Buy to let - advice please

sue_balu

Is a 2 bed terraced house for sale at £80k with a tenant (on an assured shorthold tenancy - unfurnished) paying £400 per month rent, a good investment? Its in a medium sized market town in the West Midlands.

andyyorks

That would be a 5% return on your investment each year even if it was let all year round. There are other forms of investment that are doing better than this at the minute.

There will be times when it is not let and there will be maintenence costs, it has just cost me £500 to put a new bathroom in my rental property. Does the £400 a month rent more than cover the mortgage repayments (if you need a mortgage to buy the property)?

Be careful with the existing tenant as you have not checked references for them etc. Are they paying the rent themselves or are they on housing benefit? If they are on housing benefit then you will get paid regularly but if they then get a job you may find the rent dries up a bit.

My view is that a BTL is a good very long term investment as part of a diversified portfolio. I looked at getting a second property last year and it wouldn't quite be worthwhile, it would just about break even and if anything went wrong I'd be losing money plus going to a lot of effort to do it. I'm waiting for a housing market crash to get another which may be a few years yet.

It also depends on what is happening to house prices in the area too and your view of what will happen to them in the future.

Hope this helps, sorry for the ramblings!

Andy

mystic_trev

I wouldn't touch BTL at the moment. They're a number of us on this forum, who've either disposed (or are in the process of) our portfolio's. You would be buying at (or near) the top of the market!

All IMVHO

amboy

and maybe also a number of us who are looking at expanding our portfolios as a lot are disposing due to recent legislation etc

mystic_trev

amboy wrote:

and maybe also a number of us who are looking at expanding our portfolios as a lot are disposing due to recent legislation etc

Sure- But the OP's not buying a HMO

Dead_Eye_Jones

tbh if your only point of research is a 4 line post here then Id stay well clear. I think theres a widely held myth that somehow property investment is 'easy', you just buy it and the money comes rolling in. If you do go for it use the points above as a starting point and really do your homework if you dont want to get stung.

Good luck!

BobProperty

amboy wrote:

and maybe also a number of us who are looking at expanding our portfolios as a lot are disposing due to recent legislation etc

In answer to the OP I don't think the return is good enough. I have said that every time the question has been asked on here except once.
amboy what return are you getting on the properties you are buying now?

lynzpower

The thing Id be wondering is if the property is tenanted and its "making" money, then why would the seller be selling? Of course there could be scores of reasons, but its a question Id ponder

Conrad

amboy wrote:

and maybe also a number of us who are looking at expanding our portfolios as a lot are disposing due to recent legislation etc

The only LLs I know buying are the relatively inexperienced and dare I say 'head in the sanders'.

A old time multimillionaire LL I know well is selling stock. Like me the real estate he is investing in is abroad where the returns add - up. His most recent aquisitions are £30 - £50000 condos in Thailand. He gets year round rent yields of c10% and capital growth is massively outstripping the tired old UK and Spainish markets.

There's an old saying amongst serious investors; 'leave the last bit of profit to the last mug in the queue'.

PoorDave

sue_balu wrote:

Is a 2 bed terraced house for sale at £80k with a tenant (on an assured shorthold tenancy - unfurnished) paying £400 per month rent, a good investment? Its in a medium sized market town in the West Midlands.

My question would be "is this level of rent reasonable, given the market conditions?"

I mean, is it currently being let for £400, when you could get £450 or £500pcm for it. Might make a difference. When i rented my landlord seemed to always be at least one rent increase behind everyone else (that's why i rented from him). Having said that, he never had trouble letting the place.

The property in question cost him 56k in 2000, and would now be worth around 105k, so he's done ok out of it so far

BobProperty

PoorDave wrote:

.....The property in question cost him 56k in 2000, and would now be worth around 105k, so he's done ok out of it so far

This is the point that most recent BTLers seem to miss. If he's still only getting, let's say, £400 pcm, he's better off selling the house and putting the money in the bank.