of this. 100% equities would be risky but chances are it would out perform 60% over the same period. Of course there is the chance a lot of it could be wiped off the value for a period of time.
    • Malthusian
    • By Malthusian 8th Jun 17, 4:07 PM
    • 2,619 Posts
    • 3,738 Thanks
    Malthusian
    • #5
    • 8th Jun 17, 4:07 PM
    • #5
    • 8th Jun 17, 4:07 PM
    There's not enough information to comment on the numbers (interest rates, income and expenditure etc) so I will merely say that if someone is unsure whether or not to gear up their personal assets to that extent, they probably shouldn't.

    It would be a brave man to assert that the previous favourable environment for buy to let will continue, with the recent tax changes, the ongoing political campaign against landlords, Brexit, etc.
    • bigadaj
    • By bigadaj 8th Jun 17, 6:08 PM
    • 9,623 Posts
    • 6,126 Thanks
    bigadaj
    • #6
    • 8th Jun 17, 6:08 PM
    • #6
    • 8th Jun 17, 6:08 PM
    I have other investments yes. Mixed globally in markets, funds, commodities etc.


    My own house is on capital repayment mortgage which is being overpaid.


    My other option is to buy a second BTL in cash but it would have to be smaller, probably c.£100-£120k. This would probably generate me £6-£7k a year. If I re-invest the rental incomes from both I could probably get that £100k back in 5 years.
    Originally posted by cns06
    Can't you mortgage the existing house and just buy one additional, might be a lower risk option with some upside.
    • cns06
    • By cns06 8th Jun 17, 7:08 PM
    • 217 Posts
    • 98 Thanks
    cns06
    • #7
    • 8th Jun 17, 7:08 PM
    • #7
    • 8th Jun 17, 7:08 PM
    I could yes. Only question is will my lender allow me to keep my existing rate (1% above BOE)!!
    • LabRatty
    • By LabRatty 8th Jun 17, 8:46 PM
    • 69 Posts
    • 98 Thanks
    LabRatty
    • #8
    • 8th Jun 17, 8:46 PM
    • #8
    • 8th Jun 17, 8:46 PM
    Hi,
    The changes in tax relief on BTL mortgages/income mean you'd have to do some serious planning to ensure you didn't come unstuck, plus enhanced stamp duty is now payable on additional properties.

    While other forms of investment carry risk, with BTL it's less the risk, more the certainty that there will be maintenance/repair/void/damage costs that is the problem, which can be almost unquantifiable. If all goes well, fine, but the potential for the wheels coming off in one form or another is high.

    All depends on your personal attitude to risk, your capacity to deal with stress and the depth of your pockets.

    LR
    Save In 2017 #109
    • elephantrosie
    • By elephantrosie 8th Jun 17, 10:24 PM
    • 341 Posts
    • 85 Thanks
    elephantrosie
    • #9
    • 8th Jun 17, 10:24 PM
    • #9
    • 8th Jun 17, 10:24 PM
    If you are young and healthy, go for it.
    Getting bored of my 9 to 5 job.
    • Wobblydeb
    • By Wobblydeb 9th Jun 17, 12:38 PM
    • 868 Posts
    • 1,347 Thanks
    Wobblydeb
    I would definitely look at it.......but would maybe scale back from doing the leap in one go.

    Firstly, see what rate you would actually pay for a BTL mortgage on your current property. 1% above BOE doesn't sound right for a BTL.....

    Then look for the next property. Try to find a bargain - e.g. through auction or perhaps last property on a newbuild estate? I would also look for some diversity, by going for a different type / area unless you have special inside knowledge that means you can drive better value out of sticking with what you know.

    Then I would get the second property finished and tenanted before starting to look for a third. It also gives you a while to see if there is some heat to come out of the housing market. Looking at all the newbuilds around here, in conjunction with low interest rates IMHO we are probably in another peak right now.

    Oh, and keep some of that cash back for voids / repairs / evictions.
    I've got a plan so cunning you could put a tail on it and call it a weasel.
    • bostonerimus
    • By bostonerimus 9th Jun 17, 12:46 PM
    • 657 Posts
    • 344 Thanks
    bostonerimus
    How much of your portfolio would be in rental properties if you bought another two? and how much in real estate including your own home? Think of this as an asset allocation issue and you don't want to be over invested in a single sector. Being highly leveraged in what looks like a very hot market (that might have just peaked) doesn't sound like a good move to me.

    I have a single rental and it's worth around 10% of my portfolio (I usually don't include it) and I feel comfortable with that. I wouldn't want to be above 20%.
    Misanthrope in search of similar for mutual loathing
    • mgarl10024
    • By mgarl10024 9th Jun 17, 2:59 PM
    • 580 Posts
    • 389 Thanks
    mgarl10024
    Will you manage the properties yourself? Factor in the addition time finding/vetting tenants, managing repairs, dealing with issues. As a rough guide, multiple the time you currently take by 3.
    • Thrugelmir
    • By Thrugelmir 9th Jun 17, 6:52 PM
    • 54,866 Posts
    • 47,737 Thanks
    Thrugelmir

    I am considering refinancing it to release £120k. Then take out 2 more £120k mortgages to buy 2 more £200k properties.

    Originally posted by cns06
    What if the new lender doesn't like the source of the deposit, i.e. borrowed money?
    “ “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.” Sir John Marks Templeton
    • cns06
    • By cns06 9th Jun 17, 10:39 PM
    • 217 Posts
    • 98 Thanks
    cns06
    Thanks for the further advice. To give some specifics.

    My accountant is advising I form a LTD for the property side.
    The management of the properties would be done my myself. Tenannts and legals would be done by an agent I use for the current rental as they seem pretty good.
    The % of portfolio, hard to say exact numbers but right now 30% ish in property.
    1.25% is on CTL. My lender is happy to lend more money (its a non high street lender), however that said I might not stay with them if we do this.

    Like I said my other option is to buy another on its own, just trying to figure out which will be best in the long run though...

    I take on board the comments about a toppy market and I do think we are possibly going to see a slight fall in the market. I am in no rush to do this but if I do go ahead I am thinking in around 12 months.
    • Wobblydeb
    • By Wobblydeb 15th Jun 17, 9:00 AM
    • 868 Posts
    • 1,347 Thanks
    Wobblydeb
    1.25% is on CTL. My lender is happy to lend more money (its a non high street lender), however that said I might not stay with them if we do this.
    Originally posted by cns06
    I thought there was no mortgage on the existing rental property?
    I've got a plan so cunning you could put a tail on it and call it a weasel.
    • eskbanker
    • By eskbanker 15th Jun 17, 11:21 AM
    • 5,319 Posts
    • 5,074 Thanks
    eskbanker
    I thought there was no mortgage on the existing rental property?
    Originally posted by Wobblydeb
    Presumably referring to this, although as you pointed out earlier there's no reason to believe that a BTL mortgage would be at the same or similar rate as one for a primary residence:
    My own house is on capital repayment mortgage which is being overpaid.
    Originally posted by cns06
    • jimjames
    • By jimjames 15th Jun 17, 1:10 PM
    • 11,945 Posts
    • 10,352 Thanks
    jimjames
    My own house is on capital repayment mortgage which is being overpaid.
    Originally posted by cns06
    If you're prepared for the risk of BTL and investments and your rate is 1.25%, why would you want to over pay that mortgage? Surely it's better to put that money elsewhere when you can get a vastly better return on it?
    Remember the saying: if it looks too good to be true it almost certainly is.
    • cns06
    • By cns06 17th Jun 17, 6:10 PM
    • 217 Posts
    • 98 Thanks
    cns06
    I thought there was no mortgage on the existing rental property?
    Originally posted by Wobblydeb
    In my first post I said to keep things simple lets assume.....

    I was just trying to give basic numbers to see if anyone would be able to suggest a good way forward

    At the moment we are going to hold off and see where we are in another 12 months. The property market seems slow and we should be able to either buy 1 property next year cash or perhaps consider 2 with a 50% deposit on BTL. I was also interested to see BOE rates were held and I think this might be a good time to just hang back and watch.
    • Thrugelmir
    • By Thrugelmir 17th Jun 17, 7:35 PM
    • 54,866 Posts
    • 47,737 Thanks
    Thrugelmir

    At the moment we are going to hold off and see where we are in another 12 months. The property market seems slow and we should be able to either buy 1 property next year cash or perhaps consider 2 with a 50% deposit on BTL. I was also interested to see BOE rates were held and I think this might be a good time to just hang back and watch.
    Originally posted by cns06
    A good reason to perform the number crunching exercise anyway. Particularly if it's something you wish to pursue in the future. Then you can monitor your local market and wait for the stars to all align.
    “ “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.” Sir John Marks Templeton
    • chucknorris
    • By chucknorris 17th Jun 17, 7:49 PM
    • 9,063 Posts
    • 13,679 Thanks
    chucknorris
    In my first post I said to keep things simple lets assume.....

    I was just trying to give basic numbers to see if anyone would be able to suggest a good way forward

    At the moment we are going to hold off and see where we are in another 12 months. The property market seems slow and we should be able to either buy 1 property next year cash or perhaps consider 2 with a 50% deposit on BTL. I was also interested to see BOE rates were held and I think this might be a good time to just hang back and watch.
    Originally posted by cns06
    Sorry, I don't mean to sound nasty, I really don't. But if you can't work out the figures and/or come to a conclusion yourself, don't do it.
    Chuck Norris can kill two stones with one bird
    The only time Chuck Norris was wrong was when he thought he had made a mistake
    Chuck Norris puts the "laughter" in "manslaughter".
    After running injuries I now also hike, cycle and swim, less impact on my joints.

    For the avoidance of doubt Chuck Norris is an actor and an ex martial artist (not me)
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

136Posts Today

1,454Users online

Martin's Twitter