Buy to let, multiple houses- live off income?

Mumto3cheekymonkeys

maybe start with 1 property to let, its harder then it sounds and if you dont get income for one month you have to pay it yourself. You could end up getting deeper then you want to.

vectistim

There's a couple of 2 bed flats in the £160ks in Reading (uni area), the first couple of houses are in the £170ks and I reckon you could get £750 a month for them. So gross return 5.3% (not enough for me)

Lets say you could buy two for £170,000 each and rent them both out for £750 per month.
Each one: Cost £170,000 25% Deposit: £42,500 + Purchasing costs.
So you've spent £90,000 just to buy these two.
Lets say you get a 4% mortgage, 25 yr repayment (if you want to live off the income at some stage you'll need to pay off the capital at some stage)
That will cost you about £670 per month (That might be pushing rental coverage for some lenders)
Gross monthly income: £750 Mortgage: £670 - Difference £80 per month.
Costs: If we be quite generous lets allow 5% of rent for maintenance damage etc, 5% for void periods, and £300 a year to cover insurance and gas safety.
Gross £750 - 10% = £650 - £25 (£300 per year/12) = £625
£625 - £670 = Loss £45 per month per house -> £1,080 loss per year.

Personally I try and go for having that gross (theoretical yield) above 6% but a larger deposit can make it work at a lower yield. But you can't look to be living off the income any time soon.

franklee

vectistim wrote: »

Personally I try and go for having that gross (theoretical yield) above 6% but a larger deposit can make it work at a lower yield.

The simple gross yield is the total cost of the property vs the rent. Amount of deposit doesn't change this. Chucking in a higher deposit obviously reduces the mortgage but at the same time loses you the income the deposit cash could be earning elsewhere ...