Where to go for Buy to Let deal?

Tiddler_2

mewbie wrote: »

er.. have we gone back to 2004? Are you serious about BTL?

Cost of property - 110,000?
Rent 525 (says the shark) less 11% = c. 475.

Cost of interest 7% on 110,000 = 7,700 per year
Max income - no voids, repairs = 4,750 per year.

It doesn't seem to make financial sense to me, perhaps I am missing something.

Mewbie - you are obviously on a crusade on house purchasers - this will surely lead to an increase in demand for rental properties, increasing rental incomes.

With regard to your figures I would guess that you re-read the original posts as they are only looking to raise £75k, on a property which they already own, and is currently mortgage free.

Using your interest rate of 7% on £75000 = £5250 p.a

£5250/12 = £437.50 per month, so assuming no voids or repairs a profit of £37.50 p.m.

Whilst I think that property prices will obviously reduce significantly, and hopefully they do to stimulate the market, because us mortgage advisers want to be very busy again, I don't think houses in the £100k price range will drop to £65k because as we can see on the figures above these will be gobbled up by the BTL investors as they would pay for themselves - creating more demand for rental properties.

Financial_Savvy

Tiidler Thanks.

Yes I agree that on a BTL basis, they would pay for themselves.

But I need some help in finding a suitable BTL product. Any specific products spring to mind?

Would I still need a survey etc? What legal fees would I pay?

Least I would save paying the EA commission!

Tiddler_2

As I don't know enough about your circumstances to give advice - based purely on the info available, Woolwich offer a lifetime tracker at 6.59%, with a 1.5% fee, but free legals & free val. I'm not 100% sure if they class mortgaging a "mortgage free" property as a remortgage.
Nat West do a fixed rate at 6.89% for 5 years with a £1499 fee, again free val & legal.

Financial_Savvy

Tiddler and co, can you guys help.

The chain are prepared to negotiate, I am potentially asking for them to knock up to £20K off.

The purchase price would be £100K

Mortgage say £75K

Leave £25K in.

Woolwich tracker, 6.99% over 25 years is £407 per month. potential profit element of £50 per month.

What do you think?

mewbie_2

I have in my possession some books on buy to let (yes I was interested briefly a few years back). There are a couple of things that stick out.

1. Professionals buy to make money on the yield, any capital rise a bonus. Risking 100k to make £50 month does not look good value to me?

2. A rough rule of thumb is rent x 100 = purchase price. Seriously. That makes a 500 month rental worth 50,000.

That is why the market is so far out of line with any sanity.

beingjdc

Tiddler wrote: »

With regard to your figures I would guess that you re-read the original posts as they are only looking to raise £75k, on a property which they already own, and is currently mortgage free.

But if it's worth £115k, then you have to factor in the cost of losing the use of the property.

Which in this case is the extra £40k that they could release by selling the whole lot, rather than renting it out.

So you need to compare not the cost of borrowing £75k with the rent, but the cost of borrowing £75k, plus the cost of losing the interest on £40k in the bank, with the rent.

RecoveringAlcoholic

I have in my possession some books on buy to let

I have those as well!

What seems to escape some BTL investors is the yield on their investment and the concept of risk/reward ratios.

Financial_Savvy

RecoveringAlcoholic wrote: »

I have those as well!

What seems to escape some BTL investors is the yield on their investment and the concept of risk/reward ratios.

Would the yield in this example come from the house price increase in x amount of years?

Microstar_2

Financial_Savvy wrote: »

Would the yield in this example come from the house price increase in x amount of years?

No offence intended, Financial Savvy, but you really do need to learn about the lettings business. Its a BUSINESS. I own a number of properties and have been a landlord for many years (far predating the BTL frenzy). What you are wanting to do (like so many before) is buy a property, hand over the actual running of the business (the letting part) to a LA, and live in hope of house price increase. That is not a good strategy, and hasn't been for the last four years or so. Its also potentially the path to financial problems, especially if you have a relatively low income of £22k.

Financial_Savvy

Microstar wrote: »

No offence intended, Financial Savvy.

None taken my friend.

If you could purchas the house for £100K, £25K less than 18 months ago, and get £525 per month, would you do it? That is what i want to know.