Buy to let advice - is it possible and best way to do it?

linni

We're looking into the possiblity of buying a neighbour's house for £240,000. The idea is to rent it out for a few years, then move into it when the kids have left home and sell our current larger house, or sell both homes later on and get a better house. We don't have any pensions of any value and wondered if this would be a good investment, in the long term.

Our house is probably worth £300,000 in the current market and we have paid off the mortgage. Hubby doesn't earn a lot, so wondering if it's even possible. Should we get a mortgage on our current home, or get a buy to let mortgage on the other property. We would have to get a mortgage on our current home if a deposit was needed.

Apart from Solicitors for legal contracts etc and/or Agent's fees (for renting), insurance & running costs. Are there any tax implications? Is there anything else I should be looking at is this even possible? We don't expect to make mega-money but if it could just pay for itself it might be worth it, or even as a future investment for the kids.

There is so much to look into.

DannyboyMidlands

I don't really understand the plan. Why not just buy your next house when you need it (when the kids have left)? Buying one, renting it out for a few years, moving into it, then selling the old one sounds like a massive expense and hassle.

What do you mean by "pay for itself"?

How much rent would you be receiving per month?

linni

There is 'unregistered' land between the two houses which we would like to 'acquire' and this seems the easiest way to do it. We should be able to get rent of around £850 pcm.

I'm just aware that we don't have any 'value' in our pensions and am starting to worry about old age. I know it's a bit late to start but we had several endowments which should have given us enough to fund our retirement but we ended up with a shortfall instead. I'm looking for a way to gain some retirement funds, especially as I'm not able to work at present and not likely to in the future, and I wan't to feel like I'm doing something about it.

By pay for itself, I mean mortgage etc covered by the rent. Not looking for profit as that should be in the house itself. Of course, that would be a bonus!

brit1234

linni wrote: »

There is 'unregistered' land between the two houses which we would like to 'acquire' and this seems the easiest way to do it. We should be able to get rent around £850 pcm.

I'm just aware that we don't have any 'value' in our pensions and am looking to find a way to make some.

Probably best to plough more money into your pension than risk it on buying another house in a falling market.

p00hsticks

linni wrote: »

I'm just aware that we don't have any 'value' in our pensions and am looking to find a way to make some.

So your only real asset at present is £300k in (a single) property, and you are looking to invest in more (anther single) property ? And in exactly the same location as the first ?

The proverb "don't put all your eggs in one basket" springs to mind...

You'd just need the "neighbour from hell" to move in and the whole lot goes up the swannee

linni

Thank you. I appreciate all your replies:

Probably best to plough more money into your pension

We don't really have any spare money. I've got 2 teens going to Uni in the next few years. Also, I thought you had to be working to pay into a pension.

So your only real asset at present is £300k in (a single) property, and you are looking to invest in more (anther single) property ? And in exactly the same location as the first ?

The extra land would enable us to put add another garage on our 4 bed detached chalet bungalow so it should, hopefully, increase in value. This is the only way we can get the land.

The proverb "don't put all your eggs in one basket" springs to mind...

You'd just need the "neighbour from hell" to move in and the whole lot goes up the swannee

This is of course the risk we'd be taking and if there was any other way!

The other possibility is knocking down the 2 houses and building 3 or 4 on the same plot. Loads of people have done this in the area.

DannyboyMidlands

How much land are we talking about?

The proposed 4% gross yield is terrible and in my opinion not worth it unless the land really is something special.

I still don't understand the plan. Are you proposing to borrow money (at say 4%) in order to get a gross return of 4% from which you subtract maintenance, insurance and other costs, void periods, tenants from hell, hassle factor? ..... You'll be losing money before we even consider the risk of falling prices or rising interest rates.

saverbuyer

Best to put some money into an actual pension rather than expecting every increasing house prices to fund your retirement. It's not as simple as buying a house and watching the money roll in and the mortgage get paid off.

Seems a bit of an extreme risk just for a piece of garden.

"We don't expect to make mega-money but if it could just pay for itself it might be worth it, or even as a future investment for the kids."

Seriously £240,000 is mega money. The only fool proof way of getting that sort of money for your retirement or to give to the kid is to SAVE IT.

linni

I still don't understand the plan. Are you proposing to borrow money (at say 4%) in order to get a gross return of 4% from which you subtract maintenance, insurance and other costs, void periods, tenants from hell, hassle factor? ..... You'll be losing money before we even consider the risk of falling prices or rising interest rates.

Basically yes. I honestly have only just started looking into this. I do expect to lose money to start with but thought it might be worth it in the long term. I know someone who has no trouble renting out properties in this area. It may well be a risk not worth taking but I do like to look into things properly before going ahead (or not).

DannyboyMidlands

Fair enough but what type of property do they buy and for how much? and what rent do they charge and how do they finance it?

Getting a BTL might be a good idea but you need to chose the right place at the right price. A nice little low maintenance flat that'll give you a 10% yield I could understand but I think that the land is clouding your judgement a bit.

linni

Seriously £240,000 is mega money

I didn't say this was mega money - this is just the cost of the house so we would only be making the value of the rise of the house.

I know someone who is interested in renting the house already and I thought my teens could live in/or rent it out themselves to friends when they're at Uni.

It's not as simple as buying a house and watching the money roll in and the mortgage get paid off.

I never thought it would be simple. I'm not afraid of hard work and I'm just considering it at the moment. I've known lots of people who've done it and they've not regretted it - yet! I'll be picking their brains too.