lodging while paying down buy to let?

jamels2

My friend was telling me at work about his plans, basically he lives in a shared house as cheap as possible, is single, but also has a house he lets out.

His plan is to overpay the mortgage asap, under 10 years. Once he's done this he want's to live off the rent (minus tax of course).

He says he wants out of the 'system' and aims to create this passive income as soon as possible, and end up working part time at most.

He said the way things are he will never be short of tenants. Does this sound like a good idea???

ramjug

Sounds good plan to me if you can guarantee, you will never be short of tenants.

innovate

wonder whether he plans to have a family at some stage, and if so how would that work with the lodging?

grey_gym_sock

i think it may be difficult to get a BTL mortgage when you don't already own the home you live in.

it certainly pays off if you're happy to spend a very small amount while you're younger in order to build up investments.

while his plans may change later (e.g. may want to have a family), forcing him to do more work for The Man(tm), he will still be further ahead with whatever he wants to do because of the investments built up.

(i'm ignoring whether BTL investments rather than other investments are the way to go - that's another issue.)

atush

Basically, he needs to get a good paying job, and to move into his house.

BTL can be a good idea, but generally not if you are paying rent to somehone else?

jamesd

His plan is poor, since it's related to just one property. For it to be sensible he'd need to be diversifying across many properties in different areas. This would protect him from local risks like fire or planners deciding to demolish an ara for new housing or local market conditions. And from the cost and risk of voids affecting a large part of his income.

He may find it's cheaper or a better lifestyle to have a cheap property of his own. That'll make it easier to get BTL mortgages. It's also cheaper to borrow on your own property than to use BTL mortgages.

There is also the matter of personal private residence and letting allowance tax relief, both of which apply to a place you've lived in as your main home. For this reason it's to his advantage to buy a place, move into it for a while then switch it to BTL and move on to the next property. Then he gets the letting allowance against capital gains tax whenever he sells.

Any

Well, is he planning on staying in shared accommodation for the rest of his life?
And then surviving on the lets say £500, £600 a month the tenants pay for his house for the rest of his life (and don't forget he still has to pay his share of the house share out of that)?
If he has such a small requirements for survival, then it is an OK plan.
I am quite a believer that there will always be people needing to rent.

I know I spend more then this on basic living, never mind the luxuries I like!!