Buy to let studio flat in London

Skag

So I've been seeing in rightmove some "flats" in London, costing 500-600k. These aren't studio flats, are more like big 1 bedroom flats, usually in good areas (Hyde park, by the river, etc). I don't live in London at the moment, but I might be moving in the next years.
Furthermore, I saw that such flats are let for like 1.5-2k per week (unless the entries in rightmove are wrong).

So I thought, if I got some money to invest, say 100k, and purchase such a flat, get a mortgage for 30 years and rent it out, do all these sound feasible? And if I decide to move to London, I just live there and pay the mortgage. I'm not necessarily interested in making extra money, I just think of owning something in London just in case, whilst "securing" my money.

Onawingandaprayer

So, setting aside your £100k, you're looking for a mortgage of £400k to £500k?

Gulp

lawriejones1

I think this suggests that those sort of rents and the property values of London will remain at their historic high.

I think this is a pretty big gamble.

Skag

Onawingandaprayer wrote: »

So, setting aside your £100k, you're looking for a mortgage of £400k to £500k?

Gulp

Well, presumably this is rented out so the rent pays the mortgage.

Skag

lawriejones1 wrote: »

I think this suggests that those sort of rents and the property values of London will remain at their historic high.

I think this is a pretty big gamble.

Big gamble in terms of mortgage?

atush

Do you have the assets and income to get such a mtg? the rent may pay it when rent is coming in, but they would want you to be able to serivce it w/o during vacant periods. Not to mention, they would want you to own your own home as well- do you?

There are cheaper flats in london in less but still desirable areas. And even better, large one bed flats that can be turned into 2 beds. which increases both the value and the rents.

Skag

atush wrote: »

Do you have the assets and income to get such a mtg? the rent may pay it when rent is coming in, but they would want you to be able to serivce it w/o during vacant periods. Not to mention, they would want you to own your own home as well- do you?

There are cheaper flats in london in less but still desirable areas. And even better, large one bed flats that can be turned into 2 beds. which increases both the value and the rents.

Good points to consider. Though, why do they want you to own your home? I do own two properties which are rented atm (houses), which generate a good income which could potentially cover the monthly repayments, and on top it's my job income.

EmmG_2

Hi Skag,

If you do go ahead with this plan, make sure you tell the lender that you plan to move into the property at some point. This may seem irrelevant (after all, it'll be your property - surely you should be able to live there?) but actually it makes a massive difference.
The reason it's important to tell your lender is that a BTL mortgage is usually unregulated, and a residential mortgage is regulated (by the FCA). Not telling your lender this at the point of application could be seen as mortgage fraud.
However, if someone buys a btl property with an unregulated mortgage and needs to move in at some point in the future (but did not know this at the point of application) then they can, but they would need to remortgage to a residential mortgage (which would probably be better for the old bank balance anyway because resi mortgages usually have much cheaper rates than BTL).
Hope this makes sense!
If you are interested in becoming a landlord, check out the finer points because it's hard work and certainly not suitable for the 'armchair' investor.

Best wishes,
Emma

Skag

EmmG wrote: »

Hi Skag,

If you do go ahead with this plan, make sure you tell the lender that you plan to move into the property at some point. This may seem irrelevant (after all, it'll be your property - surely you should be able to live there?) but actually it makes a massive difference.
The reason it's important to tell your lender is that a BTL mortgage is usually unregulated, and a residential mortgage is regulated (by the FCA). Not telling your lender this at the point of application could be seen as mortgage fraud.
However, if someone buys a btl property with an unregulated mortgage and needs to move in at some point in the future (but did not know this at the point of application) then they can, but they would need to remortgage to a residential mortgage (which would probably be better for the old bank balance anyway because resi mortgages usually have much cheaper rates than BTL).
Hope this makes sense!
If you are interested in becoming a landlord, check out the finer points because it's hard work and certainly not suitable for the 'armchair' investor.

Best wishes,
Emma

Thanks Emma, that's helpful addition surely. Atm I'm with a lettings agent on a partial management so I know where I'm standing with the btl properties.

Regards

atush

If you already own two, and have them let and they have some equity in them, that will help you. Are they mtg'd? IF so, that is the lender you should approach first.

But paying top prices for a flat in central london that you have not added value to (by either major renovations or increasing the number of bedrooms) will not bring you a good rental yield. The best yields are found in smaller value houses that have been bought cheaply and renovated in high letting areas. You will see higher yields by turning a studio into a one bed, or a one bed into a 2 bed flat.

Skag

atush wrote: »

If you already own two, and have them let and they have some equity in them, that will help you. Are they mtg'd? IF so, that is the lender you should approach first.

But paying top prices for a flat in central london that you have not added value to (by either major renovations or increasing the number of bedrooms) will not bring you a good rental yield. The best yields are found in smaller value houses that have been bought cheaply and renovated in high letting areas. You will see higher yields by turning a studio into a one bed, or a one bed into a 2 bed flat.

There's no mortgage on the properties. So, smaller value houses IN central London?