BTL dreams go up in smoke

RomansProperties

confused31 wrote: »

I think if you can get a hosue for 50-60000 and rent it out for 500 pound a month, its a no brainer, if i had some spare cash i know what i would be doing and i would be looking for some of these bargains to rent out.

I think the ones who have bought 2006-2007 will be in a bit of a mess, but i think now and hopefully for the next 2 years prices will stay low.

If you can pick up a house for 50,000 and get the rent paid by the government, which is more or less garanteed its a no brainer.

You would need about £20k.
£18K Deposit and the rest for fees on a £60K house
Let it out and take the income or use all the money and pay off the balance of the mortgage for retirement, like a few people on here are planning.

RomansProperties

stevetodd wrote: »

Ahh I see I couldn't be bothered converting, not for me, I am happy with what I have and in any case I suspect planning would be an issue in London (mainly due to further sud-dividing and the parking issues)

We bought a few already done just very run down
We took them back to basics and started all over again.
They are all nice clean basic flats.
Its working quite well, we now have 88 tenants and 2 properties still to finish refurbishing

confused31_2

RomansProperties wrote: »

You would need about £20k.
£18K Deposit and the rest for fees on a £60K house
Let it out and take the income or use all the money and pay off the balance of the mortgage for retirement, like a few people on here are planning.

To be honest if house prices dont go up and i dont sell my own, i think i will change my current home to a interest only mortgage and rent it out, my mortgage would be less than 175 pound and ive been told by a agent now i would get between 650 and 750 pound a month.

would the rent of my house if i rented it count has income to obtain a mortgage for a new house?

RomansProperties

confused31 wrote: »

To be honest if house prices dont go up and i dont sell my own, i think i will change my current home to a interest only mortgage and rent it out, my mortgage would be less than 175 pound and ive been told by a agent now i would get between 650 and 750 pound a month.

would the rent of my house if i rented it count has income to obtain a mortgage for a new house?

Or keep it as repayment and use the tenants rent to pay off your mortgage.
I would have thought you can include the profit you make as its still income.
You will need to get consent from the mortagee for letting the property out
Good luck with it

RomansProperties

confused31 wrote: »

To be honest if house prices dont go up and i dont sell my own, i think i will change my current home to a interest only mortgage and rent it out, my mortgage would be less than 175 pound and ive been told by a agent now i would get between 650 and 750 pound a month.

would the rent of my house if i rented it count has income to obtain a mortgage for a new house?

Or keep it as repayment and use the tenants rent to pay off your mortgage.
I would have thought you can include the profit you make as its still income.
You will need to get consent from the mortagee for letting the property out
Good luck with it

Paddy2eyes

Cleaver wrote: »

I plan to retire when Im 60. In 2011 we take an interest only 60k mortagage on the BTL property for 30 years. Let's say the average rate we'll pay on this over the 30 years is 6%. The monthly repayment, for the 30 years will be around £365 a month.

However, the 60k will be placed in savings, never to be touched until I retire. Let's say this earns average net interest of 4% for the next 30 years, which will mean I'll have a lump sum of 200k in 2011. I pay back the 60k, so I'll have a lump sum of £140k in 2041.

Why take the interest only mortgage? If you put your £365 a month, for 30 years, under the matress, without a penny of interest, you would have over £130k. Put it into your account earning 4% and you will have a lump sum of, umm.. well more than £140K. Why borrow at a higher interest rate than you will me making on the capital?

confused31_2

Ive had consent already from my lender, its just not the right time at the moment, i was going to do it and mew, but i thought im better off waiting.

Cleaver

Paddy2eyes wrote: »

Why take the interest only mortgage? If you put your £365 a month, for 30 years, under the matress, without a penny of interest, you would have over £130k. Put it into your account earning 4% and you will have a lump sum of, umm.. well more than £140K. Why borrow at a higher interest rate than you will me making on the capital?

So I don't have to pay any tax on my rental income.

geoffky

:beer:

Cleaver wrote: »

<waves>

Well, I don't think I'll be exactly what you're looking for (as in, I don't regret renting out our house) but I'm happy to admit that I ask myself whether we made the right decision.

I've put our story on here before, but back in 2007 I was offered a new job in a different area of the country, we had a load of savings and we loved our house (just not the area it is in). So we decided to rent it out (we initially bought it in 2004) and buy a flat in the area we currently live. The flat we bought was cheap, so we own around £200k worth of property. So although we have two, they don't add up to as much as what a lot of people on here will have with their one house.

For me, our BTL investment (although I hate that term) is something that will pay for itself, with little or no bother. We have an absolutely brilliant rental company who sort everything out under £300 without even bothering us, we trust them and the situation works great. We plan to mortgage free on both properties when I'm 30 in 2011, so here's my back of a fag packet plan with the property:

(deep breath everyone)

I plan to retire when Im 60. In 2011 we take an interest only 60k mortagage on the BTL property for 30 years. Let's say the average rate we'll pay on this over the 30 years is 6%. The monthly repayment, for the 30 years will be around £365 a month.

However, the 60k will be placed in savings, never to be touched until I retire. Let's say this earns average net interest of 4% for the next 30 years, which will mean I'll have a lump sum of 200k in 2011. I pay back the 60k, so I'll have a lump sum of £140k in 2041.

Our rent at the moment is £600 a month. We don't need this money, so it will cover mortgage and other costs then the rest goes to a savings account. Let's say this rent increases by 3% each year though. So over the next 30 years we'll take in around £35k in rent. We know that my mortgage payment will be around £365 a month for the next 30 years, which adds up to 13k over the 30 years. And let's allow for voids, tax, property maintenance etc. which we'll stick a figure of 20% in for. 20% of the £35k is around 7k. So after the 13k and 7k dededuction I can work out that out of the £rent each month we'll have around £115 'profit' per month in the first month, but this rises every month (the mortgage is 'fixed', according to my fag packet calcs remember) so the profit rises every month, and in 2041 our rent could be around 1.5k a month, our costs around £650 a month, so our profit would be around £850 a month right at the end. We would save all this money, so taking another average interest rate of 4% over the whole 30 years, this 'profit' (after all voids, tax, maintenance etc.) should be around a £204k lump sum once compounded.

Now let's look at the house. Let's say in 2011 it's worth 90k (we bought it for 130k in 2004). Let's have a prefect world and imgaine that house prices rise, on average, 2% a year between 2011 and 2041. This would make the house worth £166k in 2041. We sell it, pay 20% tax (is this right?) and pocket the £130k (hey, what we bought it for!)

Obviously, we've thrown a lot of money at paying off our mortgages before 2011 to make all this happen. So that's 90k of our own money before we even look at the figures above. But we paid off at least 20k of mortgage when we lived there, so it's more like 70k But we've got:

Savings pot from mortgage sum: 140k
Rental profit saved and compounded: 204k
House sale profit: 130k.

Once we've taken to 70k off that we threw at it, we will make £400,000 over the 30 years. For doing nothing. And via an investment that we don't really need. Over the next 30 or so years we'll also have pensions, savings, investments other property that we live in and various other ways of 'making' money. The house can just sit there, do it's thing and we'll see where we are in 2041.

So, after all that, to answer your question Geoff, I sometimes wonder whether we're doing the right thing. I enjoy travel, my friends, my family etc. and have to make a real effort to care about money to be really honest. I like our rental property as I can just sit back and let it do it's thing and we'll see where we are in 2041. Should have maybe sold it in 2007, but we didn't.

Blimey, I've really waffled here haven't I?

thanks for that.. i hope you have kept this for future use .... i dont think its a road paved with gold is it?

Cleaver

geoffky wrote: »

:beer:

thanks for that.. i hope you have kept this for future use .... i dont think its a road paved with gold is it?

I think it's a road paved with around £400,000. Did my post not make that clear?

Sorry, I should be a be more constructive and maybe you should too if we're going to debate the issue. Which part of my sums did you find incorrect or unrealistic?