Buy To Rent | First Time Buyer - Tips...

mattw89

Hello Everyone,

To date I've been fairly astute with my finances but I'm first to admit I have no idea when it comes to mortgages and real estate, and so was hoping for some useful pointers and references to look up and read before I commit to my biggest financial burden...(or opportunity...).

Situtation:

21 Year Old Graduate. Currently working away with an income of 31k after tax. I am out of the country 8 months of the year, and so during those 2 months I am home, I still live with my mother, but she too works away so for instance in this two months we're only home together for a week, so I'm happy to stay living at home for the next 5 years.

I've also recently been offered a job tax free of 40-50k so in around 2 years I expect my income to be in that bracket, however I know things can change...

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My current recurring monthly outgoings is 0 pound. No phone bill, nothing. Just expenses for food and what not. For the 8 months of the year I am away, expenses are inclusive by my company. So from my 31k I take home, alot of it goes straight to the bank.

So I was thinking the best idea while it's a buyers market was to look at investing in to real estate.

But moving out and living somewhere would mean paying a mortgage on a property that is vacant for 8 months of the year. So wondered about getting a buy to let mortgage and having it managed by an agency (because I'll be away so much, unlikely to help easily)...

I'm so clueless though on all of this and it is such a big deal. So any advice, tips, websites, books worth a read so I can know more, or companies, people I should consider getting in touch with to look in more depth?

I was going to talk to a mortgage advisor next week from Nationwide who is friend of family, but as i say, I'm just clueless in this but I want the best for my money in the long term and make the most out of this salary while I live away. Because in 5-10 years I may have commitments such as wife/kids in which I'd want to find a job on home soil...

Any pointers would be fantastic, thank you guys. I'm also going to download Martins 40 page mortgage guide just for my reference. Do people think I am doing the right thing with buy to let, living at home is no issue for me personally although I'm sure it wouldnt be others forte.

Cheers MSE, once again.

Henry_P_Chester

How much research have you done into the Market you are planning on investing in?

Yorkie1

mattw89 wrote: »

I'm so clueless though on all of this and it is such a big deal. So any advice, tips, websites, books worth a read so I can know more, or companies, people I should consider getting in touch with to look in more depth?

Tessa Shepperton's book on renting out your house is generally advised to be a very useful book. I'm sure it's on Amazon if not in your local library.

dawyldthing

if it was me I would save up for the next couple of years putting your money into savings (4% of £30,000 would get you £1200 a year in interest), which isn't the same as what you would get on a buy to let, but you've got all the fees of solicitors and surveys, letting fees, if anything breaks in the house then you have to pay for it whereas the money could work for you and then you can buy when you want to and not have to worry that no-ones doing anything to the house.

Thats what I would do if it was me

hazyjo

Risky investment - what if the price of whatever you buy goes down? Will you need to release that money? Would the rent be massively more than the mortgage along with its interest? If not, I don't see the point as the actual house might be worth less when you come to sell.

It might not be a seller's market, but that doesn't necessarily make it a buyer's market either as prices still seem to be going down - with no guarantees they'll go up again any time soon.

I also think savings accounts would be your best bet. No expert, but it seems like a pointless gamble if you've got lots of spare cash every month. Save and maybe have the cash to buy something that's right for you when the time's right - or at least have the dosh to put down a hefty deposit.

If you were a cash buyer, it might change things slightly, but that would be an entirely different situation.

Jx

G_M

Start here. It's available in libraries free too, as are similar books.

Also landlordzone and tessa's website.

Doozergirl

I think if you want to be a landlord for the next 25 years and have a house paid for by someone else at the end then it's a consideration.

If you are looking for something to do with your money in the medium term until you choose ot buy your own place, I'd keep saving until you have the biggest deposit known to man and then buy your own place when you are ready. No manager is ever going to maintain your massive investment like you will and I suspect that even the lovliest BTL ends up being worth less in real terms after 5 years if it's been managed by an agent (who charges a lot but cares little).

The money for my house is the money for my house.

mattw89

Thanks for all the tips again guys, and once again, great advice here as per usual.

I agree it is a risky investment, although I just feel I want to get something tangible for my money. If I bought somewhere I liked and tried to rent it, then if it failed to make much money, I could live there myself.

If I was on this salary working at home I'd get a mortgage to buy a house. So the only thing different here I figure is, why not have someone contribute to the mortgage while I work away all these years, paying off equity in the process.

Although my actual fiscal returns may be low, I'd have had 5 years of reduced mortgage payments even if it wasnt full with a tenant the entire time. As for all the expenses with solicitors and so forth, I figured it'd make sense for me to do this now, while I have no commitments or outgoings. In 5 years time if I save and do this, then I may be having to pay my way, pay for family etc. whereas now I'm in a situation were I have a bigger cushion because i have no outgoings.

I may be wrong but I just felt real estate may be the better way to go for me as I thought now is the best time for me to start on the ladder especially if others can help me which wouldnt be the case in 5 years time. If in 5 years I left work and wanted to buy a different property I could sell, and perhaps lose on the initial value, but if I'd have had someone paying the majority of the mortgage etc...

These are all just ideas and pipedreams right now, and this is why I'm here posting this because you guys are making me reconsider and realise it's not as easy as buying, renting and making money. I just want to get the best investment while I can invest without any care in terms of no dependants or debts..

In terms of research if i go down the route I'll research areas and places. I figured at first I'd want to get a semi-detached house near say a school, looking for a small family or something...but this is why if there are resources out there to teach me this stuff, I'll be much more inclined to read it.

1200 a year on my savings for free sounds great. But in 5 years time I have a fair amount of free money, but on the flip side I think id prefer it having paid 5 years off a mortgage, particularly if I only contributed with all costs, say 40% of that sum.

I'm just speaking whats coming up in my head right now, I really need advice, such a big decision. It takes me about 4 months to decide what playstation bundle!!

More advice welcomed, thanks all again!

mattw89

Doozergirl wrote: »

I think if you want to be a landlord for the next 25 years and have a house paid for by someone else at the end then it's a consideration.

If you are looking for something to do with your money in the medium term until you choose ot buy your own place, I'd keep saving until you have the biggest deposit known to man and then buy your own place when you are ready. No manager is ever going to maintain your massive investment like you will and I suspect that even the lovliest BTL ends up being worth less in real terms after 5 years if it's been managed by an agent (who charges a lot but cares little).

The money for my house is the money for my house.

Ok thanks, that makes pefect sense to me. I guess right now the most deposit I could lump up would be 12k, so I guess the larger the deposit the better the mortgage etc.

I don't mind the idea of being a landlord for 25 years, but only if it would be realistic, i'd just need to know about the industry. In a couple of years I'm moving (80% likely), to a salary of 40-50k which would be working 2 months on 2 months off, so with my 6 months of a year I could try to integrate this real estate in to a kind of business idea or something, but it's all just pipedreams, too much grown up thoughts for me here

But what you say about deposit, and thinking of agent fees if going to sell after 5 years is completely logical and something I bypassed, therefore I guess if i'm doing managed (20% fees I hear), I'd need to be in it for the longhaul...

The only other option against just saving for the next 5 years is thinking for capital gains and just buying a place and living it in there myself for 5 years, hoping for it to just go up in value and that would gain more than the savings...??

hazyjo

Someone renting might be paying off your mortgage, but that includes the cost of actually having a mortgage (obtaining it, interest rates, etc). Plus BTL mortgages are generally more. If a mortgage was interest free, it might be different.

What's the point of paying off a debt, with interest, when you might as well be saving it? Yes, you'll have something tangible at the end, but if you save instead, you'll have a bigger amount than what you'd have if you bought a mortgage with it and paid that off.

Of course, if the house prices go shooting up, that would change and you could make far more than if that money was in the bank! Therein lies the gamble

I bought 4 years ago and am selling now for exactly the same price. Would I have made more putting say £600 in a bank/savings plan each month and making interest on it, or am I better off paying that off a mortgage and reducing it by around £8-10k (give or take) - plus the price of buying and selling (many thousand, especially if you include stamp duty!)? The former, I'd say, as the latter would be all my own money saved - at least £30k, probably. At the moment, I've paid a whole heap of money for the privilege of borrowing money that I've not made a penny on. But then I didn't buy as an investment, so I'm in a different position. Met hubby and buying a house together - much cheaper than we'd have been paying if the market was still sky high. As I like to say - all swings and roundabouts.

Circumstances change - you don't know when you'll meet someone or if you'll want to settle down, kids, etc. Just don't do it thinking it's a guaranteed money-maker. In this market, with no LL experience, it's risky and might be a millstone round your neck for many years. You just don't know...

Jx

Rainmaker_uk

I disagree with much of the advice you have been given.

If you research and find a discounted property it is a far better investment then putting your money in to a savings account at 3 or 4% interest. Bear in mind that RPI is circa 3 or 4% so you might actually lose money on that 'safe' option.

A more likely place that that might get you a better return is in an ISA - particually a stocks and shares ISA - this is a tax free wrapper and you should be using your ISA allowance ever year if you can.

On a property investment you have something tangiable that not only provides cash flow but also capital appreciation. It is worth noting that property has doubled in value every 7 - 10 years for the last 50 years. In addition to this there are tax deductions you can make on property including the interest of your mortgage.

You really are on the wrong forum to ask about investments as most people on here are not interested in that and will view your aspiration to be a landlord as something akin to stamping 666 on your forehead.

That said I would recommend 'Successful Property Letting' by David Lawrenson as essential no hype reading.

Good Luck