is it wise to invest in buy to let now?

colinbloke

im really keen on buying a second property for investment, problem is i do not have a huge amount of savings. in fact i would use my current mortgage overdraft facility to pay the25% deposit required for a buy to let mortgage.
At present i could probably afford a 2nd mortgage up £65,000 which would not buy any thing great but the mortagae would be reasonable and i would expect to make over £1,000 income after the cost of mortage if the property was let out per year. i would see this as the first step onto the property buy to let/ development ladder.

as for the risk i could just about afford the mortgage if property not let out from surplus house hold income i would also have the cushion of approx £5,000 savings for any problems that could come up.

so would i be wise to take the gamble or should i just sit on my savings for the time being?

Thrugelmir

colinbloke wrote: »

im really keen on buying a second property for investment, problem is i do not have a huge amount of savings. in fact i would use my current mortgage overdraft facility to pay the25% deposit required for a buy to let mortgage.
At present i could probably afford a 2nd mortgage up £65,000 which would not buy any thing great but the mortagae would be reasonable and i would expect to make over £1,000 income after the cost of mortage if the property was let out per year. i would see this as the first step onto the property buy to let/ development ladder.

as for the risk i could just about afford the mortgage if property not let out from surplus house hold income i would also have the cushion of approx £5,000 savings for any problems that could come up.

so would i be wise to take the gamble or should i just sit on my savings for the time being?

BTL has had its day. Use your money to clear your existing mortgage debt. By then the economic climate should have improved somewhat.

PasturesNew

colinbloke wrote: »

i would use my current mortgage overdraft facility to pay the25% deposit required for a buy to let mortgage.
....or should i just sit on my savings for the time being?

Well, here's the crux of the matter: you don't HAVE any savings do you.
You'd be borrowing 100%.
Lenders would laugh you out of their offices to be frank.

The question really is: when you look at the large spreadsheet that projects the figures 5 years into the future - and compare the different scenarios as the variables change ... how does it stack up mathematically?

How many months could you pay for it if it were empty? If you lost your job, or were put on short-time?

If you want to gamble, why not take your "savings" and chuck it at the stock market, which is at a low. Or buy gold. Or visit the gee-gees.

BitterAndTwisted

[QUOTE=colinbloke;2537380_So_would_I_be_wise_to_take_the_gamble_or_should_I_just_sit_on_my_savings_for_the_time_being?[/QUOTE]

"Gambling" and "wise" in the same sentence does not compute. If you have any savings, pay off your current mortgage and leave the gambling to those who are doing it with other people's money

brit1234

You don't seem to be in a very strong position. As the others said the day of buy to let is pretty much over. Since the credit crunch all the buy to let fraud has surfaced in the banks records and thus they are tighterning up. Also buying now you risk equity loss if we go into what many predict is a double dip recession coming.

Running_Horse

Ah go for it. What could possibly go wrong?

Doozergirl

I think you should consider it when you actually have the deposit money for the property. You won't be making £1000 a year when you're paying double digit interest on your overdraft.

Buy to let will never be 'over' but the first rule is to find the right yield for your outlay, not just go out and buy anything on the basis that you think it's value will improve - and secondly to appreciate what a PITA being a landlord actually is and to know that going in. You will have maintenance issues when you tenants stick a shower where it shouldn't be and floods the kitchen. Or the cooker breaks. It is a long term investment and your house is not going to look the same in 25 years time if you don't spend money on it!

colinbloke

thanks for the responses obviously im not in a strong postition as i would be borrowing 100% although using my offset tracker mortgage overdraft to raise deposit requied currently on 1.25% rate.
also i do have about £5,000 savings which would increase aprox £350 per month if i get a tennant and could cover emergecy repairs ect.

Of course it would be safer just to use savings to pay mortgage off early but this would still take me about 10-12 years on current earnings. im looking for a medium term investment with the potential for small income yearly and decent return say 5 years time. Im just not sure or expirienced enough with shares/ gold to believe i could get a good return in this time.

Property of course could drop still but is it not likely to have picked up in 5 years
thanks for any advice

cashndash

can you afford to pay the mortgage if you have a period of 6 months with no tenant??

do you have any contingency left for emergency repairs such as a new boiler?

Pay off your mortgage for now, see what happens in the future

Rick62

You also have to consider if you got a rouge tenant who didn't pay their rent, lets say 3 months and another 6 months to get them out and three months to get a new tenant and several thousand in legal fees. If your budget couldn't afford this then you shouldn't consider BTL.

Doozergirl

colinbloke wrote: »

Of course it would be safer just to use savings to pay mortgage off early but this would still take me about 10-12 years on current earnings. im looking for a medium term investment with the potential for small income yearly and decent return say 5 years time. Im just not sure or expirienced enough with shares/ gold to believe i could get a good return in this time.

Property of course could drop still but is it not likely to have picked up in 5 years
thanks for any advice

Are you experienced with property then? 5 years is not long. People who rushed in to buy BTL new build flats 5 years ago are sitting on big losses.

I wouldn't even bother buying in with the expectation of a decent return in five years. Property won't booming up and beyond the point that it was a couple of years ago because the banks have learned their lesson and many investors have too. Whilst you don't have so many people speculating on the market then the opportunity to sell on at a profit is reduced. It all turned into a bit of a pyramid scheme. BTL for the masses I think will remian subdued - banks are still wary in general about property - we are not out of the woods yet by any stretch of the imagination.

A sensible BTL is a BTL for the long term. Anything else is a gamble.