Buy to Let - How I made £100 @ month

whitevandriver

Despite all of the doom and gloom merchants I went for it recently.

I had a game plan - target low value areas with good transport links and aim for DSS/Housing Benefit tenants.

Result - bought at £64,500 4 bed flat in October 2004. Was refubished by a local handyman in two weeks and let by me within three weeks of purchase. I used neither solicitors or letting agents. Gross yield is 8% and Council is paying my tenants rent.

There was a bit of hassle but to create an income after costs of £100 a month for a bit of hassle is worth doing.

deemy2004

DSS clients have a bad habit of trashing the place when they leave....

Still looks like you got a good deal

foot_loose

that is excellent mate.  im am going to be doing the same thing in the new year.

what area did you invest in????
if you do the same thing ten more times you could be earning 1000pounds a mounth for doing nothing,  it sounds good to me

Walletwatch

Guess this is a good deal, but doesn't renting out a house to Housing benefit tenants affect the resale value of the house?

deemy2004

How would the buyers know who the property had been rented to ?

Offcourse if its a terrace, with rowdy, messy DSS tenants on either side then that would effect the resale value.

whitevandriver

The flat was let in Johnstone, West Central Scotland. Many central areas in Pailsey & Johnstone are still comparatively modestly priced reducing investment risk if there is a drop in prices.

There is a proven demand. I had nearly 20 calls and about 9 viewings and 4 firm expressions of interest. All from a £30 local paper ad.

I did the viewings and letting myself expressly to vet the tenants (and to save the fee) am not worried about the tenant trashing the place. It cost £1,500 to decorate and put a new bathroon suite in this 4 bed flat so I consider this my worst case senario downside risk.

I have since learned Renfrewshire CAB in tandem with the Council have a deposit guarantee scheme and have said to me in print if I find more suitable flats they will provide me with tenants and fast track Housing Benefit claims. They will prepare inventories, inspect every two months and do the leases for free. Call them on 0141 889 4789. Highest demand at the moment is for one bed furnished flats of single men (usually as a result of a relationship split). Landlords make a profit, homeless people get a house and the Council gets more homeless peole off it's books.


I plan to do another next year and will try to do one every year but it I wasn't working would do at least three more just now. This would spread my void risk.

Pal

Out of interest (if you don't mind me asking):

How much deposit did you put down? The figures you give suggest about £20k?
What is the total mortgage amount and what are the monthly repayments?
What type of mortgage did you get and, if a deal of some kind, when does it run out?
What tax band are you in (22% or 40%?)
How long does the tenancy deal with the council run for? (around here it is 5 years I think)
Do you get an upfront deposit for council tenants?

Sounds like an interesting deal.

Pal

Sorry - just to add another one, how is the rent reviewed with the council? Is it index linked in some way?

Cheers

Pal

whitevandriver

I used all cash, drew it down from my own equity funds within my flex - mortgage - effectively a 100% mortgage. Will get a BTL mortgage when I have the need for some of the equity capital back for another venture.

I am a 40% tax payer. You can manage your exposure to tax on rent. My surplus is about £100 a month on a rent of £435.

Rent deposit from this tenant was cash £435. Was only after I let the flat that the CAB contacted me. There deposit guarantee is for one year max but I think they will extend if necessary.

GDB2222

It cost £1,500 to decorate and put a new bathroon suite in this 4 bed flat

That's cheap. Who's your builder?

If you get HB paid direct, you need to watch out for clawbacks. What happens is the tenant gets a job but 'forgets' to tell the local authority. After a few months, they catch up with him and claim back the overpaid housing benefit. Guess whom they claim it back from?   ;D ;D ;D

Pal

Presumably you borrowed the £64,500 on an interest only mortgage? Given that you borrowed on a residential mortgage, how do you avoid paying tax on the entire rent?

How much does the building's insurance cost? What about legal costs etc. What did it cost you to actually buy? Did you have to furnish the property?

Is the mortgage fixed rate and if so, how long for?

While it may eventually be profitable, it is still going to take you at least two years to get the cost of fitting the bathroom back, unless that was included in the mortgage you took out.

The key thing is whether you can increase the rent over time to give you more of a safety margin.

(You can tell I enjoy analysing these deals ;D)