Buy to let? Or put the money in the bank?

stilernin

Have sold own house and money is in the bank.

Considering buying one to let and a smaller than one sold for me to live in, both in a slightly cheaper region. Investment poperty could be kept for at least ten years if that is the right thing to do.

Have just had a survey done on one which is 100yrs old, (fell in love with it but know that I shouldn't have!!) and now realise that it may be more than I want to take on. The area is up and coming, was very run down and now the city is putting a lot of regeneration money into it. Hence prices are considerably higher than five years ago.

the survey talks of damp, 'unable to see the condition of some walls due to covering', cant' comment on many floors due to floor coverings (??), front paving will need lowering, and so on and so on. Lots of 'get builders to give report on' (what do you pay a surveyor for?) It all seems very daunting.

I know that surveyors must cover themselves but how do I know how much of this work will be really necessary?

And the million dollar question......... should I just buy a nice little house and a cat and put the rest in the bank?

Everyone's views and thoughts are welcome......... now I'll just go and put the kettle on and wait.........

dunstonh

should I just buy a nice little house and a cat and put the rest in the bank?

Talk about opposite extremes. What about all the various investment options available in between (and above)?

Investing is about spreading your money around the asset classes with an average risk that matches your risk profile. It isnt a case of sticking it in the bank and watch it fail to keep up with inflation or sticking all your money in a property and hope there is no property price crash. Just as sticking all of it on the UK stockmarket would be bad as well.

When looking for investment potential, does the UK residential buy to let market offer good potential at this time for the level of risk that you are taking. I would say not really. Especially when you consider that the rental yield is not likely to be much different to a bank account and then you have tax to consider.

stilernin

Hi, thanks, I didn't really mean stick it in the bank' literally, it was just shorthand for 'not Buy to Let'.

Sorry for misleading you.

I suppose in short, I mean who still thinks that Buy to Let is a good idea and what should I make of the survey?

abaxas

BTL is a business NOT an investment.

Please remember that a business is only as good as it's cashflow. Make sure you understand this and have sufficent cash reserves to be able to let at a loss, cover large rental voids, replace items stolen by tenants etc etc.

Get all the info before you proceed with any business ideas.

libitina_2

I agree with abaxus, do your research first. BTL these days is probably not the safest option imo.

dunstonh

stilernin wrote:

Hi, thanks, I didn't really mean stick it in the bank' literally, it was just shorthand for 'not Buy to Let'.

Sorry for misleading you.

I suppose in short, I mean who still thinks that Buy to Let is a good idea and what should I make of the survey?

Ok, what is the rental yield that you will be looking at? How much is your tax going to be? How much are you going to put aside for dead periods, maintenance and letting agent?

Is the potential profit worth the outlay and the risk?

Ad

I would forget 'Buy to let' only fools are entering that game now. Remember interests have now risen twice in three months and are expected to go up again in early next year. I think negative equity is a prospect for many that have brought recently. Look at what’s happening in the US.

stilernin

Thanks for your replies........ certainly given me something to think about.

Figures are house price £155000 (to be negotiated now survey received!) likely rent £9000 (conservative estimate). High demand in the area for rental accommodation.

Plan to pay cash......... live in it while it is sorted and I decide where to buy my own house (that cash also in the bank while I look)........... then get BTL mortgage on an amount that can be easlily covered by the rent, allowing for management, maintenance etc........... more interested in what my approx £55K investement will be in 10yrs plus.

The house is 1mile from a city centre with university, 50yds from large hosp and the area is being improved all the time.

After remortgaging the first house and buying my own smaller house, I will have £80K to invest.

Is it still a fair risk?

A_Nice_Englishman

Starting a property rental business is like starting up any other business. You need a business plan.

Do void periods, bad debts, repairs, redecoration, legal fees,insurance, agents fees, costs of evicting bad tenants, rises in interest rates to, say, 8% and possible falls in property values figure in your business plan?

Are you familiar with the 50 Acts of Parliament and 70 sets of regulations which may apply? Did you know you can be held responsible for the anti-social behaviour of your tenants?

Then you need to look at the taxation side. Any profit you make will be taxed at your highest rate of income tax and when you sell you will have to pay Capital Gains Tax if you make a profit, though there may be reliefs.

I decided I would be better off keeping the money in the bank. If you feel that property is still a good investment you may be better off buying a more expensive house to live in yourself. At least that would avoid the CGT problem.

bs0u0128

lol ive seen this so many times now do you have it on copy/paste? lol

A_Nice_Englishman wrote:

Starting a property rental business is like starting up any other business. You need a business plan.

Do void periods, bad debts, repairs, redecoration, legal fees,insurance, agents fees, costs of evicting bad tenants, rises in interest rates to, say, 8% and possible falls in property values figure in your business plan?

Are you familiar with the 50 Acts of Parliament and 70 sets of regulations which may apply? Did you know you can be held responsible for the anti-social behaviour of your tenants?

Then you need to look at the taxation side. Any profit you make will be taxed at your highest rate of income tax and when you sell you will have to pay Capital Gains Tax if you make a profit, though there may be reliefs.

I decided I would be better off keeping the money in the bank. If you feel that property is still a good investment you may be better off buying a more expensive house to live in yourself. At least that would avoid the CGT problem.

A_Nice_Englishman

bs0u0128 wrote:

lol ive seen this so many times now do you have it on copy/paste? lol

Yes I do lol

Well, I modify it a little to fit the particular thread.

I hope it will help potential BTL-ers decide whether this is a business they want to be in. Funnily enough I can't remember anyone coming back and saying "Yep, having looked into all that I've decided property rental is the business for me"!