Buy to Let??

Karen_is_confused!

I am looking to this for the long term as due to its location i am pretty sure it will have no probs renting out and my own kids will hopefully need it one day when they attend the college!
I think i am a bit traditional in liking the idea of putting my money into bricks and mortar.
So no quick turn around money on rent but for the long end game is it a better bet?
My sister also needs a house to rent for the long term for her and the kids so if i went for a house i would have a pretty much guarenteed rent for a long while (again thinking of keeping the house for many years).
So does this change anyones view at all or am i still mad to consider it!!?????

Karen.

nogginthenog

BTL is a huge risk in this country at the moment,as said before the market is near its top and interest rates are due to rise again .and when house prices do go down it wont be slowly they will crash in a short time without any real warning.
The final decision will be yours alone,and please also consider in a country where space is short and we have a huge population you would be hindering first time buyers in essential services getting a foot on the housing ladder your decision and conscience alone!

ollyshaw

Hi Karen,

Welcome to the site!

I would ask you this. Would you release £20k of equity in your home to invest in the FT100?

Olly

dunstonh

ollyshaw wrote:

Hi Karen,

Welcome to the site!

I would ask you this. Would you release £20k of equity in your home to invest in the FT100?

Olly

Which in the scheme of things is about the same risk. Pick a UK Equity fund spread/HYP and there isn't much difference.

Although the UK stockmarket probably offers more potential in reality and is not currently priced on speculation and isn't above long term average growth levels as UK property is.

prudryden

Karen_is_confused! wrote:

I am looking to this for the long term as due to its location i am pretty sure it will have no probs renting out and my own kids will hopefully need it one day when they attend the college!
I think i am a bit traditional in liking the idea of putting my money into bricks and mortar.
So no quick turn around money on rent but for the long end game is it a better bet?
My sister also needs a house to rent for the long term for her and the kids so if i went for a house i would have a pretty much guarenteed rent for a long while (again thinking of keeping the house for many years).
So does this change anyones view at all or am i still mad to consider it!!?????

Karen.

It most certainly changes one's views. As long as you don't leverage too much, then you can sustain any price falls in the investment product. And as long as the rent will cover interest on the loan and maintenance. Exactly the same as investing in any market, which has cycles.

MickKnipfler

Hi Karen,

My fear is that it's easy to feel affluent and naively believe (no offence meant) that you have made an easy 20 grand.

You need to do your own research but my fear is that shortly, you may look back and believe that you didn't make 20 grand at all but it was just that you ciould have put yourself £20 further in debt by borrowing against a temporarily over priced asset.

I believe that house prices have risen not because their good value but because borrowing the money to buy them has been cheap (wouldn't we all buy a ferrari or Astom Martin on a 0.1% interest only loan that you never had to think about paying back the capital?

Personally, I would work hard to pay off the mortgage while you can, and then consider BTL again when/if property prices have fallen but money may not be so cheap. - The monthly payment may be the same but you'll owe a lot less capital.

Your call though at the end of the day.

sm9ai

Karen_is_confused! wrote:

apartment in a new complex that is on the market for £125,000. I can get a furnished monthly rental of £675.

Where abouts is this.

That seams an awfully high rental for such a low price.


As a comparison, in Essex I pay £575 rent for a property worth £180k - £200k.

tidyfinance

Hi Karen,
Have you thought about investing overseas?
We rent a flat in the uk but are considering selling, and using the equity from the sale to purchase in Egypt or Morocco. We feel we may get more capital growth from this.
Opens up another can of worms I know, but I have really enjoyed researching this property market.
That said, we are no farther forward. Expecting a call this evening to discuss with an agent.
Just a thought Kazza.

ollyshaw

That does seem a high rental. I pay £325 a month in a property worth £125k

Olly

Paulxo

One thing you've forgotten is paying for that extra £20k from your house. That's an extra add on to your current mortgage which you have to find.

As far as it being a good investment or not, who knows? It depends what risk you're happy with, and what return you expect. If you're happy with gaining an extra property that someone else pays for, that's pretty good going I think. However, if it's planning to make you money, that's very different as it would seem you may have to wait a while for that to happen! Also, there's massive tax to pay if you sell it of 40% (CGT).

I have bought a BTL in a similar way that you're suggesting. I do not go around telling all my friends to do the same. I don't believe it's going to make me a lot of money either.

But it does have some advantages:

1) Acquire asset that tenants pay for.
2) Possible capital gain
3) Instead, once it has been paid for, rental payments for the rest of my life
4) Can loan against equity in property (can't do this with shares, savings...etc) if ever required

The disadvantages are:
1) Might get bad tenants
2) Costly process to set up
3) House/rent prices may crash/decline

All investments have pros and cons. There'll always be a queue of people telling you you're mad. At the end of the day choose something you're happy with that fits in with your long term goals, making sure you can sleep at night.

Let us know what you decide!