Buy To Let - General Advice

dunstonh

Cant believe people are trying to put you off what is year on year the best investment (if done correctly) anyone could make.

What a naive statement and also technically incorrect.

I dont see anyone on this thread putting tonydee off. Just pointing out the potential negatives that need to be considered. Too many people go into BTL (particulary mortgaged BTLs) thinking it is a gravy train with no risk and many are going to be in deep trouble when interest rates rise and/or property values drop.

To go into any high risk investment (which a mortgaged buy to let is), you need to be aware of the risks. Ignore them at your peril.

lypsey

Tonydee
Can you help by answering the following

1) What town are you in
2) What is the value of house you are looking at
3) What is the rental for that house
4) How much would you borrow to finance it


In my town which is Sittingbourne in Kent . A smallish house in a reasonable area is going to set you back 150k-160k . This would give you about 550 quid a month in rent
550 x 12 months = £6,600
Your 150k mortgage is going to set you back (at 6%) £9,000

Now if I had cash and put the 150K in the bank at 5% you would get 7,500 which is better than the renatl income (WITHOUT RISK)

Now you have to add insurance , voids , council tax , a yearly gas check , etc etc

Its a NO BRAINER

lypsey

Sorry just seen that you are on the Isle of Wight and did some research

Victoria Road in Shanklin , I of W , 2 bed appartment
Cost 150 k rental 475 quid a month

If you take a look at my calculations above , the 475 a month is going to give you 5700 a year - the mortgage is costing 750 ???

I am sorry but it is more expensive their (than Kent) and the rent is lower , it is worse than my example , best put your money in Ing Bank

tonydee

Hi lypsey,

1) I would look to be buying in Newport, IOW
2) Upto £150k
3) £600 min pcm
4) £100k max

I take your points on investing a huge sum but you require that huge sum initally. This is purley an option at investing for the long haul to provide a easier retirement in maybe 30 years time.

IF things went smoothly with minimum rental voids and other such costs the potential for a nice nest egg is there. BUT I also understand the many risks that have thus far been mentioned on this thread.

It's an interesting debate for sure.

itsakidsworld

Hi Tonydee,

Your last comment says it all really! " An interesting debate" is buy-to-let a good or bad thing.

You will always get people from both sides of the coin, some say it is the best thing ever whilst others say it is a bad thing. All points valid I must add because each person is entitled to their opinion.

I enjoy buy-to-let investing and have done so for many years. It has brought me great joy and financial security and it has also caused me pain and worry at some point over the many years( like paying 17% interest rates!!). However, if you set out your business plan correct as you appear to be doing by gathering information, then you will at least have a chance to complete your goal and head towards the finishing line with confidence( your retirement!!).

One point which many people appear to overlook when buying a property for investment is the question of how much cash per month are you prepared( and can) contribute to your business plan? If the plan costs you say £200 per month which is your shortfall, then that is like your pension contribution. If after 25 years your monthly payment has stayed the same or decreased as it should, then you should have made a very good profit with your investment indeed.

It is a long haul buy-to-let and does come with many pitfalls, although with the correct strategy is still ( in my opinion!!) the best business investment you can ever make.

The very best of luck in whatever you choose.

lypsey

itsakidworld
I understand that you have been doing this for years but can you give me an example of a property you could buy TODAY in your home town and the rent you could get??

I don't think it is possible anywhere in the South of England and get a better yield than the bank

lypsey

Hi Tonydee
Ok your 100,000 is going to cost you at 6% about 6,000 a year
If you can get 6000 (10 months at £600) that gives you balance
But your insurance , maintanance , gas checks , broken furnishings is going to cost you money

If you put your 50K in a high interest account that is going to get you 5.5%

If your house goes down just 10% that is going to cost you 15k .
I am sorry but do you really think that after the HUGE rises over the last few years it can continue. ??
Surely the figures don't stack up??

Herb

lypsey wrote:

itsakidworld

I don't think it is possible anywhere in the South of England and get a better yield than the bank

They are out there - Crawley/Gatwick - 2 flats purchased this year with a yield of 6% and another at just under 7%

[£650 rent/ purchase price £125000 + £795 rent/ purchase price £140000 inc SD]

Croydon can give similar yields.

Still - I'd like them to be higher.

itsakidsworld

Lypsey,

I totally agree with you that it is difficult to find property which can return a good yield as the market is at its peak in my opinion. However, I still believe that the long term investment in property can be one of the greatest investments you can make if carried out correct.

In my area you can purchase a two bedroom property for between £100,000-£115,000 with a return on rent of £475 maximum per month. With all costs taken into account and you are only paying interest only for the first five years, then you will do well to break even. That is why I mention about contributing to the investment monthly. When I first started buying property I had to contribute to my property portfolio by £100 per month and that was in 1982. It hurt my pocket alot! I just got it into profit in the late 80's when the interest rates when "boom" and once again I suffered! This tested my skills to the max and only by having a very good bank manager who listened to my long term plan, did I manage to survive. All this was when I could buy a terrace house for £20,000!

I have a very detailed information sheet which I received from a friend about property investing( pension related) which explains how it can work in your favour. It may be to long to print on here but it explains how it is possible and certainly gives you confidence when you need it. However, that is what property investing does, it gives a normal working person the chance to create a portfolio with as little capital outlay as possible. Like I said at the very beginning, property investing is not for everyone and needs to be thought out in great detail, especially in this current climate.

tonydee

I'm judging from the comments that BTL is a good idea if you can determine what the market will do.

In the 25/30 years I intend to hold the property for I'm quite certain I'll make money but the risk is when to buy. I tend to agree that the market is peaking and may drop back a bit but I don't think we'll see a crash or major correction.

The initial few years would be fairly rocky to say the least as any (if any) surplus rent would be swallowed up by other bills. If however the main bulk of the property can be paid for, then long term it seems worth while.

Still my main concern would be rental voids so maybe it's better to wait a little to see the market drop a wee bit and thus build on my savings too.