New to buy to let

Hughesy84 · 3 February 2011 at 2:36PM

Ok quick questions which anyone into buy to let will know the answer of.

Are buy to let mortgages just the same as any other mortgage?
I have my eye on 4 properties and can afford the 20% deposit for each…to get a 5% APR mortgage.....so will it be easy for me to get a mortgage on each if I do it as buy to let?
Also what happens with Rent which I take for the 4 properties?

Just an example to help me get my head around it:

Example - Monthly Rental income = £2,025
Example - Monthly Mortgage payments = £1995

Would I have to pay tax on the income or could I offset the cost of the mortgage against the earnings??

I also have an annual salary of £28k – incase it relates to the higher tax bands etc.

Cheers for the help :beer:

G_M · 3 February 2011 at 2:41PM

Not worth answering your specific questions as you clearly have a LOT to learn about BTL. Much more than you are asking. So:

Read this post and ALL the links within it. You'll find the answers to what you want to know, as well as the answers to all the things you do not yet know you need to know!

BitterAndTwisted · 3 February 2011 at 2:53PM

On a salary of only £28k I wouldn't have thought that it would warrant all of the risks you might be taking. If you owned a property worth a quarter of a million or more outright it might be a different story. Why four properties and not one?

CloudCuckooLand · 3 February 2011 at 2:55PM

BTL are not the same as normal mortgages. That's why they are called "BTL mortgages"...

Have you found any 80% BTL deals ? Don't keep them to yourself...

Your business plan will need to cover a lot more than the unknowns you don't know yet...

Hughesy84 · 3 February 2011 at 3:29PM

BitterAndTwisted wrote: »

On a salary of only £28k I wouldn't have thought that it would warrant all of the risks you might be taking. If you owned a property worth a quarter of a million or more outright it might be a different story. Why four properties and not one?

Well thats my salary (property would be in my name) - also partners salary.

After all bills we have around £2300 a month free - after EVERYTHING - food, petrol, insurance, phone bills & essential bills etc.

Why 4 and not 1? Well because I couldn’t earn as much rent on 1.
The properties are relatively low value (£50-80k each)…

I also have the money to either buy say 2 - with no mortgage or buy 4 with mortgages and buy paying off 20-30% as a desposit on each...

G_M - Thanks for the info - iv read the HRMC Tax stuff before but its still not clear to me

.....Just answer this if you can - IF i earn £2000 a month in rent, and pay £1900 a month in mortgages - what can I offset?? Is it only the interest part of the mortgage which is being repaid, or all?
CCL - Think the 80% mortgage was with Yorkshire bank...found it on 'moneyfacts'.

Conrad · 3 February 2011 at 3:38PM

Only interest can be offset against income tax.

80% B2L mortgages are difficult to get as the rent does not usualy cover the mortgage by the amount sufficient for the lender. Bare in mind lenders surveyors will assume the rent to be at the conservative end of things.

Enjoy the inheritance but don't go around in say 20 years time as if you are some uber skilful investor - as inheritance is just a matter of luck.

CloudCuckooLand · 3 February 2011 at 3:49PM

http://www.ybonline.co.uk/personal/mortgages/all-our-mortgages/buy-to-let-mortgages/

6.19% on an 80% LTV, will dent your profit expectations...those "screen-wiping" sites are not always accurate. Double-check before you commit.

Can you reliably get £500 a month on a £50-£80k property?

Somewhere that property is so cheap, indicates a lack of demand. That it hasn't already been snapped up by professional landlords, could indicate a lack of reliable rental demand.

G_M's right, you need to read that thread and the links...

mlz1413 · 3 February 2011 at 4:27PM

Hughesy84 wrote: »

Ok quick questions which anyone into buy to let will know the answer of.
Are buy to let mortgages just the same as any other mortgage? NO

I have my eye on 4 properties and can afford the 20% deposit But you clearly don't have an offer in princple

for each…to get a 5% APR mortgage Rates will go up

.....so will it be easy for me to get a mortgage on each if I do it as buy to let? Go and see a mortgage advisor

Also what happens with Rent which I take for the 4 properties? you pay the bills and keep the properties in good condition so you keep your tenants

Just an example to help me get my head around it:
Example - Monthly Rental income = £2,025

Example - Monthly Mortgage payments = £1995
this example clearly shows you don't have the 125-130% rental income to mortgage interest needed
Would I have to pay tax on the income or could I offset the cost of the mortgage against the earnings??

depends on if you have used your personal allowance for the year but on this example your have made a profit of £30pa so yes tax will be payable at the approriate rate.

I also have an annual salary of £28k – incase it relates to the higher tax bands etc.

Cheers for the help :beer:

You clearly have not understood the HMRC 'stuff' even if you have read it. Which is very worrying as you need to understand all of that and more.

G_M's points are VERY valid if you wish to enter into this business venture.

Hughesy84 · 3 February 2011 at 6:08PM

Conrad wrote: »

Enjoy the inheritance but don't go around in say 20 years time as if you are some uber skilful investor - as inheritance is just a matter of luck.

What you on about pal? :j
Nobody said anything about inheritance

CCL - Seriously on the £70-80k properties I can get around the £500 mark, easily.

Iv seen some properties which I could pick up for £55-65k that would fetch in £425-£450 a month.

Ok thanks for all advice, feel free to keep adding extra stuff....dont worry I wont jump into it all without reading everything up....this is just 1 option - the other is shares. :eek:

Hughesy84 · 3 February 2011 at 6:11PM

The other option is a property iv seen - WAY below market value due to repossession, its up for just £100k and the houses around it (same size, set-up etc) are all worth £220k+.

I could probably rent that one out for £750-800 a month....but not sure if that £100k is better in a house earning that sort of rent...or in a savings account or in shares?

theartfullodger · 3 February 2011 at 6:22PM

Hughesy dear....

So, let me get this right, you're planning to buy 4 properties @ £50-80k each (call it £260k total..) but have no understanding of the business, the rules, the tax regime etc etc etc etc...

A thought, a bit radical I know, but how about doing some serious research, read a few books, surf over several LL/T websites, go to a few seminars (beware the snake-oil crooks offering the earth...), join a LL association, get trained/accredited and, after a couple of months think about the question again....

That way you'll also know if interest rates went up from the ALL TIME EVER low of 0.5%: Remember Thatcher?? Within 1 year of her getting power Interest rates hit 17%... and stayed about 10% for some 10 years... Would your business plan cope with that?? (Silly me: £5 says you don't have a business plan...)

New to buy to let

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