Property Investment Idea

Groucho3Zeppo3

Hi all,

Just had an idea I wanted to run by the vets to see if this was fesible.

I am relatively young and entering a career where it would not be unrealistic to try and save £6,000 a year. I had an initial idea of trying to save this and every 5 years put the £30,000 towards a new house/apartment. £30,000 would be a 20% deposit on a £175,000 apartment and as house prices are cheap in my area this I would find available properties. I would want to continue to do so every 5 years and so by the end of my career have 4-6 properties that would act as a second pension so to speak with the rental income.

My question is would I even be able to get a new mortgage every 5 years to do this? If not could I simply add a new loan so to speak to my existing mortgage every 5 years to purchase a house each time?

Your input would be appreciated,

Thanks,

Tommy.

kingstreet

Presumably you plan to let these properties?

Once you have your owned residence you should be able to buy properties to let using buy to let products. These are normally available upto 75% of the purchase price and will be based on the rental income being 125%, or more, of the monthly mortgage interest at an assumed rate, perhaps 6%.

Rental income is taxable, but allowable expenses can be deducted, such as agent costs, insurance and mortgage interest (not capital) so the taxable element is smaller.

Groucho3Zeppo3

Thanks for your reply. It would be buy-to-let properties. If I owned m own apartment/house before then would I be able to get a new buy-to-let mortgage for each property?

kingstreet

Lenders don't like offering BTL products to non-owner occupiers. Once you have your own home, the BTL process is quite easy, subject to what I said above about rental income and LTV.

The only other issue for some lenders is personal income. Some want a personal income of as much as £35k, while others are a bit more relaxed.

At the time, you'd probably be better using a broker. Much of the BTL mortgage market is off-High Street.

Groucho3Zeppo3

Thanks again. So Just so I'm clear, this idea would be feasible if:

- I first buy own property to live in
- Buy to let mortgages would be available as long as the monthly rent was > 125% of the monthly mortgage repayments
- My personal annual income would be >£35,000

And so it is very possible to have multiple buy-to-let products rather than one large mortgage?

Sorry you mention it would be ok as long as you have the rental income and LTV, what is LTV?

kingstreet

Loan to value, ie under 75%.

Yes. If you meet the lenders' requirements on personal income, LTV, rental income and owned residence, you get a BTL mortgage for each property.

Unless you have a very valuable property with loads of equity, which you mortgage to raise the funds for all your BTLs, you raise a separate mortgage on each one.

Groucho3Zeppo3

Ok brilliant. Thanks for all your help.

One final question, what is the main problem in getting into buy-to-lets; finding a property of a value so that the rental income will be 125% of the repayments? Or is it the difficulty of getting enough money to cover the 25% of the mortgage?

it would be good to know which would be harder, raising the cash or finding the property? Because if there isn't any property available in the current climate or over the next 10-15 years there's no point saving money for it is there?!

Thanks

kingstreet

The main problem? Anything that doesn't fit.

If you have no means of finding a 25% deposit, there's no point worrying about rental yields, so the basics I've mentioned are the starting point.

Once you have them in place, you have to find a viable, lettable property which ticks the cost/income boxes.

Groucho3Zeppo3

Ok, thanks for all your help!