Anyone done this?

abby1234519

Has anyone ever bought a repossession say 40k and done it up and rented it?

edgex

Havnt done it, but:

the rental market is in for a drop, too many properties up to let
buy-to-let mortgages have almost gone

if youve got the cash to buy it & do it up, & that still comes to less than what it really is worth*, & you can afford to either undercut the nearest rents by £100+pm, or have it sit empty for 6 months, you might take the gamble.


* look at what similar properties in the area are going for, as in the real sales price, then knock 15-20% off, then take off 5-10% for the hassle of doing it up

Fred1_2

the rental market is in for a drop, too many properties up to let

There are a lot of properties to let and that number is increasing. The number staying empty for weeks/months is increasing too. However, that doesn't automatically mean that rents are too high. A lot of these properties are utter !!!! and not fit to live in. The sooner those landlords go out of business the better. Decent family homes are still in demand. At least in this area.

buy-to-let mortgages have almost gone

Agreed. You can only seriously consider doing this if you are a cash buyer. But if you are a cash buyer, the world is your oyster. Having said that, there is no rush. I don't think house prices are anywhere near their floor yet, so there's nothing really to be gained from rushing in.

Edgex's maths are pretty spot on, but I would say that if the property is done up to a good standard and you abide by the letter of the law and treat your tenants as what they are - valuable customers, then you should neither need to undercut rents by that much or face such a rental void. I don't know whether you should factor in depreciation to your figures or not. I never factored in appreciation, because I've never planned to sell any of the properties, so I'm not factoring in depreciation either. Your plans/circumstances will guide you as to what to do.

How much of a return on investment are you after and over what time?

Say you buy this house for £40k and spend £20k doing it up. An annual profit of £3600 will give you 6% ROI. Is that enough? Is that achievable in your area? Remember to allow for all costs - marketing, maintenance, admin, legal costs, letting agent fees (if you use one). Also cost your time. This is a business, not an investment. It requires work and organisation. If you can make a profit that you are happy with by charging the LHA rate for your area, then i'd say you're onto a winner - you'll never be without a tenant.

DISCLAIMER - my crystal ball is as rubbish as everyone else's.

abby1234519

Fred1 wrote: »

There are a lot of properties to let and that number is increasing. The number staying empty for weeks/months is increasing too. However, that doesn't automatically mean that rents are too high. A lot of these properties are utter !!!! and not fit to live in. The sooner those landlords go out of business the better. Decent family homes are still in demand. At least in this area.

Agreed. You can only seriously consider doing this if you are a cash buyer. But if you are a cash buyer, the world is your oyster. Having said that, there is no rush. I don't think house prices are anywhere near their floor yet, so there's nothing really to be gained from rushing in.

Edgex's maths are pretty spot on, but I would say that if the property is done up to a good standard and you abide by the letter of the law and treat your tenants as what they are - valuable customers, then you should neither need to undercut rents by that much or face such a rental void. I don't know whether you should factor in depreciation to your figures or not. I never factored in appreciation, because I've never planned to sell any of the properties, so I'm not factoring in depreciation either. Your plans/circumstances will guide you as to what to do.

How much of a return on investment are you after and over what time?

Say you buy this house for £40k and spend £20k doing it up. An annual profit of £3600 will give you 6% ROI. Is that enough? Is that achievable in your area? Remember to allow for all costs - marketing, maintenance, admin, legal costs, letting agent fees (if you use one). Also cost your time. This is a business, not an investment. It requires work and organisation. If you can make a profit that you are happy with by charging the LHA rate for your area, then i'd say you're onto a winner - you'll never be without a tenant.

DISCLAIMER - my crystal ball is as rubbish as everyone else's.

Its just something I would like to do in the future, maybe 2010.
I do have a high disposable income, of which I am stick all into paying off debts, should happen by August if Snowballer is correct. We were looking at buying a rundown property in Leeds, maybe even a 1 or two bed terrace and then working hard on it. As OH current mortgage is rather small it means he pays the bills and then my wage isn't taken up by anything apart from chucking it at debt.
I was just aware that there are a lot of repossessions and nasty places that need some TLC and as Leeds is a busy area I thought it might bea good place to start. We live in Harrogate so its not too far

carolt

Might be wrong here, but isn't Leeds famous (notorious?) for its oversupply of city centre BTL properties?

Don't know how it affects all of Leeds, but possibly might not be the best best?

IveSeenTheLight

abby1234519 wrote: »

Has anyone ever bought a repossession say 40k and done it up and rented it?

Not personally, but I do know a guy that bought a place for £5k.
He has to strip everything out, floorboard, wiring, platerboard etc.
think it cost him about £40-£50k to do up and then it was valued at around £120k.

This was about 10 years ago.

they didn't rent it out though, they stayed there for a few years before upsizing

abby1234519

carolt wrote: »

Might be wrong here, but isn't Leeds famous (notorious?) for its oversupply of city centre BTL properties?

Don't know how it affects all of Leeds, but possibly might not be the best best?

What is the best way t research this? How do I work out the best area to do something like this in?

silvercar

Nice CGT bill if you do it up and sell for a profit, having never lived in it. There is no CGT allowance for renting it out.

edgex

1 bed places are the worst places to own for renting out:

the people that are/were renting 1 bed flats could just as easily stay at home or houseshare with friends.

if they lose their jobs, they are likely to just move back home


the rent on a 3-bed is not 3x a 1-bed
people will look at the total cost of living on their own, & realise that if they share with 2 others, the running costs of the shared rooms is cut in 3.

DKLS

carolt wrote: »

Might be wrong here, but isn't Leeds famous (notorious?) for its oversupply of city centre BTL properties?

Don't know how it affects all of Leeds, but possibly might not be the best best?

Notorious is the word for Leeds, there are more "Excutive New build apartments" than you can shake a !!!!!! stick at. Rumour has it that the only buyers will be housing associations, Quarry Hill flats anyone? :rolleyes:

A mate was offerered 5 flats at 50% off, without any haggling.

besonders1

For 40K the house must either be in an undesirable area or there is something seriously wrong with it or you wouldn't get a look in. I know of three houses in the north east going for around 38K and all three of them were in streets earmarked for demolition next year. I agree with the other poster too many BTL's especially as many people are considering renting out their house rather than selling at a loss.