BTL instead of selling?

Kessie1

Hi, just looking for opinions.

Bought in 2000, a three bed terrace for 35k, originally on market for 125k, now on market for 105k. Got a mortgage of 18K. It sold back in May, but then fell through in July, then I posted about four weeks ago, saying I had been offered 100k from some FTBs, who then withdrew their offer the next week to be fair, I could hardly blame them given current conditions.

Apart from selling, I've been pondering on another option. Just say, if I wait until prices hit rock bottom, I may be able to re-mortgage this house on BTL (say 60K) and use this release (60k minus 18k = 42k) as a deposit on a house up to 100k (so a 58k mortgage for me and a 60k BTL mortgage to cover with rent). Is this a completely stupid idea?

I was thinking of doing some cheap decoration, not a brand new kitchen or such like, but just tidying the place up so I feel more settled for the next 12-18 months and also may attract tenants, which I now realise I should have done back last year, however up until this year, the houses on my street sold within 6 weeks regardless of condition so I decided to save my dosh for the new house. Hindsight's a great thing huh? :rolleyes:

I'm employed by the council and my husband is self employed. Apart from the obvious of a nightmare tenant, what are the obvious pitfalls? I've met a financial adviser in passing who said to ring him once I was ready to talk more seriously about it, however this won't be until next year at least. Everyone else I have mentioned it to is totally negative, apart from two friends, who are both successfully renting property out.

This is my house http://www.rightmove.co.uk/viewdetails-20599598.rsp?pa_n=1&tr_t=buy&mam_disp=true
Its on a popular street in a nice village, on the same street as the school so very family friendly. another house at the end of the street is rented and its never been empty. The rent around here is about £500-550 per month.

Sorry for the ramble, just trying to sort my head out in the nightmare market

brit1234

Main worry is rents are falling (mainly due to a huge influx of people like you who can't sell their homes). On top of that rents typically fall in a recession and the buy to let industry has announced that there has been a dramatic rise in indebted renters.

Doozergirl

You should always bear in mind that the rent you receive is not a profit, it's mainly offsetting the extra cost of your new mortgage.

You're nearly mortgage free, it's a decision that you are in a position to make. So many people have heavily borrowed to do what you want to do.

I do believe in buying a house specifically for BTL rather than letting out your old house because it's convenient to - it has to be a business decision. I get as much rent as you would but the house I have cost £65,000. It means the whole of my repayment mortgage is paid by the tenants with change for insurances and the tax man with little capital input from me.

Just because your house has fallen in value - it doesn't make it the best BTL prospect. I'd seek to find the best yield you can - house price falls and rises aren't so important when you're looking to let property over the very long term. You calculate the decision to buy based on the yield you will acheive.

I wonder if those people advising you not to do it would have said the same thing eighteen months ago When everyone starts saying the same thing, it's time to consider the possibility of doing the other, IMO.

eco-friendly_2

brit1234 wrote: »

Main worry is rents are falling (mainly due to a huge influx of people like you who can't sell their homes). On top of that rents typically fall in a recession and the buy to let industry has announced that there has been a dramatic rise in indebted renters.

Rents for 3 bed family properties are increasing! rents for many new builds are dropping.


brit, if people can't buy, they RENT!


Present your property to the market in a good order, carry out proper credit checks you'll be OK.


Nightmare tenants are created by NUMPTY LLs renting dumps, who carry out viewings with their 'fingers crossed'

Incisor

Kessie, why do you want to move? That may make quite a difference to what you should do.

If you are under immediate pressure, then your plan at least gets you on the move, but you do have the risk of voids and the problem of finding good tenants. Plus of course you are only delaying the problem of selling into an even more uncertain future, possibly for 4 or 5 years. You will be on a treadmill of deciding to keep renting out or have the property empty while you try to sell, as each tenant comes and goes.

Given your equity, you are in a good position to undercut virtually any other FTB to get a sale - as you are selling to an FTB market, your problem is that FTB's now have to find a deposit- which comes as a total shock to most, plus the income multipliers are so low. There are people out there who want to buy, you just need to make yours the lowest hanging fruit.

If you take a hit, you need to transfer that hit to the people you buy from. As there is a shortage of 1stTB's there is also a shortage of 2ndTB's. You just need to look around for those sellers who have realised they too need to make their houses the lowest hanging fruit.

pawpurrs

I would try and sell it. Research the market well and price it well accordingly.
It looks well presented and a new kitchen wont make a difference. The kitchen is nice enough for letting or selling IMO.
35k gosh that sounds soooo cheap now doesnt it. I think its price that you need to look at.

clutton_2

The VERY first thing to do is to find out if there a demand for houses in your area ? put an advert in the local paper for 2/3 weeks and find out first - if folks want to come and view - tell them you will take their number if the first prospective tenant fails to proceed - if there is no demand - why rent it ?

poppysarah

It's also not BTL its RNS - rent not sell.

stevetodd

Hi,
I'm from the Newcastle area originally but now live down South and rent out property in London (I rent 4 flats, my wife 2 houses and 1 house we jointly rent out). I think this is what you should be aware of:

1. Firstly if you can get £500/month that produces a very good yield of approx 6% (based on a £100,000 sale alternative) so it would produce a good investment for you.

2. What is the rental market like, it's very strong in London and I have never had a rental void in 17 years. Speak to letting agents but take what they say with a pinch of salt, it's worth paying for an advert and finding out first hand. I never actually use a letting agent, if you feel able I would recommend that you do it yourself. BUT and it's a big but, in London the market is good enough and large enough to do this, it's perfectly normal for private landlords to market their own properties. You would have to check up on this for your area. Rental voids can be a nightmare, not only is your property not earning for you, you still have expenses and it may be more vunerable to burgalry/vandalism.

3. Do not be lax over selecting your tenant, in the early days I was quite relaxed and niave. Eventually I ran into the wrong tenant and have just taken her to court. Do credit checks or at least see wage slips, bank statements and verify their id (the tenant I took to court gave me an alias and back in 2001 when she moved in I didn't verify tenant's ids). This court experience hasn't put me off, but it has made me do a much better job of tenant vetting.

Despite the current condition of the housing market my wife and I are going to buy 2-3 more houses in the next 2 years. This bit is my opinion only and others may disagree but I beleive in about 6 years the market will be fine again (sales I mean) and if you feel comfortable about locking the money away for 6-10 years then you can have an asset that produces not only a 6% yiled but also will EVENTUALLY (my opinion) produce addition capital growth. BUT don't forget it isn't free money you have to deal with tenants and any problems, it isn't too onerous but can be annoying at times.

Ulfar

stevetodd wrote: »

Hi,
1. Firstly if you can get £500/month that produces a very good yield of approx 6% (based on a £100,000 sale alternative) so it would produce a good investment for you.

Why would you consider this a good return, you can get more than this in interest from a bank or building society.

Thats before you consider all the extra costs that come from being a landlord such as :

Getting the agreement of your mortgage company to let the property.

Letting agent fees.

Insurance, this isn't just buildings you also need third party insurance.

Maintenance of the property.

Problems with tenants.

I haven't listed tax as you would pay that on interest or rent in excess of the interest payments on the mortgage.

Gas/Energy checks each year.

brit1234

eco-friendly wrote: »

Rents for 3 bed family properties are increasing! rents for many new builds are dropping.

The recent big drops in rent have been in houses, just look at the ARLA statements over the last couple of months. The housing side is being flooded with properties as they can't sell bringing prices down.

Only the dodgy Paragon (vested interest and minute survey group) are saying they are rising. However Paragon have been proved wrong constantly in the last 2 years and are going bankrupt like they did in the last recession

eco-friendly wrote: »

brit, if people can't buy, they RENT!

Or move home or some other arangement

Increased demand against bigger increased supply means cheaper rents.