thinking of a buy to let

bargainbasement

Hello, currently outright home owner no mortgage. Thinking of buying a second house to rent out but I haven't got a clue what kind of mortgage we need to look into getting.

Any information or links greatly received!

socrates

Simple advice don't do it.

There are professional investors with cash money ten steps ahead of you. Anything left behind is either overpriced or the wrong thing to make money from.

There are loads of pitfalls.

BUT if you still want to do it - then look for properties that are going to give you as near a 10% yield as possible.

bargainbasement

The house we are looking at is in a pretty good community area - good rental potential, generations of families live on the estate. We haven't even looked at it yet and probably you are right it will already be under offer if it is that good a deal, but I am interested in knowing whether we have to do the BTL mortgage or if there is anything we can do having around £200k in equity in our mortgage free home..... (The house we are looking at is £80k)

socrates

If you have the income you can draw down from your own home - however this puts the house that you live in at risk - this will not be a BTL mortgage.

Then you can buy the other property outright.

hearts

You would remortgage your present home for 25% of the purchase price of the one you are proposing to buy + x% extra to cover costs.
You would then get a BTL mortgage on the proposed BTL. 75% is about the going rate.
You will need to have the income to cover the mortgage on your home. The BTL will need to achieve a rental of aprox 125% of the mortgage.
Best to visit an FA for full info. This should be free if it's not look again.

Having just reread the above post. This is a good idea ;-) However, you will recieve tax relief on mortgage interest on the BTL. You get no relief on your home mortgage. So it depends on a few figures you would need to work out. Ask The FA or an Accountant.
Interest rates on your own home mortgage would be far less than on a BTL. So another reason to consider Socrates way.

silvercar

hearts wrote: »

You would remortgage your present home for 25% of the purchase price of the one you are proposing to buy + x% extra to cover costs.
You would then get a BTL mortgage on the proposed BTL. 75% is about the going rate.
You will need to have the income to cover the mortgage on your home. The BTL will need to achieve a rental of aprox 125% of the mortgage.
Best to visit an FA for full info. This should be free if it's not look again.

Cumbersome and the disadvantage is that you will pay two mortgage arrangement fees and two valuations. You also won't get a decent rate on the BTL, or at least not as good as you could get on the residential mortgage.

hearts wrote:

Having just reread the above post. This is a good idea ;-) However, you will recieve tax relief on mortgage interest on the BTL. You get no relief on your home mortgage. So it depends on a few figures you would need to work out. Ask The FA or an Accountant.
Interest rates on your own home mortgage would be far less than on a BTL. So another reason to consider Socrates way.

You receive tax relief (or more accurately, can consider the mortgage interest as an expense of the letting) wherever you secure the mortgage. There is no requirement to have the mortgage secured on the let property.

socrates wrote:

If you have the income you can draw down from your own home - however this puts the house that you live in at risk - this will not be a BTL mortgage.

Your home would always be at risk, it would just take the creditor a bit longer to come after you.
Default on your BTL get repossessed with a shortfall and the lender will look to saee what other assets you have. Once they spot your main home they will go for a charging order on it.

getmore4less

socrates wrote: »

Simple advice don't do it.

There are professional investors with cash money ten steps ahead of you. Anything left behind is either overpriced or the wrong thing to make money from.

There are loads of pitfalls.

BUT if you still want to do it - then look for properties that are going to give you as near a 10% yield as possible.

I think you should say as much over 10% as possible.

socrates

getmore4less wrote: »

I think you should say as much over 10% as possible.

Would be nice - but from my research quite unlikely

Gorgeous_George

A house priced at £80K makes more sense as a BTL than a house worth £160K.

Take a loan against your own home of £80K. At 4.5% this would cost £300 per month in interest.

What would the rent be? My BTL property is probably worth £80K and the rent will be £450 per month from April (I could charge more but I like to keep long term tenants).

If you can set the rent at £450 per month that is a gross yield of 6.75%. some way short of 10% suggested earlier :rotfl: which I can consider highly unlikely. Of course, if rents rise by 3% per year, in five years time you should be looking at £620 per month and a gross yield (against original price) of 7.8%.

Long term the numbers stack up much better. All depends on what you think will happen to house prices and the economy.

There are risks but there are also rewards - if you do the sums and get reasonable luck. One bad tenant and you could lose a lot of £££s.

GG

hethmar

Of course a lot of wannabee buyers will also be doing the same figures and may feel they would rather buy than rent. There may soon be so many repos rented out that rents will plummet.

socrates

Gorgeous_George wrote: »

A house prices at £80K makes more sense as a BTL than a house worth £160K.

Take a loan against your own home of £80K. At 4.5% this would cost £300 per month in interest.

What would the rent be? My BTL property is probably worth £80K and the rent will be £450 per month from April (I could charge more but I like to keep long term tenants).

If you can set the rent at £450 per month that is a gross yield of 6.75%. some way short of 10% suggested earlier :rotfl: which I can consider highly unlikely. Of course, if rents rise by 3% per year, in five years time you should be looking at £620 per month and a gross yield (against original price) of 7.8%.

Long term the numbers stack up much better. All depends on what you think will happen to house prices and the economy.

There are risks but there are also rewards - if you do the sums and get reasonable luck. One bad tenant and you could lose a lot of £££s.

GG

Outside of London there a fair number of properties with good yields - but as always they never get past the EA and the investor with the brown envelope.

close to 10% is achievable you just have to be a member of the "in crowd"