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

clutton_2

on those figures with a rental of £9000pa i would only pay £135k for a property to get a decent yield and to get 30% more rent than mortgage, calculating @ 6% interests rate.

bs0u0128

lol no i bet not, its a very helpful post

A_Nice_Englishman wrote:

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"!

BobProperty

clutton wrote:

on those figures with a rental of £9000pa i would only pay £135k for a property to get a decent yield and to get 30% more rent than mortgage, calculating @ 6% interests rate.

On those figures with a rental of £9000pa i would only pay £60k for a property to get a decent yield.....

which is one of several reasons why I am not buying any property at present.
If I were to post figures on here saying I've found a Fish and Chip shop which grosses £1200 per week and I propose paying £1,000,000 for it, do you think everyone will think it's a great idea? (after you've all stopped laughing)
To save you working it out, that's a 5.8% return too. (like 9k on 155k)

dunstonh

As has been commented, the rental yield is too low to make this a decent investment. A common problem at this time in the UK market.

clutton_2

my figures - maybe i did not explain them properly in my haste - £135k is the MOST a lender will lend you @ 85% loan to value borrowings - and yes, this is a modest yield, but the 30% coverage at least makes sure that overheads are normally covered. most of my properties i bought on a 45% coverage some years back. i also have not bought a BTL since May of last year - house prices have gone up, but, rents have not followed suit.

bobsa1

I know that current advice on this site is that people should not get into BTL at the moment however I do think that there are still some areas in the country and types of property that are a reasonable BTL investment.

I bought a HMO BTL in June for £200,000. It is now worth £295,000 (it was run down and I spent approx £20K on it) I get a 15% return on my investment and due to regeneration in the area property prices are likely to remain stable if they do not rise.

I think homework and a business plan is vital and I would add that I can't count the number of times people have said "I fancy getting into BTL it looks like easy money" which it certainly isn't!

clutton_2

i think the yields on HMO are a lot better than on small family homes, but, surely much more management time since the new regs came in ? and more voids ? hassle ? repairs ? - although, i suspect if you get the right tenant client group this may not necessarily be the case.

bobsa1

Clutton, yes it is more difficult to manage but voids etc are about the same. Client group plays a big part as you rightly state.

We are in the process of negotiating another HMO BTL property as these are the only type that stack up for the yields we are looking for.

We self manage (housing prof. by trade) so this reduces costs and probably accounts for minimal problems.

clutton_2

nothing would induce me to buy a student HMO, but young professionals possibly - or even mental health hostel type HMO with one tenant acting as in-house manager.

Jim_B_3

Don't you chaps read the papers? If you buy a house worth 100000 now, it'll be worth a million next week. You'd be a fool not to subsidise your tenants!