Buy to Let now...or wait a year??

IveSeenTheLight

mewbie wrote: »

I have changed my mind since reading this thread and am now ready to become a fully fledged BTl, there's obviously money to made without too much hassle. So. I would be very grateful if anyone could show me a current property for sale (Rightmove link please), where I can put down a deposit of say 20k, and start to make money in the way you describe.

I want rent to cover mortgage, plus loss of interest on my deposit money, to allow for 2 months voids per year and agents fees (I don't want to faff around with tenants myself). I think a decorating budget of at least a thousand per year would be required, so please can you factor that in for me. I expect to be paying off the property over a 25 year period, so need to have a repayment mortgage factored in. No silly interest only for me thankyou!

If this works out then I will guarantee you a share in profits of say 5-10% from the first year for my gratitude.

Thanks.

BTL is slightly different to normal mortgages so once you have saved up a little more, preferably say 35k then I can start to show you plenty

Dithering_Dad

IveSeenTheLight wrote: »

BTL is slightly different to normal mortgages so once you have saved up a little more, preferably say 35k then I can start to show you plenty

Can you show me the figures I asked for in order to calculate whether your £250pm profit is correct?

andrewmp

Dithering_Dad wrote: »

I doubt IveSeenTheLight paid cash for the BTL, so the £750 at 6% wouldn't apply. .

I meant that interest only would cost about that at a typical 6%.

Either way, a crap yield, even with a good deposit. I'd rather just keep the interest on the deposit!

ncooper1974

DD has made some guesses into the true cost of owning/selling a BTL investment. For what its worth, here is my take on things
1. In the past I've been able to sell a property for less than 1% commision, not the 2% stated.
2. All my properties are self contained flats (not new builds I might add), so no need to repair a roof.
3. I never buy anything with gas. Hence no need for gas certification, and certainly no expensive boiler to replace
4. As others have said, I deliberately keep rents low to ensure no voids. With 3 properites, I've experienced about 6 weeks void in total over 8 or so years
5. Because I keep rents low, the yeilds don't always stack up when compared to interest received from the bank, but that’s a strategy I decided on when I could see HPI in the investment. Now this is not going to happen for a while, I may consider raising the rents a little to increase the yeilds (while still staying below market rates)
6. I use an EA just for the tenant find. They want commision, usually 6-8%, based on the duration of the tenancy. So I normally get a 6 month tenancy and then let it go periodic.
7. I live within 20 mins to all my properties, so I can manage them myself. No EA fees to pay
8. From experience, the only goods I supply are fiited. Tenant is more than welcome to bring his own things with him, but if they brake, its not up to me to replace/repair them

Dithering_Dad

andrewmp wrote: »

How wouldn't the 6% not apply if you doubt he paid cash?

I meant the £750 would not apply unless he paid cash. I assumed that you took the price of his BTL £150000/100 * 6 = 9000/12 = £750pm. So had he invested his £150k in a 6% savings account he's get a £750 return pm in interest.

I suspect though that he hasn't paid cash so the 150k calculation does not work.

It does raise the question about the return people get if they overpay on the BTL mortage instead of leaving it to the tenant to pay off. The amount of capital that the BTLer has invested in the property increases, the rent remains the same and so the yield actually decreases. Not a very effective way of investing money if your return actually falls!

IveSeenTheLight

Dithering_Dad wrote: »

Can you show me the figures I asked for in order to calculate whether your £250pm profit is correct?

I never said the £250 was profit, I said I earned that more in rent than in your calculations. I'm also paying less mortgage interest as well.

I don't make any profit, all rent earning goes into reducing the mortgage.
I'm not about to go into each detailed costs as one its too personal and two would take far too much time than I am prepeared to spend detailing on a forum.

I can tell you that the latest property I bought in Jan 2007 is scheduled to be paid off by end of 2016 (in essence 10 years instead of 25) along with another BTL I have. This is mostly covered by tenants rent although I do contribute personally for any maintenance costs ( I see this as saving money as my mortgage debt is reduced faster)

Like I said, I do not follow a normal BTL business model

andrewmp

With a 25% deposit, show me a property, currently on rightmove where you could make a good profit (keep in mind lost interest on the 25% deposit too).

andrewmp

IveSeenTheLight wrote: »

I don't make any profit

Then you won't be buying any more BTL houses in this falling market then will you?

Dithering_Dad

ncooper1974 wrote: »

DD has made some guesses into the true cost of owning/selling a BTL investment. For what its worth, here is my take on things
1. In the past I've been able to sell a property for less than 1% commision, not the 2% stated.
2. All my properties are self contained flats (not new builds I might add), so no need to repair a roof.
3. I never buy anything with gas. Hence no need for gas certification, and certainly no expensive boiler to replace
4. As others have said, I deliberately keep rents low to ensure no voids. With 3 properites, I've experienced about 6 weeks void in total over 8 or so years
5. Because I keep rents low, the yeilds don't always stack up when compared to interest received from the bank, but that’s a strategy I decided on when I could see HPI in the investment. Now this is not going to happen for a while, I may consider raising the rents a little to increase the yeilds (while still staying below market rates)
6. I use an EA just for the tenant find. They want commision, usually 6-8%, based on the duration of the tenancy. So I normally get a 6 month tenancy and then let it go periodic.
7. I live within 20 mins to all my properties, so I can manage them myself. No EA fees to pay
8. From experience, the only goods I supply are fiited. Tenant is more than welcome to bring his own things with him, but if they brake, its not up to me to replace/repair them

Cheers Mr Cooper, this is exactly the sort of 'inside information' I was looking for. Great idea about not buying property with a gas boiler - I can't think why this didn't cross my mind as I'm actually renting an apartment that's all electric! Doh! I guess I just had my mind fixated on terrace housing (which I was looking at when I first entered into the BTL debate).

I must admit that I wrote off apartments in my BTL considerations because they have an annual management charge and always seem to be the first type of property to lose their value in a crash. I also thought that apartments limited one's tenant market - i.e. if you have a terraced house with two or three bedrooms you can rent to singles or to a family (or retain a single tenant who starts a family).

p.s. thanks for the other info. I've just had a quick glance as I'm in the office but even from that I can see you run the BTL like a proper business.

ncooper1974

andrewmp wrote: »

Then you won't be buying any more BTL houses in this falling market then will you?

but why not?

Everyone has their own business model. I prefer to reduce the debt on the investment before buying another. That way I can always be sure that I dont go into negative equity, but also, so that I dont need to rely on the tenants income to pay the mortgage.
I can tell you that I certainly plan to be buying in the falling market. And I probably wont make that much profit in the next couple of years, but this doesn't bother me, because over the long term (with or without a HPI) I plan to live on the income from the tenants rather than rely on any pension from the gov't