FTB - Buy to Let?

oyohbb

Hi everyone,

I have been reading this forum for ages but this is the first time I've had the guts to make a post so be gentle! I am looking to buy a flat to live in but I have a minimal deposit at the moment. Where I live (North London) housing is expensive (2 bed flat 200k+). I have salary of £35k but no deposit so I was thinking of buying a cheaper house (for maybe £130k) out of the area and renting it out for a couple of years and then buying. In 2008 I have some share schemes maturing which are worth about £20k, and I will be saving in the mean time.

I know that most of these sorts of posts get replys like BTL is not an easy option, you probably won't make any money and that house prices are going to drop. I do understand these points but if I get on the property ladder then at least its a start. I can afford to pay the mortgage for that sort of price pretty easily anyway but if I get tenants its a bonus isn't it. Or am I just a typical FTB who thinks that its an easy thing to do whereas its a lot of hard work and not worth the hassle?? I have found 3 bed houses near my sister's uni for around £130-140k and finding students to live there should be pretty easy.

Thanks for all your help.

vishpatel

It's an investment choice, and a fairly demanding one at that. What do you expect to get from the investment in 3,5,10 or 25 years time? What is the risk vs reward? Risk is quite high at this point in time IMO. Interest rates have bottomed and are likely to be in an upward cycle from now on. This means that all the cheap money that has been pouring into property will dry up, and start to leave.

I'm a wanna FTB myself, and I just don't understand why people want to walk before they can crawl. I considered BTL'ing before buying my own for about a second before I came to my senses.

I've built up deposit funds which I've decided to invest elsewhere for the meantime. Property at these prices is a no no for me, to live in or as an investment. I expect some sectors to vastly outperform property over the next few years. In fact builders stocks are beggining to crack quite convincingly now. This is an indicator of whats to come with regards to property prices IMO.

Good luck - maybe we can compare where we are in 3 years time?

MissMotivation

You need to get some independant financial advice as the majority of BTL mortgages require a minimum deposit of 15%. You also need to take into consideraton, letting fees, void periods, non-payment of rent, bad tenants, repairs, maintenance etc. BTL is not the easier option IMO

F_T_Buyer

Welcome.

Why would you want your own home, but not to live in. If you are getting a BTL it is an investment, and hence you would expect investment replies which you said you don't want?

So what do you really want? Do you feel you *should* buy because of pressure in society?

And what is this 'property ladder' you speak of? How would it differ to you saving?

I think this is a confusing post, and you are probably not alone. Unfortunately you are (well, I assume you are) in the losing generation - the ones in their 20s or below, who are priced out of home ownership in this country.

The best thing you can do is educate yourself about economics, society, policitcs and what's generally going on in this country. Soon you will come to realise what this governments policies are, and how to avoid the fallout when it comes.

dunstonh

You have obviously read up on it but we can only repeat the same

rental yields are low.
you should be prepared for a price drop of 30% (may not happen but certainly possible)
you should be prepared for mortgage to increase by 50-75% over current level
you should be prepared for an increasing liability and increased requirements over time
You should be prepared for Gordon Brown to increase taxation on BTLs

stphnstevey

Whether you buy a BTL or your first home, as long as you buy something! Renting is a dead end and despite those people who go around saying the "sky is going to fall on our heads" (or the property market is going to bust), as long as your in it for the long term, you won't go far wrong.

Property market goes down = buy more
Property market goes up = sell more
Renting = paying someone elses fortune

stphnstevey

BobProperty wrote:

Unless interest rates go up and you can't rent it and / or you can't afford to subsidise the mortgage.

Look how easy this property business is:
http://www.leabeven.com/property.htm
just read down to the bottom of the first para.

Fix the rate if your worried and/or can't afford the rise

I presume the point in your link is reposession? Is this biography you?

BobProperty

stphnstevey wrote:

Fix the rate if your worried and/or can't afford the rise

I presume the point in your link is reposession? Is this biography you?

I think that she is Lady Lea. Given that I am called Bob - no. From what she said it looks like she did a number of "no money" deals that didn't quite go right. I just used it as an example I came across. I'm sure she would explain what happend (all I need to do now is remember which site forum she's on :embarasse )

Getting a long term BTL fixed might be a problem.
I have no qualms over people getting into BTL. I am concerned that at present I have yet to see a property with a yield that I would accept, but people are buying stuff with gross yields of 5% and thinking they are onto an easy winner. I'm often thinking of the people who bought the last tranche of BP shares when the government sold its holdings. It was a "good idea" because everyone was making money on share privatisations. (Except them, the market crashed between share offer document and application deadline, but they still bought because it was a "good idea".)

F_T_Buyer

stphnstevey wrote:

Whether you buy a BTL or your first home, as long as you buy something! Renting is a dead end and despite those people who go around saying the "sky is going to fall on our heads" (or the property market is going to bust), as long as your in it for the long term, you won't go far wrong.

Property market goes down = buy more
Property market goes up = sell more
Renting = paying someone elses fortune

Some posts on this website make me laugh so much, I cry.

If the sky is going to fall on our heads, what's the harm in getting an umbrella? if someone wants to lend me an umbrella for 1p a month, who's the fool?

Tassotti

I'm going to start investing in umbrellas and rent them out on a monthly basis

oyohbb

Thanks for the replies, to be honest I'm not doing this in particular to make a profit but more just to get started. I have taken interest rate rises into account and the rental money will be a bonus not essential to pay the mortgage.....

But I do see the points you are all making.