£400 a month to invest - should I get a BTL?

misterman

Hi
This is my first post on here, so go easy on me! Wife and I have £400 every month left over after all bills, fuel, food, leisure spending etc. We are seriously considering a buy to let, using the money to top up the interest on the BTL mortgage and also save each month to cover times when the property isn't let. We have seen a few houses at around 100k, we can put down 10k from savings and get a BTL mortgage on 90k for approx £450 per month. The property would let for £425, so from our spare £400 would be used to pay letting agent fees (approx £50), top up the mortgage (£25) and insure the house (approx £15 month). The rest will be saved to cover times when the house isnt let. We'd then rely on house price increases over the next 5 - 10 years to make this worthwhile. To us this sounds like a feasible and 'relatively' low risk plan - but we have no experience of BTLs and would really welcome any input. Our alternative plan is to spend the 10k on our existing home, primarily to add value, and look at other options for the £400 / month.
Thanks in advance for any advice
MM

Feanor

What area do you live in? Do you know what the rental market is like at all?

prudryden

Second option sounds much less stressful.

nelly_2

Bacon lettuce and tomatoe has had its day mate

mr.broderick

nelly wrote: »

Bacon lettuce and tomatoe has had its day mate

that one tickled me

Doozergirl

I think pretty much all of us agree that 5-10 years is not the timescale to be thinking of. You either go short term or very long term but 5-10 years is just a very hazy place for property prices.

Relying on capital gains is the wrong reason for BTL. You also need a 15% deposit, and your rent needs to cover 130% of the mortgage repayments, so you're scuppered already.

Do you really want to buy an investment when it was really expensive, and you'd have to subsidise your tenants rent? What if interest rates keep going up?

Contrary to popular opinion, house prices do not always go up. Prices haven't moved much at all in my part of the world in three years. You should check what they're actually doing in yours.

misterman

Hi
Feanor -We're in the North West, the 2 houses we're looking at at for sale are about 10% below current market value based on others in the area, and both require no work to get them ready to let. After speaking to others who rent and judging from the low number of empty rental properties there seems a very good chance of letting. prudryden - im not averse to a bit of stress(!) but wouldnt want to take a major risk. nelly - thats the impression I get from reading a few threads on here- but is this the case for all areas and price bands?
Thanks
MM

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misterman

Thanks for the advice Doozergirl, I thought we'd need 15% and 125% rental but we were offered a 90% BTL mortgage at 5.?% (cant remember exact figure, think it was 5.9%) based on the figures i quoted in the first post, with the conditon that we'd top it up ourselves. So 5-10 yrs is neither here nor there, I presume then its got to be approx 2 years or alternatively > 15 years. We would probably then go for the long term option. I appreciate the impending rise in interest rates but there does seem to be a lot of people round here still snapping up houses and apartments at around 100 - 130k and then letting them.

pinkshoes

Some areas will always require BTL investors to rent to the private sector, and other areas are saturated already, so you could risk having the house empty for long periods of time. Do you homework, check out the type of people that live in the area i.e hospital workers, students, immigrants, that may require private rented houses, and make your decision based on that.

Unless your "spare" money easily covers the interest on the BTL mortgage, I don't think it's a great idea. Doozergirl, where did you get the 130% figure from?


It's not necessarily a risk, but you should look at it as more long term than 5 years. Some people are speculating about a housing crash, but that doesn't necessarily mean doom and gloom. Most house owners I know have extra cash put aside to pay their mortgage even if interest rates rise above 12%, and if houseprices drop, it just means that if they ever went to move, they'd rent their house out rather than selling, which will just mean even less properties available to FTBs.

Most the negative house crash speculators are those who rent privately and are hoping they'll be able to bag themselves a 4 bed detached mansion with extensive grounds for 50p!

misterman

Obviously not all FTBS can afford the mortgage but may still like to have a place of their own