Newbie - Buy to let

kingjimbob

Basically,

I have been offered a house for (from family member) 70K which is worth at least 110,000 with a 15K investment required (increase lease hold to 100 years + basic new kitchen etc. - 3 houses on same block have sold for around this)

if i can get a mortgage for 90 to cover costs + buffer and looked at renting it.

Now ive worked out (or a friend has for me) that... if im borrowing 90K (no deposit) then the repayments will be approx 400 a month (at a interest of 5.3%)

quick quote by letting agents, they will be able to rent the property for £550pm taking 8%... so i work that out me being left with approx £500 a month left over. around £100 profit?!

does this seem like a good idea to you? or like me.. really risky for a small profit.... what worries me is that even though its going through an agents... what if they dont fill it for 3 months on end.. yes i would have a buffer to cover the payments but i would see it as wasted money.

Then the other side is... i could always sell it 6 months/12months down the line.... but always the possibilty that i would just break even?

Sorry to be vauge its just that i am very new to all this, only know the very basics. I cant work out if its worth the risk or not?

UK007BullDog

At this particular time most BTL investors look long term. For short term gain most hope the property market continues to grow as that is where the money is, not so much the rents. The rents are there at this time to cover the costs.

You also have to think about having spare money for any repairs coming your way. Paying the management fee, void periods (no rent). Landlords Building (& contents if rented furnished) insurance if freehold......

Then once you sell you have to pay the Government 40% Capital Gains tax on the profit you made.

For that you might need to pay an accountant to offset your expenses (losses) against your gains to pay less tax. So you also need to figure in the accountants fees. Unless you are an accountant yourself or willing to read up and do it yourself.

Only you can make this decision.