is this smart or stupid ? remortgaging so i can buy to let !!!

andykolo

my house has nearly doubled in value since i bought ie 48,000 now approx 90,000., my friend has suggested that i remortgage and use the extra funds to put a deposit on another property and get a buy to let mortgage for the other property so it pays itself plus some towards my larger mortgage.

it has me thinking is this really possible and wondering what the ups and downs of this possible venture might be.

any advice will be gratefully received

roswell

depends on your view of risk, surely you would be better off paying yours off than payong more interest on a higher amount ? can you rent another proprty out ? is there already a flood of properties up for rent that are empty ? can you afford 2 morgages if the property your renting out doesnt have a tenant for 6 months ? if the centeral heating breaks can you afford to replace / repair, do you want to re deorate / replace kitchens ect when tenant move out and wreck the place ?

joepubli

If money is tight don 't even think about it. If the place is unlet you will struggle to keep up. Also on low value properties you tend to get more problems but a lot of costs (legal etc) are the same.

Joe

AndrewSmith

You should never think of a buy to let as a way of producing an income. Given the way that the lettings market is currently I doubt that, unless you are considering using a deposit of 20% or more, you would have any surplus income left over once you have paid the buy to let mortgage and the letting agents fees. This is assuming of course that you manage to let the property at all.

The market has been flooded over recent years with would be developers and landlords thus the window of opportunity to make money from such ventures is passing. I myself, until last year, had a portfolio of 6 letting properties however decided to sell and realise the capital growth whilst the market was still favourable, as there is every increasing competition from proerty owners in the lettings market. This has led to a downturn in the rentable values of some types of property. This is factually indicative by the fact that it is now harder to find a property with sufficient rental income to cover 130% of the mortgage costs for the purposes of obtaining the finance to buy it. This is why in recent times some lenders have reduced this percentage requirement to 125% or even 120%. There are some lenders who will accept a lower percentage, however they assume an interest rate of somewhere near 6-6.5% whan applying the calculation. Trust me, I do this every day.

Buy to let is a mid-long term investment to provide capital growth whilst the property self funds (as long as it is let).

Only by having multiple buy to lets will you ever earn a significant income. Also dont forget that any income from the rental after mortgage and letting agent fees is treated as taxable income, thus further eroding any possible surplus.

Take individual professional advice as what you are looking to do is far beyond the scope of being answered correctly on a forum. There are so many variables and outside influences that you need to consider which cannot be taken into account without a proper discussion.

Hope this helps

Andy