BTL effects on own mortgage

Lizzy

My BTLs are students and are about 5miles from where I live. This is important when needing to call for any reason. Students can be difficult so needing to be close is important. The rental yeilds are massive in comparison to anything elso though so for us worth it.

The BTL are a business plan and pension. They are on interest only and will remain that way because when enough properties are purchased in time they will increase in value (over the long term). When we come to retire the increase in value minus capital gains should be enough to sell some of the properties to pay off the others. This means we should be able to live off the rental income alone and not have any mortgages to pay on the remaining properties. Interest only for this moment in time gives us more money to play with and invest and of course to maintain the properties.

BTL are self servicing and will not count towards your HOME MORTGAGE NEEDS.

Always best to buy where you know. Also when you find out how much these agencies cost I think you will change your mind. Do it yourself if you can.

Lizzy

PoorDave

Lizzy wrote:

My BTLs are students and are about 5miles from where I live. This is important when needing to call for any reason. Students can be difficult so needing to be close is important. The rental yeilds are massive in comparison to anything elso though so for us worth it.

The BTL are a business plan and pension. They are on interest only and will remain that way because when enough properties are purchased in time they will increase in value (over the long term). When we come to retire the increase in value minus capital gains should be enough to sell some of the properties to pay off the others. This means we should be able to live off the rental income alone and not have any mortgages to pay on the remaining properties. Interest only for this moment in time gives us more money to play with and invest and of course to maintain the properties.

BTL are self servicing and will not count towards your HOME MORTGAGE NEEDS.

Always best to buy where you know. Also when you find out how much these agencies cost I think you will change your mind. Do it yourself if you can.

Lizzy

I would also like to do BTL as a "pension". It was only yesterday that using BTL as an income source dawned on me. In my head it was all about someone else (tenant) paying off your full repayment mortgage, so that in 25 years you have a house that's paid for. It seems you are using it as an income stream right now, which is something i hadn't thought of. Good job i'm only at the talking about it stage!

I have had a look around online for lenders, but i can't find any sites that will give me an illustration of payments on an interets only basis for a btl mortgage - anyone know any? I need this info really to help with my thinking.

I am already planning to see my friendly local broker in a few weeks, but i want info now!

I think if your BTL property is nearby it makes perfect sense to do as much of the work that you might otherwise pay others to do yourself. By this i mean both finding tenants etc and repairs. My problem is that it's less affordable where i live (south east) than say 40 miles further north.

I guess i'll have to get my stoozing and matched betting schemes going (see elsewhere on this site for some excellent info on these) to make some more deposit money!

NeilH_2

Poor Dave,

You can quite easily work out the payments yourself, if you know how much you want to borrow and the likely interest rate. ie £200000 property with 15% deposit (£30000). So £170000 mortgage interest only at 5% = £8500pa or £708.33 / month. Rental cover of 125% would mean charging a rent of £886/mth. etc
I hope this helps.

NeilH

PoorDave

NeilH wrote:

Poor Dave,

You can quite easily work out the payments yourself, if you know how much you want to borrow and the likely interest rate. ie £200000 property with 15% deposit (£30000). So £170000 mortgage interest only at 5% = £8500pa or £708.33 / month. Rental cover of 125% would mean charging a rent of £886/mth. etc
I hope this helps.

NeilH

I think i fell into the trap of being puzzled by exactly how you calculate repayment mortgage payments. I was forgetting we're talking interest only, so maybe it is as simple as you say...

UK_Landlord_2

int only is more tax efficient as you can claim the interest as a tax deuctable expense, also as someone here touched on in 25 yrs the original purchase price will be similar to that of a second hand car, 25 years ago houses were 3-4k and these are now over 250-300 so assuming similar growth over the next 25 paying them off won't be a drama. you can save the money on not repaying to buy more property. why pay off money borrowed at 4.8% and invested at 7.5+%

and please don't debate me on whether they will grow the same as my cyrstal ball has packed in after the last 500 onilne arguments about future house prices! i think what i think i don't care what anyone else says about future growth and spending habits and earniongs flippin ratios..... sorry really sick of this argument as you can probably guess.

PoorDave

UK_Landlord wrote:

int only is more tax efficient as you can claim the interest as a tax deuctable expense, also as someone here touched on in 25 yrs the original purchase price will be similar to that of a second hand car, 25 years ago houses were 3-4k and these are now over 250-300 so assuming similar growth over the next 25 paying them off won't be a drama. you can save the money on not repaying to buy more property. why pay off money borrowed at 4.8% and invested at 7.5+%

and please don't debate me on whether they will grow the same as my cyrstal ball has packed in after the last 500 onilne arguments about future house prices! i think what i think i don't care what anyone else says about future growth and spending habits and earniongs flippin ratios..... sorry really sick of this argument as you can probably guess.

Personally, i wouldn't dream of getting into the debate!

I was thinking it might be wise to get any BTL properties owned valued occasionally so you know where you stand. In an ideal world i'd build up a collection of fully paid off BTL houses for my retirement (about 40 years off, if i'm lucky), but interest only does seem to make a lot of sense. If prices only remain the same, the the rental income would certainly be good to have.

As always, prices having fallen is only an issue if you are selling!

UK_Landlord_2

In an ideal world i'd build up a collection of fully paid off BTL houses for my retirement

You can, as the house prices rise you could sell of some property to pay off others. Or apy a little capital off each year from any profits.

out of interest where are you thinking of buying? who are you going to let to, students/professionals?

PoorDave

UK_Landlord wrote:

You can, as the house prices rise you could sell of some property to pay off others. Or apy a little capital off each year from any profits.

out of interest where are you thinking of buying? who are you going to let to, students/professionals?

Professionals, hopefully.

Looking at the town i live in (in Bedfordshire), within walking distance of the railway station for the London commuters.

Also had another idea of buying approx 40 miles north of here, where the rent to property price ratio is higher, but there is not such an obvious tenant supply, and in an area i don't really know. Sounds like a worse idea with every word i type...

UK_Landlord_2

lol hhmmm... yeah i think sticking to an area you know is a good plan, you are able to sell it better to prospective tenants for one.

personally i do both but i like letting to students as they rent for a full year, professionals often are only in for 6 months, so double the work in some cases.

Jo_anne_2

PoorDave wrote:

Professionals, hopefully.

Looking at the town i live in (in Bedfordshire), within walking distance of the railway station for the London commuters.

Also had another idea of buying approx 40 miles north of here, where the rent to property price ratio is higher, but there is not such an obvious tenant supply, and in an area i don't really know. Sounds like a worse idea with every word i type...

Hi PoorDave,

I have a BTL approx 40 miles from where I live, as the house prices were lower and the rents higher (and demand for rental property higher) than closer to home. So far, it has worked out well and the property let really quickly. I knew the area as I grew up there, so it wasn't unknown territory, so to speak. Where are you considering buying? My BTL is in Northants.