Buy to let advice please ?

sconieroany

Hi folks, I am looking to buy my first buy to let properties and would be grateful for a bit of advice, the property will have a re-payment of £450 pm over 20yrs with a mortgage from the "Morgage Express" peolple starting at a 5.49% 3yr fix, does this sound like a good deal to start with ?, the property will rent for £410 Pm, leaving me £40 out of my own pocket, I understand the rent is classed as taxable income on the capital part of the re-payment, so if £250 pm was towards this I would pay 20% tax on this = £50 pm, due by self assesment at the end of the financial year, is this correct ?

I had planned to take out a joint mortgage on the btl, but on reading articles online they advice putting the property in my wifes name as she has a small salary, incase my earnings take me into the 40% bracket ?

I will have to seek some accountant advice but I am unsure on costs for this service, any ideas on how much I will pay an accountant to sort out my tax bill ?

Thanks.

Conrad

Give it a lot of thought.

Many experienced property people, myself included have sold as returns from other arenas are much higher now.

You will make zero on the rent especially when you factor - in occasional costs such as repairs, rent voids, agents fees, insurance, lease maintenance, ground rent and accountants fees.
This is not a good return.
You are totally reliant on capital growth.

Most property since Spring 2004 to late 2005 didnt increase. Some has had about 5% growth since late 2005 but is now slowing. We have had a long boom and you are comming in at the highest price point, not good really.
Over the last 2 years my stockmarket based Unit Trust policies have grown about 60% (thats vastly more than property).

If you really want property then buy off - plan abroad. Many of us are making 20 - 30% per annum capital growth here and you only have to put down small deposits then sell just before the place is built (say 2 year delay). The idea is to sell the contract on and pocket all the profit whilst only having 'risked' a small deposit yourself.

Remember UK property fell every month in value from 1989 - 1995. Thats 6 long years. Im not saying it will happen now. I am saying it is not really a sensible investment until prices fall or rents increase a lot.
Over time the FTSE outperforms UK property.

Good luck and be wise to avoid the thikkie that says 'property only ever goes up'.

clutton_2

i would agree with a great deal of what Conrad said, but, i would advice extreme caution in buying overseas without a great deal of research. The uk property market is difficult enough to research, but the pressure put on newbies on "free overseas buying visits" is almost irrestistible. https://www.singingpig.co.uk has an overseas investments section, with some interesting tales to tell.

silvercar

IS there ever a good time for BTL? When I look back at the effort in selling my first flat and how much I could have gained by keeping it and renting it out.

I'm completing on my first BTL next week. Interest only mortgage with no redemption penalties at 5.39% from Natwest. BTL came about to keep my house chain in act so I got this mortgage so I can sort out another deal whenever I want.

The disadvantage of not putting ahouse in joint names is that when you sell you only have one capital gains allowance of £8,800 not two. Have a look at the forum on landlordzone.com for general BTL tax advice.

dunstonh

Buy to let with borrowing is a high risk transaction. This hasnt seemed to sink in with a lot of people who see the gravy train that passed by years ago and think its a good time to get on now.

Whilst experienced people in this field could still find opportunities in some areas with some properties, it is not something you should get into unless you are prepared to potentially lose a lot of money in the short to medium term. If you already have a mortgaged property as your main residence, then the risk includes you losing that as well.

You can find other ways to invest into property with lower risk. Commerical property funds are expected to return at least 8% p.a. over the next 3 years. Although they have been saying that for the last 3 years as well and provided 13-20% a year in that period. No guarantees but there isnt with buy to lets and property funds are much lower risk.

mystic_trev

I really don't know how many of these BTL Investors will be going to the wall if there's a House price correction, but It'll be several hundred thousand at least. When I went into the market (10 years ago) it was called Residential property Investment - I started getting concerned when the phrase BTL got coined.

Now I know many have made large gains and have well balanced and managed portfolios. Most who've joined the party in the last three years haven't. If (like many of these people) they are too highly geared, they will not only lose their "Investments" but their homes as well. I'm afraid I will have no synpathy for their plight. From Landlord to DSS tennant in one easy move - it's only a question of time.

BobProperty

sconieroany wrote:

....the property will have a re-payment of £450 pm over 20yrs with a mortgage from the "Morgage Express" peolple starting at a 5.49% 3yr fix, does this sound like a good deal to start with ?, the property will rent for £410 Pm, leaving me £40 out of my own pocket......

How come they are even offering you a mortagage which isn't covered by the rent?

Gorgeous_George

I don't think the OP should be looking at this at all.

All of an interest only mortgage or the interest element of a repayment mortgage can be offset against your tax liability.

I guess you are looking at a £65K to £66 mortgage which will give you an interest element of about £300. Is this the most that can be boprrowed against the property.

In 5 years time your outstanding mortgage will be only £50K with an interest element of about £230 and the fall off in the interest element of a repayment mortgage would drop more quickly after that.

Stick with a interest only mortgage for the BTL and make overpayments to your residential mortgage rather than paying off the BTL.

Best wishes whichever way you go.

GG

silvercar

If you already have a mortgaged property as your main residence, then the risk includes you losing that as well.

Talk about doom and gloom merchants! Who is going to risk their own home for a BTL. Short of cash, which mortgage do you pay first the BTL or your home? Need to sell, which do you sell the BTL or your home?

Basic common sense says your first priority is the mortgage payments on your home. Always take your BTL mortgage with a different company to your main mortgage. Always make sure that the bills on your own home are paid up.

Ems*Honie

I have a buy to let, I am a long way away from being an expert, but I have to agree with another poster who has questioned a bank giving you a mortgage that is not covered by the rent. How much have you researched this?

AndrewSmith

Having previously owned a number of Buy to Lets I can tell you this:

If the rent doesn't cover the mortgage then there is a clear message there for you.

You are unlikely to see a substantial appreciation in the property value over the short term.

If it is going to cost you money then what is the point? You may as well give the £40 per month to charity and saveyourself the hassle of having a property sat empty waiting for tennants costing you money, and the inevitable re-decorating and cleaning when tennants move out.

Andy