Buying a buy to let

poppysarah

In the same way as buying your own home depends on savings (deposit) and your income, a BTL mortgage should depend on the income you can expect from the house you buy.

Having a deposit is probably essential. Perhaps even 25%.
And you might need to only borrow a certain LTV amount.

You should budget for EPC, GSC, tax, voids, marketing, cleaning etc etc etc. And membership of a landlord association.

leeroypenmut

Cleaver wrote: »

Are you sure you need this sort of advice? You sound pretty expert to me.

Its just the order things need to be done in

1. Find House
2. Survey?
3. Offer price to buy?
4. Mortgage Offer?
5. Pay Deposit?

Survey before Offer?
Offer before Mortgage?

leeroypenmut

poppysarah wrote: »

In the same way as buying your own home depends on savings (deposit) and your income, a BTL mortgage should depend on the income you can expect from the house you buy.

Having a deposit is probably essential. Perhaps even 25%.
And you might need to only borrow a certain LTV amount.

You should budget for EPC, GSC, tax, voids, marketing, cleaning etc etc etc. And membership of a landlord association.

EPC??
GSC??
Voids??

Help:eek:

silvercar

leeroypenmut wrote: »

Thanks, But on my house the bank asked how much i earned, then said i could borrow X amount & sent me an offer!
I asked about buy to let & they said all depends on the house, find a house & then sort it out

I see what you mean now.

For mortgages the lender will require at least a 15% deposit and then will look at the likely rental value. Usually the rental over a year needs to be at match, but often higher - could be as much as 130% of the interest only mortgage payment.

example: property costs 100k, deposit 15k. to get a mortgage of 85k rental value would need to be £460 a month (assume 6.5% mortgage rate). If the likely rental was only £400 a month, they would only lend you 74k, so you would need a bigger deposit.

silvercar

EPC= energy performance certificate, budget about £70 - you don't need to read it, lasts 10 years.

GSC= gas safety certificate, need one annually; budget about £100 including a service.

Voids = times when you have no tenant, so no rent comes in but you still need to pay the mortgage; budget for 1 month a year on average.

ashers

If you need a home to buy to rent and you live anywhere near Stafford I could have the perfect solution. Due to my wifes illness and poor advice, I remortgaged my property with Northern Rock on a 4.99% interest only fixed rate mortgage that expires on the 1st Dec 08. I did not pay the fees at the time as I was told they would just be added to the mortgage. I have also had a holiday break on the payments which Northern Rock actually asked me if I wanted earlier this year. Anyway I did not realise interest was added to these payments so where I thought my outstanding mortgage was the orginal price plus these add ons it has actually increased by £9,000 pounds even though interest only. In December my mortgage jumps up to 7.49% meaning a monthly rise of £306!!! The reason it could be good for you is that I need to now sell quickly (before december) and a tenant is already in place as I am renting as I had to relocate for work.

leeroypenmut

silvercar wrote: »

EPC= energy performance certificate, budget about £70 - you don't need to read it, lasts 10 years.
.

Whats That, EPC?? Do i need it? Where from?

OK, 3 Bed Terraced House On the market for £114,995
I offered £95,000, and they accepted £97,000.
I have a Deposit of £25,000
Rent in the area of £600-£650pcm
Houses sold in the area for £127,500 - £132,750

poppysarah

leeroypenmut wrote: »

EPC??
GSC??
Voids??

Help:eek:

Put some effort in please.
Otherwise your attempts at BTL will be a complete and utter waste of money.

Go read the last two weeks worth of this forum for a sprinkling of ideas about the problems and fun that can happen.

You should only be doing BTL if you're prepared to treat it as a proper business. You will be responsible morally and financially for someone's home.

Cleaver

leeroypenmut wrote: »

Whats That, EPC?? Do i need it? Where from?

OK, 3 Bed Terraced House On the market for £114,995
I offered £95,000, and they accepted £97,000.
I have a Deposit of £25,000
Rent in the area of £600-£650pcm
Houses sold in the area for £127,500 - £132,750

What other houses have sold for is a slightly okayish indication of what this house is worth. If you can get this current house for £97k then it's worth around £97k.

Your figures...

Your annual rental income would be around £6500 a year (I allow for 1.5 months a year voids)

Your annual costs would be:
Repayment Mortgage (if you can get one): around £5650
Agency Fees: around £700 (I would suggest you have an agency, as you don't seem to know too much about the detail that comes with renting a house out).
Repairs: let's say around £600 average per year (for standard stuff, then something like a bolier breaking down every once in a while).
Insurances, certs, checks etc.: £600
Total Expenditure: £7550

So you'd be losing around £1000 a year.

If house prices fall another 20% in the next year (seems to be most people's expectations), you would be heading for negative equity and losing money month on month.

Ttick your £25k in a savings account.

Just my two cents worth.

silvercar

leeroypenmut wrote: »

Whats That, EPC?? Do i need it? Where from?

OK, 3 Bed Terraced House On the market for £114,995
I offered £95,000, and they accepted £97,000.
I have a Deposit of £25,000
Rent in the area of £600-£650pcm
Houses sold in the area for £127,500 - £132,750

you need an EPC if you are advertising a property after 1 October.

72k mortgage at 6.5% interest only= 390/month
agent =780(finders only), 1170 managed
gas cert/epb/insurance=450
total outlay =5910 or 6300 before any maintenance.

income (assume let for 11 months)=6600-7150.

Which leaves under £1000 for any issues, big question is what happens to the value and to rental values in the long term.