Should I buy a house to let or use savings account?

Legacy_user

By the end of next year I hope to have £170,000 in the bank. I'm living with parents. I'm going to buy a house for around £100,000. Then the leftover £70,000, should I buy another house/flat to let or put it in a savings accounts. I want this money to fund my house bills which are approx £3k-£4k so there's no pressure if I don't have a job.


I was thinking buy to let is the better option, say I buy a flat for £70,000 and let it out for £400 per month, thats £4800 per year. Compared to around 2% in a savings account, £1400. Also as long as someone is renting the house, I will always have an income, so I'm not too bothered if the house value falls (they can't fall much more anyway)

so is letting the better option? any costs involved?

anselld

berbastrike wrote: »

. I want this money to fund my house bills which are approx £3k-£4k so there's no pressure if I don't have a job.

You can't do both! If you spend the £70k on BTL you will need cash buffer both for yourself and for any unexpected BTL costs.

berbastrike wrote: »

so is letting the better option? any costs involved?

Of course there are costs.... agents fees, service charges, maintenance, ground rent, insurance, etc, etc.

System

anselld,
thanks,

I kind of agree about cash buffer, but life is dull without risks! and surely it wouldn't be too much of a risk, say an unexpected cost of insurance excess £100, then I'm pretty sure I could get that money somehow.

[Deleted User]

berbastrike wrote: »

surely it wouldn't be too much of a risk, say an unexpected cost of insurance excess £100, then I'm pretty sure I could get that money somehow.

Famous last words.

A landlord approaching landlording properly will approach it like a business, because it is a business. Even a rinky-dink corner shop would never say what you've just said!

Landlording is a serious commitment, have you considered what happens if you get a tenant that decides they're not going to pay their rent and you mistakenly serve the S8 wrong and then the court doesn't grant posession and you have to start all over again with the reposession process? That could mean you'd have a house, with a tenant that hasn't paid rent for 6 months, maybe more! If you cannot survive with at least 3 months of no rent and then the costs of rectifying tenant damage, you're going to have a bad time.

If you're serious about it, Start here with this post by G_M.

anselld

berbastrike wrote: »

anselld,
thanks,

I kind of agree about cash buffer, but life is dull without risks! and surely it wouldn't be too much of a risk, say an unexpected cost of insurance excess £100, then I'm pretty sure I could get that money somehow.

New boiler, £1500?
Major structural works required to block by freeholder?
Tenant from hell - prolonged eviction proceedings followed by flat being completely trashed?

... but yes, it is ultimately down to your attitude to risk.

Ellie007

Do you have a job at the present? i.e. hypothetical question regarding your situation if you lost your job, and went a few months without income whilst job-hunting? Or are you intending to go into this without currently working?

ValHaller

berbastrike wrote: »

I'm living with parents. I'm going to buy a house for around £100,000. Then the leftover £70,000, should I buy another house/flat to let or

Living with parents, no experience of your own property and going into BTL?

Good intentions - but as ever they are paving a road to hell.

somethingcorporate

7% yield on your first B2L property?

I think you'd be lucky to get 5%.

At least if you leave the money invested, in bank accounts etc you will get some income from it. What if you have tenants that don't pay, trash the place etc etc. lots of headache for often a very poor return.

Guest101

Don't forget that the rent is taxable, which once you factor in costs etc, you'd probably lost 30-35% of that income. and that's if you have a tenant

Stratus

70k to invest? Learn to invest in the stock market. Your returns should far outstrip any BTL unless it's student digs. Far less hassle too.

AlexMac

I'm in favour as my second, recently purchased BTL is producing the % yield you describe, but then, it's in suburban SE London where there are still cheap ex-council 2-bedders which rent really well. And I'm seriously businesslike about being a landlord, and able to cope with expenses like a £2k boiler replacement ( 2 in the last few years; 1 in each of my little BTLs). There are masses of earlier posts exactly like yours, so do a search, do the numbers. ask whether you're up to the legal compliance and financial responsibilities (including tax) or whether it's easier to get 2-3% in safer cash ISAs and fixed term savings. Good luck!