Buy to Let??

tomstickland

Nah, it's OK here, you've just lit the touchpaper on a very old argument that will run and run.

Personally I'd advise you to not bother at the moment. The margin is too slim. Interest only and hoping for capital growth is just gambling with your own money. New builds do not retain value well.

I could be wrong and prices could double next year, but I see that as very unlikely. The rediculous price rises of recent years were funded by easy borrowing and I believe it's going to end up very messy.

aussielovell

i dont think your figures stack up unfortunately. You would have to consider the costs associated with letting ie
annual gas safety inspection/service, fixed wiring checks, applicance checks, void periods, management fees if using an agent, advertising, repairs etc. I would only bargin on you getting 9 months rent out of 12. As someone said earlier, rents arent increasing and you might struggle to make it worth it if you take on that level of mortgage.

If you do go down that route, you might want to consider rental guarantee insurance products to help protect if your tenant doesnt pay too.

Lots more research needed on the specific area you are thinking about. Overall, city centre one bed will increase in value the best and rents here still holding there own.

BobProperty

Karen_is_confused! wrote:

.....I have equity in my home i can release to give me a £20,000 deposit on an apartment in a new complex that is on the market for £125,000. I can get a furnished monthly rental of £675. I am unsure of the exact repayment amount on the £105,000 but imagine it to be about £500 so will it be enough to cover the deposit amount?

£105k IO (interest only) at 6% will cost £525 per month. At 8% (long term average - ish) £700 per month. So at an optimistic mortgage rate, and only deducting say £50 for the service charge you will be paying, you will make £100 a month. Out of which you will have to furnish the place, do any repairs, get a CORGI cert, allow for any voids and anything else that happens. Also the average property only rents for about 10 1/2 months per year so you still need to cover the mortgage that month. So, leaving out the possible need to pay a Letting Agent or any bad tenants, where do you expect to make any money?

Karen_is_confused! wrote:

Is this a good option?
I hope to make money on the property ina few years when I sell it on but is it enough for the risk involved?
This is all interest only so if it doesn't appreciate in value i may have to hang onto it for a long while!

Er No, No and possibly all the way though a house price cycle (> 10 years if not > 13 years)
Your gross ROI is 6.48%, you can get over 5% putting money in the bank.

And a Troll is someone who posts on internet forums with the intention of "winding people up", usually by asking naive questions, hence the other comments.

PoorDave

If you're talking about a furnished let, don't forget the cost of the furnishings! And the cost of replacing them when your tenants wreck them!

A void period of 3 months a year seems a bit excessive, I would expect more like 1 month (8%ish) to 10%, but it depends on your area of the country.

Worst case scenario is your lose both properties if interest rates go too high. Up to you whether the potential return is worth the risk.

Karen_is_confused!

Thank you,
Unfortunately I am just naive!
I can see why people were wound up, but not meaning to sound too pathetic, where else can a woman on her own ask questions!
Sorry all, I really am that sad!
All the advice is great. thanks.

Ad

Karen_is_confused! wrote:

Did I say grumpy. What an understatement!!!!

Forget it,
I asked an honest question of people I thought could help. I didn't realise I was in the miserable old man section of the site.

I feel "snuff out the poison in the market" was a bit flaming strong!
Also I want a home for my kids when they leave home and it was not "just some trading chip."

I think if I do decide to take this investment I will gleefully note that i am in some small way contributing to your feeling that "This country is in the state its in due to this type of speculation."

I never thought going on the forum would be like this.
You live & learn.

I don’t mean to offend you personally I was responding to the situation in general. I feel particularly strongly as I’m a priced out first time buyer.

I wish you well and hope whatever decision you make is right for you.

Gorgeous_George

Karen

a troll is a person who enters an established community such as an online discussion forum and intentionally tries to cause disruption, often in the form of posting messages that are inflammatory, insulting, or off-topic, with the intent of provoking a reaction from othersAs I said, apologies if I am wrong. BTL is an emotive subject on MSE. Many people, driven my jealously or a lack of self confidence, treat BTLers as if they had two heads.

Do your sums. What if prices fall by 10%, 20%, 30%? What if Interest Rates rise by 1%, 2%, 3%? Include voids (periods when the property is not let (but the mortgage, insurance, water rates still need paying. If you can still cover your costs and you are prepared to take the risk, go for it. You also need to be aware that some tenants believe that the rent they pay is lining your pockets and that the world owes them a living. and its all your fault!

Ad wrote:

If there was a shortage of accommodation in this country then why haven’t rents increased?

My rent hasn’t changed for over three years...

Its already been widely recorded that property speculators are holding back property and not renting them out in hope of future price increases.

Rents may not have increased because inflation is low and landlords' costs reduced.

So, it's speculators who keep property empty that is the problem, not Buy-to-LET landlords. If so, I agree. Include holiday homes in the equation.



GG

Karen_is_confused!

Ta,
I really am real!!

Ad

Karen_is_confused! wrote:

Ta,
I really am real!!

Apologies I forgot to ad welcome to the site it will save you money. There are too many great sections to note, enjoy your time here.

dunstonh

Look at your yield before tax (it gets worse after). You are looking at a high risk transaction and will be getting little more than 6% before tax. The way things are with interest rates, you may be paying for someone to live in your house rather than the other way round.