Buy to let Mortgage

djsban

I am looking at purchasing a property to rent out in the south-east and was hoping for some advice on the long-term feasibility of this.

Estimated property Purchase Price - £170k

Deposit - £42,500k
Mortgage - £127,500k (expected repayments, as advised by bank, of £540)

Monthly rental income - £925

Im not necessarily interested in a return on a monthly basis as long as the property pays for itself.

What do you think in principle?

Met_Bobby

As long as you get 6 months of rent each year and repayments to bank don't go up the property starts to pay for itself. Maintenance, accounting costs etc need to be added so you will need a further couple of months rent to help with this. More than 4 months unpaid rent in a year and you lose money. If the property remains empty for a period and you can't keep up the bank repayments you run the risk of negative equity. If you can't find tenants you will struggle to find buyers.

brightbuy

The income figures look good, there would be two things I would check straight away. First of all, are you paying the right price in this market for the property? Get recent sold figures in the area. Secondly, who has told you the property will rent for £925?

Make sure you check with many sources. Cashflow is king, this property offers a good return but if your not interested in this then you need to ensure you are paying the right price for the property.

Avoid blocks of new build flats, your rental income will be driven down by other landlords marketing theirs as well.

getmore4less

Gross yield is 6.53% on the low side aim for 10%

feisty1

i read yr other thread, this property appears to be a new build in Reading and you're an inexperienced landlord............very risky project

Robert_Sterling_3

What a time to take the plunge.

socrates

These are the real facts:

djsban wrote: »

Hi all,

I was hoping that I could make use of the experience and knowledge on these forums with regard to purchasing a new build home.

I am looking to purchase on a small newbuild development on the outskirts of Reading (South-East). There are 23 plots on the site and all have been completed since early December, there are 10 plots still available.

The property that I am interested in is a 2-bed mid terrace house which is listed at £225,000 and I am looking at purchasing two of these and have mortgage arrangements in place.

I am at a point now where I am looking to make an offer imminently but was wandering what you think would be a good offer to go in with bearing in mind that I am ready to go ahead with the purchase of two of these.

I look forward to getting your ideas?

djsban wrote: »

One of these properties would be to live in and the other would be BTL. Rental yield on the 2nd property is 6.2%.

Funds are in place and ready to go and as such should be no problem in meeting the exchange in 28 days ideal that they have!

djsban wrote: »

The expected rent is £925.

Mortgage re-payments will be £680 in total, arrangement fee for the mortgage is £499 and will be at 3.44%.

As far as I am aware the £225 is the initial list price and has not been reduced. Can't be certain of this though.

djsban wrote: »

Ok. I have £85k deposit available (hoping this will equate to at least 25%)

- The live in property will be funded by a residential mortgage at 3.44% with an arrangement fee of £499.

- The rental property will be funded by a second mortgage with the same arrangement fee but a higher rate of 4.1%.

Obviously the exact payments will depend on what the agreed purchased price could be.

Hope that's enough information for you.

djsban wrote: »

BTL mortgage is fixed for 3 years.

I am not especially concerned about the monthly payments increasing as I am more interested in the long-term equity gain on this property. If they were to increase significantly beyond my means in 3 years time then I am comfortable that there would be an increase in the equity if the property needed to be sold.