Buy to Let Questions

devils_advocate

Byrneand wrote:

Although this is not as great as the 5% we could get in a savings account, we feel the risk would be offset due to the leveraging and compounding effect.

Don't forget that leveraging works on the downside as well as the upside.

silvercar

Silvercar - you say they use rates other than that quoted in the deal, do you happen to know what rates they do use?

I know Natwest use base+1.25, RBS use a minimum of 6%!

Does anyone know what happens if the rent does not meet the repayment do they:

Their underwriters will make a decision. If its only marginal or the feel you have "spare" salary they could say yes.

Is anyone aware of other items we can offest against any profit - e.g. solicitors fees, insurances, travelling expenses to the property?

All expenses necessarily incurred in the running of the "business" can count. It sounds as though your mortgage payments will cover the lot anyway!

Byrneand_2

Thanks again!

Clutton - Landlord association sounds the way to go. Thanks for the heads-up on that.


Jim B/Devils Advocate - I'll take my chance on 10-15 years being a suitable period of time to avoid any down-turn (obviously can't rule out all risk but looking at historic dips these seem to have lasted < 5 years) and so should hope that I wont need to sell during these periods - hence not really overstretching myself. As with all investments there is exposure to risk and so we all just need to make investments that we are comfortable with and can afford - There's no point bricking yourself everytime there's the possibility of a rate rise (obviously fingers crossed we'll keep that as low as possible!)

Silvercar - thanks for the information. I'll double check with my broker tomorrow, on the details of the offer.

clutton_2

certain expenses can only be claimed against capial gains tax when you sell a property and solicitors fees to purchase and sell the property are one of these.. i think that any "capital" expenses can also only be claimed on sale - such as major refurbishment.

Expenses such as mortgage interest payments; repairs; insurance; Professional body subscriptions fees (NLA etc); telephone; postage; accountants fees; advertising; CORGI landlord certificates; cleaning; mileage can all be offset against any profit you make on the rental - dont expect to make any profit in the first, or even second years !!

Try to find a good accountant who has his own portfolio of property, and who has at least a clutch of clients with property, as the Inland Revenue have concocted some fiendishly complex rules re expenses for property. It all depends on what type of property business you do. A good accountant can pay for himself in unpaid tax !!

Conrad

I am investment mad so invest in many different asset classes.
I owned 4 B2Ls until recently and enjoyed a reasonable yield, however my gut teold me it was time to get out of this asset class.

I reasoned that capital growth had been so strong in the last 10 years, for this to continue was highly unlikely and that we are nearing the end of the boom which meant over the next 5 to 10 years capital growth would slow to little more than inflation with the potential for a crash as a fair possibility.

The other factor for me was oversupply. Every other person I meet tells me they are getting into B2L, this is a warning sign for me.

I had 1 newbuild B2L and it was the worst investment I ever made. The problem is most of the property within the development came up for let all at once so yields went ridiculously low and prices actually dropped significantly 9oversupply).

Im glad Im out and now enjoying far better returns elsewhere (German and Moroccan property plus a UK commercial property etc).

clutton_2

Conrad, i absolutely agree with regard to buying new builds for BTL - every city in the UK has a glut of empty 2 bedroom new apartments with For Sale boards on them. Family homes are a much better bet for BTL