Buy To Let - would you pay £150K for a £625 BTL ?

Helonearth

Generali wrote: »

I have 3 questions, just out of interest:

- What deposit did you put down on the BTL place?
- Will the £200 for wear and tear, voids etc cover the irregular big stuff like a new kitchen/bathroom/roof etc.
- Are you on an interest only or repayment mortgage?

I'm interested in peoples' rationale for getting into BTL right now as it doesn't really make sense to me.

Since, (unlike others) you have been polite in the response to my VIEWPOINT (which, I am entitled to have) I will explain my reasoning. Just to clarify, I am not in any way going to justify my decision to anyone, because I have done what I feel is right for me. Everyone else can do what they want with their money, but don't expect me to follow.

For starters, I didn't buy the property as a buy to let. I bought a place for me to use as somewhere to get away from my parents. During the week I still live at home, but there isn't a place in Britain I could currently work and buy my own place in. I tried.

It is in a town that is undergoing regeneration, in a part of the country which has a lot of growth still to come. I intend to do some work to the property which will increase it's value, even if the market remains unchanged.

I am quite happy to continue paying the mortgage on this place and not letting it out for the forseeable future, as I love the freedom it gives me. However, I have decided that this autumn I will look at letting the place, purely for financial reasons.

To answer your questions:
- My deposit was minimal, as I was impatient and decided that 100% mortgages aren't the worst thing in the world. Go on, judge me!
- The property has an almost new kitchen and bathroom. Any major refurb I can do myself as I have been helping my parents refurbish properties since I was small. The property is leasehold, so major structural problems will not be solely my problem.
- My mortgage is on a repayment basis. Rate is fixed for 5 years.

To my way of looking at this, any money I get from letting is a bonus. Additionally, by not occupying the place myself and travelling there as often as I do, I save on electricity, council tax and petrol to the tune of around £200 a month. Someone earlier decided to define what they feel is investment or speculation. This would definately come under the definition of speculation, but to me it means so much more emotionally.

Maybe it isn't the most financially perfect decision ever, but I'm not a robot. Some things are worth more than money.

Generali

Helonearth wrote: »

Since, (unlike others) you have been polite in the response to my VIEWPOINT (which, I am entitled to have) I will explain my reasoning. Just to clarify, I am not in any way going to justify my decision to anyone, because I have done what I feel is right for me. Everyone else can do what they want with their money, but don't expect me to follow.

For starters, I didn't buy the property as a buy to let. I bought a place for me to use as somewhere to get away from my parents. During the week I still live at home, but there isn't a place in Britain I could currently work and buy my own place in. I tried.

It is in a town that is undergoing regeneration, in a part of the country which has a lot of growth still to come. I intend to do some work to the property which will increase it's value, even if the market remains unchanged.

I am quite happy to continue paying the mortgage on this place and not letting it out for the forseeable future, as I love the freedom it gives me. However, I have decided that this autumn I will look at letting the place, purely for financial reasons.

To answer your questions:
- My deposit was minimal, as I was impatient and decided that 100% mortgages aren't the worst thing in the world. Go on, judge me!
- The property has an almost new kitchen and bathroom. Any major refurb I can do myself as I have been helping my parents refurbish properties since I was small. The property is leasehold, so major structural problems will not be solely my problem.
- My mortgage is on a repayment basis. Rate is fixed for 5 years.

To my way of looking at this, any money I get from letting is a bonus. Additionally, by not occupying the place myself and travelling there as often as I do, I save on electricity, council tax and petrol to the tune of around £200 a month. Someone earlier decided to define what they feel is investment or speculation. This would definately come under the definition of speculation, but to me it means so much more emotionally.

Maybe it isn't the most financially perfect decision ever, but I'm not a robot. Some things are worth more than money.

Of course, your viewpoint is your own. It doesn't matter what anyone else thinks (although I add the caveat that I always listen to others in case they know better than me - it happens, although not often!)

- 100% mortgage leaves you pretty vulnerable to a loss if prices fall. Having said that, the value of your property doesn't matter unless you want to sell or remortgage.

- It doesn't really answer my question although if you can DIY you reduce the costs. A kitchen is still going to be expensive even if you put it in yourself.

- 5 yr fixed i/r repayment is good. If rates rise at least you've paid off some of the principal sum when the fix expires so you'll pay interest on a lower balance owed.

Where I disagree with your choice of investment is that you could do better elsewhere. I may be misreading things but it seems you're effectively subsidising the BTL by £300 pcm (or £3600 pa). That's a lot. What happens if you lose your job or fall ill so you can't cover the shortfall?

That money going into shares and bonds is going to build up a pretty decent nest egg pretty quickly without the risk of leverage.

Coda: Does the mortgage company know you're letting the property? If it all goes wrong and they reposess then they're going to be pretty miffed. That's miffed as in looking to the police to charge you with fraud.

PS Agree with the 'some things worth more than money' bit as a father. I'm not convinced that's the best way to view an investment though - investment should be all about money, no more , no less.

RichardJohn_2

nelly wrote: »

Go for it! houses only ever go up

I hope you're jokng!

wecanhelpu

What?

Are you saying........




............No

That can't be true.

Helonearth

Generali wrote: »

- 100% mortgage leaves you pretty vulnerable to a loss if prices fall. Having said that, the value of your property doesn't matter unless you want to sell or remortgage.

- It doesn't really answer my question although if you can DIY you reduce the costs. A kitchen is still going to be expensive even if you put it in yourself.

Where I disagree with your choice of investment is that you could do better elsewhere. I may be misreading things but it seems you're effectively subsidising the BTL by £300 pcm (or £3600 pa). That's a lot. What happens if you lose your job or fall ill so you can't cover the shortfall?

Coda: Does the mortgage company know you're letting the property? If it all goes wrong and they reposess then they're going to be pretty miffed. That's miffed as in looking to the police to charge you with fraud.

PS Agree with the 'some things worth more than money' bit as a father. I'm not convinced that's the best way to view an investment though - investment should be all about money, no more , no less.

I understand the risks involved in 100% mortgage, but I don't intend to sell anytime in the near future. This has always been a long term plan, and has to stay that way to be worthwhile. I will add that it took 6 months for the sale to go through, so by the time I was actually paying the mortgage, the property was already worth more than what I had mortgaged it for.

Agreed a kitchen is expensive, but I am in a position where if the monthly savings were not enough, I could cover the costs.

I can see where you are coming from on the 'subsidising the buy to let' thing. I'll explain it this way. I currently pay out about £500 a month in mortgage payments and £200 for electricity, council tax and petrol to get to the flat. Total monthly spend from my pocket £700. If I rent at £400, I instantly stop paying CT, electric and petrol, save £200 for maintenance and receive £200 towards the mortgage. Total monthly spend from my pocket £300. Even then there is £200 a month going in reserve and earning interest.

If I did lose my job or fall ill, I have got insurance to cover those eventualities. If it got worse, I just sell the place. I'm still living at home the rest of the time, so I have a back up plan. Yes I'd have got my fingers burnt, but at least I tried it and enjoyed what I was doing.

As I am not yet letting the property, I have not crossed that bridge with the mortgage company. They do make a charge of £299 for registering that you will be letting the property. I also know that I would have to look into commercial property insurance, the costs of property maintenance, electrical safety checks, tax implications etc etc.

This never really started as an investment, but I don't see why I shouldn't get what I can from it. I guess I am just going back to my original point. If it all fell through and the place was empty for a year, I'm not all that worried.

I hope I've helped you understand why I've made the decisions I have.

dannyboycey

Helonearth wrote: »

I know where all the people who say "Don't Do It" are coming from, but personally, as long as you can afford to cover the mortgage even if you don't have a tenant, I would say do it as a long term investment.

I don't think of it as me subsidising a tenant, I think of it as them subsidising my pension! If the repayment is £500 on the mortgage, and the rental income is £400, even saving £200 for wear and tear, voids etc, there is still £200 a month going towards my pension investment!

Sooner or later the property market will slow up and speed up and slow up again, but I would have 25 years to ride it out. I doubt the property would still be worth x amount in 25 years time!

If there were an award for stupidist post of the month, this would win hands down ^^^^^

Helonearth

dannyboycey wrote: »

If there were an award for stupidist post of the month, this would win hands down ^^^^^

Why thank you Danny. Can I just point out the little note to the right of your screen entitled Forum Etiquette. The first paragraph reads thus:

Pls be nice to all MoneySavers. There's no such thing as a stupid question, and even if you disagree courtesy helps.

wecanhelpu

But you are not a money saver

Helonearth

Is money saving not about getting the best deal you can on what you want?

Don't worry, I've realised that this board really isn't the place for me. I'll not darken your door again.

franklee

Helonearth wrote: »

Is money saving not about getting the best deal you can on what you want?

Don't worry, I've realised that this board really isn't the place for me. I'll not darken your door again.

Try this one

http://www.singingpig.co.uk/forums/

There's lots of property investors there so you may pick up some tips, scroll down for the property section.