BTL mortgage

seven-day-weekend

We will have about £30-35K left from the sale of our Spanish house after spending on both our own house and our son's flat. We have no mortgage nor debt. We have other savings totalling about £20k.

Round here you can buy a decent two-bedroom flat in a nice area for under £90k (our son's was £65k). You can buy a terraced house in a not-so-nice area for this too.

We were thinking of getting of a buy-to-let while houses are cheap. We would probably be looking to spend not more than £80k. The flats/houses we are looking at would probably realise £400-£500 pcm in rent.

We are 62 and 63, have been landlords before. I'm not sure how btl mortgages work. Would our ages be a factor? Our income is from Pensions mainly and at the moment is about £14k p.a. It will be increasing by about £5k per annum in 2014. I also undertake some house/dogsitting and expect to earn about 1.5k p.a. from this (earnings from this year are on line for this amount).

We don't want to re-mortgage our home.

Has anyone any advice for us?

Dave_Ham

Hi - this will be fine with a 25% deposit.

Due to your age/income, you may not pickup market leading rates but will be straightforward...

Hope this helps

seven-day-weekend

That's re-assuring Dave, thanks!

seven-day-weekend

http://www.rightmove.co.uk/property-for-sale/property-22750137.html

This seems a reasonable possibility, if we could get it for £70k.

I think it would rent with no problem, it is an ex LA in a small cul-de-sac of similar, reasonable area, on good bus route and within 1 mile of city centre. Asda and Lidl nearby, Morrisons slightly further out but still accessible by bus. Several schools nearby.

So, if we put our 25% deposit (£17.5k) and then had a mortgage for the rest (52.5k), then spent £10k on upgrading (c/h, d/g, rewiring), do you think this one seems feasible?

Senior_Paper_Monitor

What will it rent for ?

Dave_Ham

Mortgage will be feasible, depending upon the above question on likely rent?

Although given the loan size, I would almost say already this will be fine...

seven-day-weekend

Don't know about rental yet, but am going to ask someone I know who is a lettings agent, but would imagine iro £450 pcm or slightly more.

Thanks for your comments.

Brock_and_Roll

"while houses are cheap"

Really? Buying costs aside, if you get the place for £70k and it generates £450pm in rent, then the yield is only 7.7% gross - i.e. before any voids, repairs, and other costs seems pretty darn skinny even before the hassle of dealing with tennants etc.

Without wishing to start an argument about house prices, given the negative real incomes growth the poor economic situation resulting in historically low interest rates, I would be very surpised indeed if you see any real capital growth in the medium term. I am a banker so feel free to yah boo me!!!

seven-day-weekend

Brock_and_Roll wrote: »

"while houses are cheap"

Really? Buying costs aside, if you get the place for £70k and it generates £450pm in rent, then the yield is only 7.7% gross - i.e. before any voids, repairs, and other costs seems pretty darn skinny even before the hassle of dealing with tennants etc.

Without wishing to start an argument about house prices, given the negative real incomes growth the poor economic situation resulting in historically low interest rates, I would be very surpised indeed if you see any real capital growth in the medium term. I am a banker so feel free to yah boo me!!!

So, in your professional opinion, what should we do with our money instead?

Senior_Paper_Monitor

The 'oft quoted' calculation of yield (simply using the purchase price and rent) is frankly next to meaningless.

Out of fairness, B&R identifies that this excludes 'buying costs & 'issues' which certainly needs factoring in - but, bearing in mind that the mortgage interest element is simply a 'cost' not an investment it should be treated as such and therefore excluded from the 'capital'. The correct figure is calculated on the capital (deposit/equity) plus 'buying costs' against the residual income after costs.

This (as the mortgage will be at a different - and probably lower - rate) figure will, in this case show, a better rate of return on capital than suggested above - we run these calculations for BTL clients with various sub-calculations showing impact of fluctuation in interest rates and/or rental voids and/or maintenance costs.

The correct BTL investment still shows as good a return/risk option as most other vehicles (albeit with a higher potential grief factor) - excluing any capital growth potential (which I agree is high risk).



I think the main deciding factor here will be what the mortgage deal is going to be - bearing in mind the age/income issues that Mr Ham has already pointed out.

Brock_and_Roll

seven-day-weekend wrote: »

So, in your professional opinion, what should we do with our money instead?

Of course thats a million dollar question.

Obviously you have to balance the risk free passive option of placing on a term deposit to get say 3.5% at one end of spectrum with the higher risk more active investments at other.

Personally, if it were me, I would sit on my cash for a while - the ongoing recession is bound to present some opportunities which the quick move and solvent will be able to take advantage of.