Buying a second property

getmore4less

Pennylane wrote: »

Like what getmore4less??

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.

Looks like this is not just a business investment, that changes the return requirements.

SuzieSue

Jonbvn wrote: »

To precis the above, BTL may not be be a good investment at the moment.

I have considered it recently, but none of the properties I have looked at give a yield of even close to 5%. Why bother when I can get this from a fixed rate BS account with no hassle? BTW, just relying on capital appreciation is surely not a viable business model.

And the hassle is an important point - we have two very different BLT properties - one which was planned - a 2 bedroom purpose built flat in a smart area and one unplanned - a 3/4 bedroom town house in a less salubrious area which was the only house my OH could afford when he fell on hardtimes a few years before he got divorced and which he was unable to sell.

The flat is relatively easy to manage and to let out but there is usually something to do (the electric shower stops working or the tenant decides to move out, or the boiler needs to be serviced).

The house is a complete nightmare to let and manage (we spent around £5,000 clearing and doing the house up after our last tenants and they didn't even deliberately trash the place - they were just mucky and had a dog which urinated everywhere).

Something that we have learnt to our cost - you should prepare a folder for the tenants with information on how things work (heating, cooker etc), and dos and don'ts such as not pouring fat down the sink etc.

Also, it is very important to visit the property regularly - it is amazing how many landlords are happy to leave the tenants to their own devices as long as the rent is paid each month. We were also guilty of this with our last tenants in our house and learnt our lesson the hard way. However it could have been a lot worse - I am sure that you have heard stories of cannabis plants being grown throughout the house and this actually happened to a friend's sister. It is common for the gangs to use a respectable family to meet the landlord and then pay someone to grown the cannabis.

The OP seems to be in a very good position as they have paid of the mortgage on their main house, so shouldn't need to worry about void periods too much as they can probably cope financially.

Thrugelmir

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.

Then sit and wait. As with any investment class there's a time to avoid investing, even banking profits instead.. Thats why the BTL boom frothed over, just like the Dot Com share boom. People are investing who don't understand the market, they are gambling. For every winner (seller)there's a loser (buyer).

56cheffy

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.

Excuse my ignorance, but what do you mean when you say '10% rental yield'

10% of the purchase price!

EXAMPLE:

If I buy a house/flat for £50k..borrow £37500....put a 25% deposit of £12500.. I would have to let it for approx £425 pcm to achieve 10%.....Correct?

getmore4less

56cheffy wrote: »

Excuse my ignorance, but what do you mean when you say '10% rental yield'

10% of the purchase price!

EXAMPLE:

If I buy a house/flat for £50k..borrow £37500....put a 25% deposit of £12500.. I would have to let it for approx £425 pcm to achieve 10%.....Correct?

Gross yield of 10% on total purchase costs.

£50k, £5kpy or £417pm.

Net yield after costs will be much lower.

Pincher

In any given location, have a look at the asking price for one type of property: for sale and for rent. Divide. Your eyes light up when that number goes above 5%.

The cost of stamp duty, solicitor's fees, ad infinitum are the same for your budget range, so you don't need to think about it every time.

Pennylane

Thanks very much to one and all! DH has done some sums, we've looked at rental prices and spoken to a few people who already rent and we are going to put an offer in. The property is very well decorated, double-glazed etc and there will be very little upkeep. Going to grab the bull by the horns with our offer and see what happens. We are not desperate to buy but we're hoping they're desperate to sell! Thanks again, will keep you informed how it goes.

shane42

good luck pennylane

iam just wondering, as you have paid of your mortgage on your principle home, does your mortgage for this 2nd house have to be a buy to let or is it a normal mortgage?

thank you

Pennylane

Our second offer has been accepted.:j We had to go up just a bit more than our original offer. They've also agreed to leave all carpets, curtains and blinds. We're very happy with the price because there are a couple of similarhouses for sale for what we've paid - without double glazing, with smaller gardens and ours has a really nice conservatory.

Thrugelmir

Pennylane wrote: »

Our second offer has been accepted.:j We had to go up just a bit more than our original offer. They've also agreed to leave all carpets, curtains and blinds. We're very happy with the price because there are a couple of similarhouses for sale for what we've paid - without double glazing, with smaller gardens and ours has a really nice conservatory.

Remember you are letting this out. Not living in it.

While a conservatory is a nice feature how much extra rent does it yield?