Buy to let part 2 - thoughts welcome please!

fluffpot

Hi everyone

A little while back I posted here about re mortgaging to purchase a BTL property in a seaside town - possibly for holiday lets and longer term for us to move there. I received some extremely helpful advice and did look into things further

I came to the conclusion though that it would be much easier (and profitable) to manage a holiday let if you are live in the town where the let is and people pointed out also that a holiday property is not necessarily one you'd chose to live in! So this is parked at the moment

However, it is now likely that the house next door to me (in London) will be up for sale soon. I know the owner. It is completely unmodernised (outside loo!). I've done a bit a research into the figures and I wanted to pick your collective brainy brains as to whether this might be a go-er?


To summarise:
Likely cost of house next door up to £400K. A house in the street also needing work (but not as much as this one) sold 6 months ago for £425K
I reckon you could easily spend £100K - which would include side return extension and loft extension. This would make it a big family home 4 1/2 -5 beds (or 6 if you really wanted to), huge kitchen. House in street with this no of beds but smaller footprint sold for £625K about 9 months ago.

The plan would be then be to rent it out (or move in and rent ours out??). Properties like this tend to rent for around £2500 a month. It could of course be sold.

I work in construction (sparks) so would oversee the building work and do the electrics (I realise that I'll take some loss of income during this time!). My husband works from home and we are both self employed, but me the chief earner.

So to the big Q's
1. Does this sounds like a sensible plan?
2. Could we re mortgage our house to pay for all of this? Value I would estimate is £600K but we have about £35K left on mortgage. Not masses of spare cash around at the moment as we did the loft extension about 18 months ago - could access maybe £20K instantly and might be able to borrow more from family (but we'd have to pay it back!).

Sorry for the long post. I find it very helpful just to put ideas down and would welcome any feedback from those more knowledgeable than me!

Thanks

Fluff

Fire_Fox

Research land registry sold prices in the street and area, you need way more than just one or two! I suspect you will have to re-mortgage your own property, with an outside toilet the adjacent house may not be deemed habitable by a lender. That is to your advantage, it will reduce the value significantly. See an independent mortgage broker about re-mortgaging. Have you considered converting the house to flats and letting those? I would have thought you could get several good sized ones if you can extend the ground floor and get into the loft too.

fluffpot

Hi Fire Fox

Thanks for the reply. Houses don't sell very often in my street.. but will check out a bit further afield. We have lived here for 11 years so know the area (and prices) pretty well.The house also has an inside loo (not functioning though!). No central heating, so would also look into grants for this.

I wasn't sure if the re mortgage value would be too high (ie almost for all of our current house value). Maybe I'll post over on the mortgage board...

Flats-not sure. So many of our boroughs family homes have been converted that there are now council restrictions in some streets (not ours, but this might be because ALL of the current houses are intact). I suspect it might be hard to convince the planners. Also as I will be living next door, not sure I want it to be flats (realise this makes no financial sense at all, so could be persuaded!).
I'd need to make enquiries with the planners - will get onto this
Thanks again

Fire_Fox

What type of flat will help dictate what type of tenant, the best profit is from small ones so developers focus on this and flood the market. I would imagine you attract more sensible professionals in more luxurious flats, if you can make two beds you might get young families. Or could you make two maisonettes or duplex apartments so they are still clearly family homes?

fluffpot

thanks for that - food for thought, but it will depend entirely on the planning situation

JQ.

Assuming the numbers stack-up, I don't think I'd fancy living next door to my tenants - too many complications for me.

No doubt some people will be fine with it, but not me.

fluffpot

That's part of the attraction for me - as I can be around to sort out problems straight away!

Fire_Fox

fluffpot wrote: »

That's part of the attraction for me - as I can be around to sort out problems straight away!

It certainly means you could sort out an emergency quicker but you would need to be careful about just turning up on their doorstep for anything else because tenants have the right to quiet enjoyment. You should give notice in writing if you intend to do an inspection or otherwise visit or of course they can give you permission to do away with that, but if you are asking for that permission whilst you are stood on their doorstep there is an element of pressure.

If they were noisy for example you would be best writing to them with your landlord's hat on quoting their tenancy agreement, rather than knocking on the door with your neighbour's hat on asking them to turn it down. It does also mean the tenants might take to knocking on your door late at night with the most minor problem. I know it's ahead of time but also don't be tempted to service notices by hand for convenience, you may need proof of posting/ delivery.

JQ.

You might want to check with some letting agents whether being next door might affect tenant demand. Again, I wouldn't dream of living next door to my landlord, constantly worrying about being noisy or making a mess, feeling like I'm being watched and my behaviour monitored.

fluffpot

well I've always had lodgers and have let a flat before, and I'm pretty laid back (or so they've told me)... anyway, the agent doesn't have to give the landlords address, eh?

franklee

fluffpot wrote: »

anyway, the agent doesn't have to give the landlords address, eh?

Yes they do if the tenant writes to ask for it. However living next door I doubt you'd get away with no one noticing. On the plus side it looks to me like you've plenty enough equity to remortgage and get enough for this. However is it a bit all eggs in one basket? One of the first things to is is to establish rental demand for that type of property. it's an established family's home would that type of family usually buy? Look at the let ads locally and talk to some letting agents?