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Looking to buy to let

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I am looking to purchase a 2 bedroom flat for 40,000, i currently have a 10,000 deposit for the property. I am looking to buy now as I don't want to be priced out of the property market. Lucky I live in the North East were prices are not as high, but are contunuing to rise.

I don't want to live in the flat just yet, I was thinking I could purchase the flat and let it out for a year or two, or I could even leave it as an investent and continue to let it out and maybe purchasing another property for me depending on the developemment of my career.

I am new to the property game, I was wondering as im buying to let originaly, do I have to get a buy to let mortgage or if not could I get one of the various mortgages on offer. I would probably like one were I could pay it of quickly with no penalties.

Also what fees would I be looking at paying, I assume I don't need to pay tax as the property is below 60,000.

Thanks for any help

Comments

  • lisyloo
    lisyloo Posts: 30,077 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Here's a post from an experienced landlord. Hope it helps.

    http://boards.fool.co.uk/Message.asp?mid=9134668

    We often get people on this board asking for basic advice about investing in property (not surprising given the board function).

    Unfortunately, especially in recent times, the advice is usually “don't”, and it may come across as pretty negative, and perhaps somewhat suspicious, as this board is populated (in large part) by property investors! Are we just trying to exclude newbies to keep the rental market to ourselves? Do we want to prevent anyone else from making money out of property as we have done?

    What may be helpful is to provide a self-analysis framework that will help new “would-be” investors have a PROPER look at the economics, rather than just looking at top line rents vs mortgage, and reckoning they can make up £100 pcm shortfall while prices rise. Perhaps we can use it as a precursor to discussion in much the same way as an SOA is the precursor for discussion on DWD board, and so that when we say “Total acquisition costs” everybody knows what we mean by that.

    My first draft is below. I would welcome input and changes to it, so that we can put an approved version in a single post, perhaps linked to FAQ. This version IS NOT RIGHT OR COMPLETE: it is just “off the top of my head” to get the discussions started. In particular, please give your point of view on maintenance costs, furniture and fixture replacement cycles, and provision for voids.

    Investment Property Income & Expenditure analysis

    Acquisition costs:
    Purchase price
    Stamp duty
    Mortgage arrangement fees
    Legal fees
    Survey cost
    Refurbishment cost
    Furnishing & carpets cost
    Initial void (loss of rent) prior to first let
    Total Acquisition costs:

    Gross rent:

    Running costs:
    Provision for voids (1)
    Managing Agent fees (or notional cost if self-managing) (2)
    Maintenance & repair allowance (3)
    Insurance
    Gas service / safety check
    Ground rent
    Service charges
    Gardening or other services provided
    Provision for refurbishment at relet (4)
    Provision for replacement of furniture (5)
    Mortgage interest (6)
    Lost interest on deposit (7)
    Total running costs:

    Notes
    (1) Voids vary widely by area, and also depend on whether you are using an agent or not. Unless you have specific experience to give you a hard figure, allow at least 6 weeks per year
    (2) Property NEEDS managing. Either you pay someone to do it, or you will have to do it yourself. Even if you plan to do it yourself, you should budget an amount for your time and effort, as no-one should have to do this for free.
    (3) Will vary hugely dependent on age / type / condition of property & what is the responsibility of any freeholder (covered by any Leaseholder service charges). In absence of a better figure, allow 0.5% of acquisition costs pa for low maintenance, 1% for older, higher maintenance property.
    (4) You should expect to have to spend money at each relet to keep it up to standard, and offset effects of normal wear & tear. Allow for complete redecoration every 3 to 5 years, new kitchen & bathroom every 10 years
    (5) Furniture will not last for ever! As a rough replacement cycle, expect to have to renew: Carpets & soft furnishings every 5 years, sofas etc every 7 years, beds every 3 years, electrical appliances every 5 years, wardrobes, tables etc every 10 years.
    (6) Exclude capital repayments
    (7) Amount, before tax, you would have earned on amount of Total Acquisitions costs less mortgage advance, if invested in a high interest account.
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