Input please on ideas BLT for cash/help me make my money work !

futureplanning_2

Hi
I have finally sold my house and wondered whether I could use the clever people on here to run some ideas by as nobody I have spoken to seems to understand what I am trying to achieve.

I will be renting privately as I dont have enough savings/income to afford a suitable property for me and my kids. I have 50k equity from the house sale. I cannot get help with benefits for rent as I have 50k and I work part time. So I have resigned myself to renting privately. I am a single parent.

Now I could pay my rent and live comfortably using my savings for 5 or so years after which time I will probably need help in the form of housing benefit due to low earnings.......probably ending up in rented forever with the insecurities that brings...you get the gist!

So I am trying to think of a way to make my savings work for me and help me to provide for myself and my children long term.

My idea (please dont shoot me down it's just a thought!) is to buy a property for cash (a flat/small house ....yes there are properties for that price!) and rent it out to offset against my own rent?

I have read lots on the risks of voids/bad tennants etc, and am trying to work out if it's worth the risk to possibly have a long term way of moving forward? There will be no mortgage costs to cover but of course there are other costs......

How would it work if I mortgaged that property later on to buy another property (again a cheap one) and rented that out too? 2 possible sources of income? 1 mortgage ?

As I said am just toying with ideas for now...trying to find a way to become self sufficient (not rich!) with some future for me and my kids!

anyway please throw some useful comments before my head explodes trying to figure out if I am just dreaming or if there is a way of doing this!

Of course nay other suggestions of how to make my savings work for me would be very welcome!

many thanks

silvercar

At the moment you have 50k in the bank. You will earn interest on this money that can supplement your income.

If you buy a property then the rent will be your income. Out of this rent you will have to pay maintenance for the property and spend on complying with all the landlord costs like insurance, gas safety etc. If your tenants don't pay the rent or you have voids you will have no income temporarily.

Mortgaging the property is possible - all that does is return some money to you to do with what you want. Same rules apply if you take on another property except now you also have a mortgage to pay.

You also have a tax problem; the rental income is taxeable at your marginal (highest) rate. So you will probably lose 20% of the rent (less any costs connected with the rental) out of which you still have to find your own rent.


Some questions:

a) do you have the time to manage a property or two?

b) are you financially secure enough to take this on?

If you gradually spend your 50k in the bank, you will eventually be eligible for housing benefit and possibly other benefits. If you have other properties you are unlikely to be eligible for benefits. So if you got into difficulties with the rent side of things you couldn't rely on government help.

At the moment BTL mortgages are not that easy to secure. Lenders often expect large deposits and a decent income from the applicant. Something to consider for a second property.

futureplanning_2

thank you silvercar for your reply and helpful comments.

My hope is to be in a position where I dont have to claim benefits....hence my desire to make my savings work for me in some way.

Still looking into buying a small place and weighing up the risks v the possible benefits!

In answer to your questions, I do have the time to take this on but not sure about the financially secure enough bit ! I could survive paying my rent for a while without the rent from another property....but my hope is to make it work .....rather than be stuck in a system from which it is not easy to try and make a future for yourself!

Much easier to give up ....but that's not my style and certainly not how I have brought my children up !

Any other ideas on what to do with 50k to make it work instead of in a bank (low returns) or used to pay rent?.......no jokes/insults please people this is my future and I am doing my best !

cheers!

mlz1413

B2L will bring you an income but is pitted with problems and needs time, energy and constant maintenance.

Savings are currently giving a low return but it's still a return even if only £100pm, and high interest rates are very likely in the not too distant future which could well see your savings paying a considerable proportion of your rent for no effort and no pitfalls.

Not sure of your childrens ages but the fact you have sold a home with a large equity to rent a larger home sounds as if the children will be with you for a few years yet. Are your circumstances likely to change in the next 10 years, a partner? children working and paying you rent? ability to work full time or a better paid job? All of these things effect your future and need to be considered along with any investment plan.

Go and have a chat with a financal adviser and see if there are any investment options you haven't considered and then write yourself a list of ideas you like the sound of. Do a budget plan for each idea and then see if there is a clear best option for you.

TTMCMschine

Do you have a well paid job? If not why not take the opportunity to go back to college and get some qualifications with a view to earning more. Although you could already be a doctor for all i know. That's what i'd do in your shoes. For me it would work and i'd get into a higher earning bracket without going into debt. Plus when finished you'd be able to afford something better for your children.

Scabs

If you can afford a small house why not buy one and move in yourself?. No more rent, all wages for yourself and security for your family. BTL has a lot of risks in these financially uncertain times.