Buying to rent

ognum

mahoney wrote: »

I do appreciate the advice . I've just read the thread and there's a lot in there. Some scary bits too about tenants from hell. I rented once and seem to remember the deposit was quite high - wouldn't that cover any damage - depends on the damage you say.

What makes people want to be LLs then?

In the past people became landlords because there was a rising property market and it was a good way to make money.

Increasingly people are becoming landlords because they can't sell the property they own so they let it and rent themselves or buy again.

Also there are many people who have cash that is making no interest in a bank and they are happy to tie it up in property and take a rental income with the thought that maybe one day house prices will rise.

Then there are the inheritors who have a house gifted to them in a will and decide to keep it and let it.

It certainly is not a way to make a load of cash at the moment but if you keep your property well maintained and respect your tenants then you will get through.

the biggest problem for landlords is for those who cannot afford a void or the cost of replacing a boiler, buying a new carpet or fridge. I think it's unusual for a property to get trashed but you need to think of all the things that need attention in your home and those will need to be done in your rental property and the deposit does not cover replacement windows, new appliances redecoration other than wear and tear, the cost of finding new tenants etc etc.

Hope this helps.

kingstreet

It's worth bearing in mind how BTL mortgage funding works.

Some lenders require a high personal income, perhaps as much as £35k per annum. In addition to that, you're likely to find a set formula is applied to calculate if the proposition is feasible.

Remember that only mortgage interest can be offset against the rental income for tax purposes, so you'll probably need;-

Rental income = 125% of mortgage interest at 6% mortgage rate.

As an example, if you borrow £75,000 on your £100,000 purchase, you'd need a rental income of £470 per month as this is 125% of the monthly mortgage interest which is £375 per month on a £75k mortgage at 6%pa.

BTL mortgage fees tend to be high and the maximum loan to value will be lower, with you needing 20% or more for your deposit.

As the others have said, spend some time learning the responsibilities of being a landlord and use the formula above to calculate if a particular property is a sensible investment.

somethingcorporate

OP, do you know many people going into the BTL business at the moment?

I think you will find there are lots more trying to escape it but are trapped by their situation. It really is not all cheers and candyfloss. There is a lot that can and does go wrong, even if you have good tenants and a reasonable agent. Unless you actually desperately want to be a landlord then your money may give you less of a stress headache wisely invested in the stock market.