Buy to Let Advice needed

UKBob_2

I don't accept all this 5 years too late stuff. Sure it would have been better to buy 5 years ago as we have all seen what has happened but who is to say that will not happen again over the long term you want to keep your BTL property. I don't think I would buy at the moment for short term gain but if you are intending to keep for 20 years or so I think it is still a good time to buy. Look at house prices historically over any 20 year period you choose and see if you can tell me that they did not make a good investment.

However, initially you need to do the maths.

Find out what is the best FIXED RATE mortgage you can get. I would always insist on fixed rate as you are not at risk from rate rises. Plus the inevitable redemption fee will not matter to you as you are sensibly in it for the long term. Work out the cost of this per month.

Then find out what the going rental for similar properties are in your area and assume your property will be rented on average 10 months out of every year. Phone 2 or 3 agencies up and look at rentals on https://www.rightmove.co.uk to get a good indication. Also ask agencies whether your particular type of property is in demand.

If 10 months rent covers 12 months mortgage then you potentially have a good investment. However, don't forget such things as maintenance, repairs, decorating etc as these all cost you money.

Generali

Returns aren't necessarily all that great. Below are the real return (i.e. after inflation) for 20 years from 1983-87.

Year......20 Year Return
1983-2003....3.40%
1984-2004....4.19%
1985-2005....4.16%
1986-2006....4.19%

All figures from The Halifax. A 1 month void every 2 years that you haven't planned for wipes out your profit from capital gain entirely, before leveraging.

Leveraging will increase your profits vastly. It will also have the same effect on any losses.

Wings

If only we had that Bright Lamp of Hindsight, and although UKBobs post is sound advice, although there are other criterias you need to consider, these are that you will be able to both let and receive rental payments for the property, and that any financial costs/losses can be offset against any taxes you are paying from your full time employment.

meanmachine_2

UKBob wrote:

Find out what is the best FIXED RATE mortgage you can get. I would always insist on fixed rate as you are not at risk from rate rises. Plus the inevitable redemption fee will not matter to you as you are sensibly in it for the long term. Work out the cost of this per month.

Some landlords would disagree violently with that.

They would argue that the best mortgage is a length of term one where you have no redemption fees to pay, so that if you do need to sell unexpectedly you won't be clobbered by an ERC.

Back to the OP, in a house share HMO regs come into force. You need to be fully up to speed on those before you spend a penny of your own money.

And yes, this is a business, not an investment like a savings account. If it doesn't wash its face from the get go, you could hit trouble very quickly.

meanmachine_2

brainiac44 wrote:

yeah, the problem you have is that your 5 years TOO LATE !!

Consider this: Rented a 2 bed flat in 1997 for 950 a month. It could have been purchased for 90K.

Today that same property would cost 300K, and rents for...£1000 a month.

Say no more.

BTL in 2007 is a mugs game.