Thinking of buying as an investment

northerntwo1

I have a small amount of savings which are not gaining much interest and considering buying to rent out.

With that in mind do any of you lovely people have sage words to give or what to look out for? I will do my own research but as I have no experience renting wanted to gain some insight if people don't mind so I have a clearer picture. I am not risk orientated so want to look at all angles and have a better idea if this is really for me.

R_P_W

How much savings is small?

You will need 25% deposit plus fees plus a contingency fund funds repairs and void periods.

Rent will need to cover 125% of mortgage. Income is liable to income tax.

It is actually very risky!

northerntwo1

R_P_W wrote: »

How much savings is small?

You will need 25% deposit plus fees plus a contingency fund funds repairs and void periods.

Rent will need to cover 125% of mortgage. Income is liable to income tax.

It is actually very risky!

For the area involved it would be cash purchase with 30% contingency fund. I will leave myself 2 years savings for my own emergency fund, so looking at putting most of my savings in that.

An example of the area is price for a 2 bed house (estate agent says houses rent better than flats) is £60,000 - average rental is £550 per month. Does this sound about right?

I understand about income tax it will go in my name so lower rate of tax and I already pay income tax on the savings.

Thank you very much for your comments I do appreciate them.

Thrugelmir

Do you not use your ISA allowance?

Do you have a pension scheme?


There's a considerable difference between a savings account and running a property business. Personally I would invest in a broader range of investments before committing to a single punt.

rob404uk

That would be a great yield of 11%. Where are you looking if you don't mind me asking?

Cornucopia

Several Northern towns have these kind of figures.

Even better if you buy at auction.

northerntwo1

rob404uk wrote: »

That would be a great yield of 11%. Where are you looking if you don't mind me asking?

Its northern on a good transport link.

northerntwo1

Cornucopia wrote: »

Several Northern towns have these kind of figures.

Even better if you buy at auction.

I have considered auctions but they scare me if honest as I don't know enough about them, but I probably should research and attend one to find out more.

Cornucopia

The main thing is that the process is legally binding. So... you need to have viewed the property and decided to buy it beforehand. And you need to have the deposit ready and any funding in place before you bid.

That's the gist of it, though i understand there are some variations on the auction process around.

I'm interested in investing in the north because the returns are better than here in the south-east, and the initial investment is smaller.

Does anyone think that there is more risk up north, and if so, what form does it take?

lessonlearned

Well I'm "up north" and I can't say that I've noticed any risks.

Your quoted yield is good. I suggest you do some in depth research over several months.

Putting some similar properties that are currently vacant on a "watch list" and see how long they take, on average, before they get tenants.

Start monitoring some letting agents and see how they perform.

Think about areas and likely tenants ie - hospitals = medics, unis = students, that kind of thing.

What kind of property - agree here go for houses rather than flats, however think about gardens - a lot of tenants don't "do" gardening. You may need to factor in gardening services.

Which brings me nicely to outgoings. You seem to have plenty of reserves to cover contingencies.

Do you really want to pay cash and buy outright. A BTL mortgage would be more tax efficient.

Invest in a really good tax guide before you even buy your property. The Tax Cafe do a series of guides aimed specifically for property investment. They cost around £25 and are updated yearly. Well worth the money - you will save yourself a small fortune if you do it properly. They are easy enough to read - well as easy as any thing to do with tax can be.:rotfl:

Familiarise yourself with all the current legislation before you buy anything.

Finally remember it is a business - so be businesslike.

Good luck.

robtgossard

“No Risks No Gains”, so think again buddy. Whatever you invest in, there would be some amount of risk factor attached to it. Only if you are ok, then go ahead. There are avenues like investing in precious metals wherein the prices are at a low for now, which is expected to go up manifolds in future.