Investigating buy to let

Paxtonios

Fire_Fox wrote: »

Net profit of £50 assuming no voids or tenants that don't pay rent? Do you know how long it takes to evict a tenant through the courts for non payment?

Have you factored in letting agents finders and admin fees - 10% is usually management only? Who is paying for lodging the deposit, check in and check out, drawing up ASTs and so on? Tenants usually pay for referencing and credit checks.

You should factor in voids, it's bad practice to have tenants back to back, that leaves you no time for tenants who don't move out when you think they will (yes even when they serve notice!), for cleaning repairs and maintenance. Also remember tenants do not have to permit viewings, if you don't have viewings you cannot line up a new tenant.

If I did achieve a net profit of £50 per month that would comfortably allow for a one month void per annum. On the assumption that repairs and maintenance aren't required on a month to month basis the net profit figure would more than double during those months, which I'm projecting would allow me to offset against initial agent, deposit and tenancy agreement costs.

Of course, this is all dependent on obtaining the mortgage in the first place.

kingstreet

So, taking the value at £124k, you are thinking of borrowing £25k to get the mortgage down to £93k, 75%?

At that level, you'll need a rental income of £580, to cover 125% of the mortgage interest, which at 6% is £465?

I can't see a major problem with this.

The cost of borrowing the £25k will be deducted from your income for the affordability on your onward purchase, but you feel you would still be able to borrow enough.

Paxtonios

kingstreet wrote: »

So, taking the value at £124k, you are thinking of borrowing £25k to get the mortgage down to £93k, 75%?

At that level, you'll need a rental income of £580, to cover 125% of the mortgage interest, which at 6% is £465?

I can't see a major problem with this.

The cost of borrowing the £25k will be deducted from your income for the affordability on your onward purchase, but you feel you would still be able to borrow enough.

That's pretty much how I'd calculated it, but with a rental income closer to £725, which is the preliminary figure quoted by the agent.

Thanks for the advice, as long as I know it's feasible I'll start pursuing it.