Buying a second property

Pennylane

We've paid off our mortgage and are interested in buying a small house probably to rent out and in the longer term it will go to one of our children.

I'm sure someone will say "there's no money to be made in property now" but I'd welcome any ideas/suggestions on going ahead. Thanks.

happybroker

if you buy well and look long term you stand a good chance of making money imho.

there are some bargains out there at the moment certainly but it is still possible to get this wrong and renting isn't as straight forward as some make out. research your area and also what type of tennant you are looking for in great detail.

Pennylane

Thanks Happybroker. Because it's only a small property it would really only suit 1 or 2 people. We have started looking at what houses are being rented out for here and got some surprises!

happybroker

I know what you mean, some of the rents where I live are quite amazing, there is a 1 bed "flat" above a post office locally going for more than a relation of mine gets for a quality 3 bed semi in an excellent area....the mind boggles.

To be fair though, once you factor in income tax, spells where the property is empty, insurance, refurb costs (which can be high if you don't have the right tennant) and agent fees if you use one the money isn't in the rental income but the growth in the capital value of the property.

The last single tennant I let a house to (it was a 4 bed house admittedly) left the place in a right state. I filled 3 x 17 yard skips with "stuff" when she left (you don't want to know what!) but doubled my money on the house itself when i sold it so all worth while, it's a talking point at parties too I suppose! If you go into this with the mind set that we don't get anything for nothing then it will help.

itsakidsworld

If it is done correct then property investing for the long term can still offer rewards. As you are looking at an investment with your childrens future in mind, make this a part of the criteria when looking. For example find a property which can provide excellent rental return and hopefully an annual yield but also one which you would be happy for your children to live in when they are ready. Then it will remove the need to sell a property for them to buy something that is suitable as yours will be ideal for them to refurbish.

Lots can go wrong and do without a doubt. However doing your homework on this issue before you start to invest and then doing your homework again prior to buying to cover your tracks should remove alot of the pitfalls.

The very best of luck with your idea and I love ideas like this where your childrens future are your target. As a family we followed this same principal many, many years ago and it has been very helpful to our children.

Pennylane

Thanks very much Itsakidsworld - it would be perfect for the child we have in mind. Well, young adult really, who will always need more help than the others. I would like to know that should anything happen to us, this house would be theirs.

Thrugelmir

As a guide I would recommend that you should aim for a rental yield of at least 10%.

Too many recent investors have been drawn in by an unsustainable rise in prices. So assume that capital gain in the future will provide a return alone.

VIGILANT22

Pennylane wrote: »

Thanks very much Itsakidsworld - it would be perfect for the child we have in mind. Well, young adult really, who will always need more help than the others. I would like to know that should anything happen to us, this house would be theirs.

More to this than buying a property...ensure you take the correct advice (financial & legal) re' estate & IHT planning.... up to date wills in place etc .good luck....:)

Pincher

Letting is a business, not stocks and shares that you just buy and sell. You have income and outgoings, and overheads during vacant periods. You have to be fully aware of the cash flow, nobody else will do it for you. Prices have stopped falling, so it's a good time to take a punt, which is why EVERYBODY is getting itching wallets.

Radiantsoul

Thrugelmir wrote: »

As a guide I would recommend that you should aim for a rental yield of at least 10%.

Too many recent investors have been drawn in by an unsustainable rise in prices. So assume that capital gain in the future will provide a return alone.

Whilst I agree around the risk of expecting capital gains to provide a return yields of 10% seem pretty high. There can't be very many properties offering that kind of return.

getmore4less

Radiantsoul wrote: »

Whilst I agree around the risk of expecting capital gains to provide a return yields of 10% seem pretty high. There can't be very many properties offering that kind of return.

But as a sustainable investment(without capital gains) it needs to be at this level.

Any investment lower than this start to involve more risk.


Long term property is a good investment(3-4 generations can become self housing never needing to worry about the boom/bust again) but speculating that a particular property might be of interest to a child in xx years time is another risk.

I suspect there is more involved here