Renting advice

GeorgeBaird

Hi guys I'm a first time poster so be gentle lol

My name is George the reason I seek your advice me and my two brothers have decided to buy a property to rent out. What I really need to know is the pro's and cons of interest only mortgages, this is what the advisor suggested. We are looking to build a portfolio or properties and build for our futures we are currently 21,24 and 26 so quite young.

The reason the advisor said interest only is because we will have more money spare each month to put by for our next property and so on. What is bugging me though what I don't want is to be 55 years old with hopefully 10, 15 ,20 properties all on interest only . Obviously the easy answer would be repayment mortgage's but we want to grow asap. we don't plan to withdraw any money any money purely will be used to grow the portfolio

Can anyone please advise me if you were in my shoes what would you do?

Thanks in advance

George

GeorgeBaird

well? someone must have an opinion lol

poppy10_2

GeorgeBaird wrote: »

Can anyone please advise me if you were in my shoes what would you do?

Go for it! :j

Borrow as much as you can, on an interest-only basis, and pull out any equity to buy further properties. You can't go wrong with bricks and mortar, it beats all other investments. This time next year you'll all be millionaires! :beer:

Annisele

I'd say that the pros and cons of interest only mortgages are likely to be the least of your problems at this point.

Generally landlords will want interest only mortgages for tax reasons. However, there's more to becoming a landlord than that - and there are plenty of potential pitfalls to going into business, either with or without family.

G_M has a post aimed at new landlords; I'd strongly suggest you read it.

BigAunty

Yeah, I'm with Poppy10 on this one.

Not only is building a portfolio based solely on interest only mortgages achieved via house price inflation a brilliant idea, it's also fab to mix business and family, too, that way you all share in the enormous rewards and it'll make your relationship even stronger.

GeorgeBaird

Thanks for the feedback peeps looking forward to it

sariebeth

I work with a company who source properties for investors and I would say that 95% of their investors have interest only mortgages. This is because the aim of the property is to produce the largest monthly cash flow possible, so you can put this towards purchasing your next property. Ok so you wont be paying off the house, but that's not really important as it's earning you cash.

In 15-25 years time you can always sell your properties to pay off the mortgage as they will have increased in value, and if it has been hugely profitable to you then it should be eay to sell on to another buy to let investor.

If you are going to buy with family though, make sure you tie it all up legally as mixing business and family often doesn't end well

BigAunty

Yeah, new builds are a steal and can only go up in value, always a strong demand for professionals paying top dollar for a luxury flat.

And ex-local authority places are low risk -there's always a constant supply of poor people with guaranteed housing benefit and as the properties are low cost, can never collapse in value.

So your portfolio should encompass both expensive new build flats and cheap ex social housing to increase the reward and lower the risk...

GeorgeBaird

Thanks again posters the advice is very helpful. As it is with family it WILL all be written up legally

AdmiralX

BigAunty wrote: »

house price inflation .

Depends on the location and freehold/leasehold. UK prices peaked in 2007 and remain below that level now (Zoopla).
Profits will depend also on the freehold/leasehold and state of repairs which affects the rental value. Repairs depend on managing agent and these many times need agreement of all lesses; and covenant enforceability is a difficult area. Rental value is affected by the other landlords and the Local Authority which has now powers to intervene in privately ented flats.

Have you looked at auctions?

GeorgeBaird

AdmiralX wrote: »

Depends on the location and freehold/leasehold. UK prices peaked in 2007 and remain below that level now (Zoopla).
Profits will depend also on the freehold/leasehold and state of repairs which affects the rental value. Repairs depend on managing agent and these many times need agreement of all lesses; and covenant enforceability is a difficult area. Rental value is affected by the other landlords and the Local Authority which has now powers to intervene in privately ented flats.

Have you looked at auctions?

Thanks for that yes we will be looking at auctions we have our first property hopefully completing in the next 3-4 weeks then we will be going down the auction route but will always look elsewhere too