Buy-to-Let before we've bought a house...

Clam_Abuse_2

Pure insanity or a shrewd investment?

I am currently renting with a view to buying when a decent deposit is made up. I am saving with the missus and we want kids in a few years. I earn 30k+ (self-employed) and she earns 26K with a 1K yearly bonus and a promotion in three years.

We travel a lot and spend a lot on rent and we have savings of around £8500. We are finding it hard to save for a deposit and by my calculations, it will be over a decade before we can afford a house.

We have found a two bedroom apartment in the city centre which I think I could rent recovering costs, maybe a little more. The idea being that in 5 years or so we could sell the property and use the rise in price towards a deposit for our own house.

Is this a good idea or the most ridiculous thing you've ever heard?

googler

Prices have dropped since 2006/7, so what makes you think they'll rise in the next 5 years?

Is your calculation of 'rental covering costs' based on the assumption that it's rented full-time, or with at least some allowance for 'void' periods?

Does this calculation make allowance for any unexpected maintenance, letting agent's costs, or - full redecoration and refurbishment after you've evicted the nightmare tenant?

Cannon_Fodder

If the rent, less the mortgage, was going to make you a hefty profit, to cushion you from potential house price drops, it might be worth investigating.

There is a strong likelihood of price drops through the rest of this year, and who knows when they will turn back upwards when the austerity measures start to have an effect...

Bear in mind that you will need a 25% deposit for buy-to-let. If you earmark £4k of your savings for fees and legal costs, that leaves £4,500 for the deposit.

So, the flat could cost upto £18,000. What does that buy in your part of the world ?

Why are you paying a lot in rent? If you think you will only cover your costs, if you were the landlord, something doesn't add up. Perhaps you need to research your market more.

How about being your own landlord, i.e. buy it, to live in it, yourself. A 90% mortgage would see you looking at lower fees, so £6k may be left for the deposit - what does £60k buy in your part of the world ?

If on £56k, you cannot save another £8.5k in the next year, you really need to stop and have a hard think about your hopes for a family home.

Get to £17k savings this time next year, and you could be in a reasonable £130-140k place...why would it take a decade ?

mynameisdave

If you are going to do it you sould be looking to BTL a property you are prepared to move into yourself, but if you only have 8k in savings then you're going to fall a long way off the minimum LTV most lenders want for BTL mortgages.

Alan2020

Clam_Abuse wrote: »

Pure insanity or a shrewd investment?

I am currently renting with a view to buying when a decent deposit is made up. I am saving with the missus and we want kids in a few years. I earn 30k+ (self-employed) and she earns 26K with a 1K yearly bonus and a promotion in three years.

We travel a lot and spend a lot on rent and we have savings of around £8500. We are finding it hard to save for a deposit and by my calculations, it will be over a decade before we can afford a house.

Sorry you both have a combined income of 57K and you can't save :rotfl:

Perhaps you will be better off keeping tight accounts and cutting down your outgoings. Say live in a flat, £800P/M and that way you can both save ~ 20K per year and in 2 years buy a house with a 40K deposit.

googler

If, by 'travel a lot' you mean you take lots of holidays, then the method for saving more of a deposit is clear - take less of them. And as previous poster says, review your outgoings in order to spend less.

I assumed you meant you travel a lot on business at first....