Buy to let and continue renting?

MarcusAurelius

Hi, am renting, and still a touch short of the 25% deposit on the "entry-level dream property".

Now, have a good BTL opportunity nearby, which would be good for commuters, and can create some additional cashflow, and, potentially, capital appreciation.

The question I'm asking myself is should I lock up a part of the valuable initial deposit capital in the BTL property now, or keep waiting for the moment when I have those magic 25% plus stamp duty plus a bit extra?

Thanks.

Werdnal

Do you fully understand all the legal requirements and responsibilities of becoming a Landlord?

Do you have a contingency fund for covering voids in the let, damage/repairs/maintenance obligations, tenants who default on rent (which you will be depending on to cover your BTL mortgage) or will not leave when you want them to, so you need to go to court to legally evict them?

In your position, I'd continue with the plan to buy a property of your own, and leave any BTL opportunity until later in life when you have some "disposable" capital that you might be able to invest in a 2nd property.

MarcusAurelius

Werdnal wrote: »

Do you fully understand all the legal requirements and responsibilities of becoming a Landlord?

No, but, then, there's no bad time to become one.

Werdnal wrote: »

Do you have a contingency fund for covering voids in the let, damage/repairs/maintenance obligations, tenants who default on rent (which you will be depending on to cover your BTL mortgage) or will not leave when you want them to, so you need to go to court to legally evict them?

That should be fine, enough for a rainy day, or two or perhaps a few months

Werdnal wrote: »

In your position, I'd continue with the plan to buy a property of your own, and leave any BTL opportunity until later in life when you have some "disposable" capital that you might be able to invest in a 2nd property.

It feels like catching a train for which I was already late. Back in '07-08 almost came to a point where we had enough given the very high LTVs of those times. Feels like a never-ending chase since...

G_M

To start you on your research into what's involved, read this post and check out all the links at the bottom.

rexmedorum

Maybe a silly question but how about being your own LL? Instead of renting? Saves lots of officiel hasstle + dealing with difficult people

Werdnal

Also remember that the rental income is taxable, and any potential capital increase on the property value would also be subject to capital gains tax when you eventually sell it.

Pupnik

If you are going to be putting off the dream house surely it would make more sense to buy a flat and live in it and continue saving for your dream house deposit, then sell the flat when you are ready to move. If you get a cheap place you could be paying much less per month on a mortgage than on rent so even if the worst happens and house prices continue to fall the money you will have saved on rent will make up for it.

MarcusAurelius

rexmedorum wrote: »

Maybe a silly question but how about being your own LL? Instead of renting? Saves lots of officiel hasstle + dealing with difficult people

It does, but raises a question of where to get that 25% deposit plus stamp duty plus a bit for a rainy day. 76%+ LTV is just too expensive in terms of monthly payments.

And, last but not least, the BTL I had in mind would not suit me, but perhaps a single commuter could call it home...

sequence

If you don't have the 25% for a dream property, you don't have the 25% needed for a BTL either, so the idea is a non starter.

MarcusAurelius

Pupnik wrote: »

you could be paying much less per month on a mortgage than on rent

Last two places I rented were a steal: the ratio of the annual rent to an approximate current value of the property was about 3.5%. Would an FTB be able to secure this rate after house insurance costs? I have doubts...

MarcusAurelius

sequence wrote: »

If you don't have the 25% for a dream property, you don't have the 25% needed for a BTL either, so the idea is a non starter.

?

The BTL is almost half price of the "dream one"...