Should we buy a second house to rent out?

real1314

realwildone wrote:

Apart from the fact I find this morally wrong. When there is a correction you will get hit twice. I agree with the previous poster. If you got a bad tenant or voids, how will you manage.

When house prices increase, they'll get a bigger boost! This is the only true way to win in the house price gamble, as having just one home means that you can't really release the "money" you've made.
As for the morality of it, it's just like any other form of market. Is owning shares in Tesco immoral because people have to pay a price on food that includes profit?

Debt_Free_Chick

real1314 wrote:

When house prices increase, they'll get a bigger boost!

IF ..... IF houses prices increase - there's no guarantee of that. And what if they fall?

What if interest rates increase and the rent doesn't cover the mortgage?

Debt_Free_Chick

Bren wrote:

I would like some advice please...we own a house which is worth £450,000 and have a £130,000 mortgage. We are considering buying a second property for approx £170,000 to rent out for investments purposes.

What rent could you expect on the property? 5% of the purchase price is pretty good these days, but not a great return. And remember, as a landlord, you have all the costs of maintenance to pay for - where would the money come from? Would the property be "ready to let" or would you have to redecorate, improve or refurbish? Where would the money come from?

We have virtually no savings at present and therefore no cushion if things go wrong.

Even without the financial costs of being a landlord, this is a very precarious position to be in. How do you manage emergencies? What if one of you lost your job? With rising utility costs and the prospects of higher mortgage repayments, are you sure can manage now even without a second property?

Are we being foolish to consider buying a second property

Possibly - at the very least, I think you are financially unprepared for life's surprises and your priority should be to have sufficient savings to enable you to pay all your bills for 3-6 months, in case you have no income. This will also provide a cushion for other emergencies.

or is this the wise way to make money in the long term?

Personally, I'm not convinced. If property prices increase over the long term (10 years +), then you will realise a tidy profit over the purchase price. Before then, though, you will have all the costs of maintaining a second property. And you have to account for "voids" (periods when you have no tenants), bad tenants who do a runner or damage the property/furniture/fittings .. and you have to remember the sheer pain of keeping all the relevant records so you can do your tax return.

IMHO, investing in property is pretty much a full-time job. You certainly can't "buy it, let it and then forget it".

At the very least ... you need to do much more research.

HTH

Sapphire

Bren wrote:

We have virtually no savings at present and therefore no cushion if things go wrong. Are we being foolish to consider buying a second property or is this the wise way to make money in the long term?

I would say yes, it would be foolish to buy a second property if you have no savings, particularly given that the housing market is at an all-time peak and liable (I believe) to crash in the not too distant future. At the very least you need to ensure that:

a. You can continue paying off the mortgage on your existing property when BoE interest rates go up.

b. Make enough of a return to ensure that your rental income would cover the payments on your second mortgage (and rental incomes could come down should property prices fall).

I would say that you should never gamble more than you can afford to lose.