First time buyer, buying to let

Sambuka

Hi all I'm 22 looking at buying a flat 20 mins from cent London and letting it out. I don't really know where to start to be honest, I'm in the Army based in Germany and will be for at least another 5 years so I will be using a letting agency to do all the hands on work for me.

I've got £10k in the bank, the property is £125k and I plan on pouring all the rent money back into the mortgage plus overpaying an extra £1k a month on top, so around £1500-1800 a month.

Am I right in thinking that I could be mortgage free on this property within around 8 years if I stick to this plan? As my pay goes up, I might even be able to pay it off even sooner, but I think around the 8-10 year mark sounds realistic for me.

How feasible is this? It would be great knowing that when I leave the army in 5 years I'll only have 3 years to wait until I have my own mortgage free flat.

Werdnal

Sounds like a good plan, but there are several things you need to remember:

Firstly, you obviously understand that it needs to be a BTL mortgage. These are usually higher terms that residential, but probably not too much of a problem if you shop around. Similarly, you would need LL insurance for the propety - minimum buildings cover, but contents too if you plan to let it furnished.

Your rent will not be pure profit. As you are overseas, you should employ an agent to manage your let. Not only does this make letting and looking after the property easier for you in your absence, but someone has to pay tax on your rental income whilst you are outside the UK. Tenants can even be forced to pay your tax bill for you out of the rent, so obviously getting a agent who could take care of this would make it easier for all concerned.

Agent fees, mortgage interest and other costs are deductable from your tax bill!

You also need to keep a contingency cash flow in place for unforeseen repairs, void periods when no rent but still mortgage to pay, and rogue tenants who trash the place, or stop paying then require eviction to remove.

Mrs_Z

As Werdnal points out, not all your rental income will be pure profit. There is maintence to be considered as well as your legal obligations with regards to annual boiler servicing, gas safe certificates, lettign agent management fees, void periods, etc...

Also, have you looked into BTL mortgages - you'd normally need at least a 25% deposit - and often the set up fees can also be very expensive. Not sure about all lenders, but some will not lend to a first time landlords unless they are already home owners.... So you'll probably find that your £10,000 will not be enough and then there are buying costs too; solicitors, surveys....

You really need to do your sums and research - there is plenty of information available on the internet.

_Andy_

Sambuka wrote: »

Hi all I'm 22 looking at buying a flat 20 mins from cent London and letting it out. I don't really know where to start to be honest, I'm in the Army based in Germany and will be for at least another 5 years so I will be using a letting agency to do all the hands on work for me.

I've got £10k in the bank, the property is £125k and I plan on pouring all the rent money back into the mortgage plus overpaying an extra £1k a month on top, so around £1500-1800 a month.

Am I right in thinking that I could be mortgage free on this property within around 8 years if I stick to this plan? As my pay goes up, I might even be able to pay it off even sooner, but I think around the 8-10 year mark sounds realistic for me.

How feasible is this? It would be great knowing that when I leave the army in 5 years I'll only have 3 years to wait until I have my own mortgage free flat.

Are you saying the property value is £125k and you have just $10k for deposit and fees?
If so this will not be sufficient for a BTL mortgage

G_M

Do some research on the subject. Getting the answers to a few selected questions here (when you may not even know what questions you need to ask!) is not enough.

Read the links here to learn what is involved, legally, financially, practically.

kingstreet

You should be permitted to let your property with a residential mortgage. This is unusual but a concession to service personnel based overseas.

Read down to the bottom of this article;-

http://www.thisismoney.co.uk/money/mortgageshome/article-1684902/Armed-Forces-barred-from-best-mortgages.html

hazyjo

Is it in an area you know? It's very cheap for London, so make sure you're not thinking about buying into a rubbish area!

You have less than a 10% deposit (not taking fees into account). I'd definitely be looking for at least 10%.

Alternatively, consider saving this money for the next year or two. You'll not have to pay the interest on it that you would be paying on a mortgage, so would have a much healthier deposit which would get you much better interest rates. Doesn't look like prices are going up any time soon, so might be worth looking in a year or so.

Jx