want to buy and then rent out

haribo27

Hi woody Im also a single woody (coincedence?) and am thinking of doing the same thing. So your not alone!!!

wecanhelpu

:rotfl: :rotfl: :rotfl:

haribo27 wrote: »

Hi woody Im also a single woody (coincedence?) and am thinking of doing the same thing. So your not alone!!!

!!!!!!?

Running_Horse

Many people think we are at the top of the market.

Perhaps not the best time to be buying a house you won't be living in?

But if you're brave, go for it.

edthedead

I was in that fortunate position (my parents moved abroad to work... handy!). I brought a studio flat which was all I could get a mortgage to cover, did it up and sold it on. I did a few more properties and now (5 years and 5 properties later) I live a 2 bed house and have a flat that I let out....

It was hard work, but worth it!

The good thing about only owning one property is the tax position... you don't pay capital gains tax when you sell your primary residence and you can get a normal mortgage since it is your home... obviously this means that you have to 'live in it' while you do it up

Errata

Sounds like you've got your head properly screwed on your shoulders, well done. Why not call into a couple of letting agents and find out exactly what they would do for you and at what cost, then you can compare how much it would cost you to do it yourself. Don't forget to add something for the grief you might be faced with if you go down the DIY route and remember to think about the possibility of voids.
Have you considered buying something you could rent out a room in? A young relly of mine has bought a one bedder but made it into two bedsits with shared kitchen and bathroom, it was the only way they could get on the property ladder.

A_Fool_&_His_Borrowed_Mon

Using Logic Here,

If you cant afford the mortgage, could anyone else afford it either?

In Short,
The rent received will likely be less than the cost of the mortgage.

Average yields 3-4%, Mortgage interest 5-6% + repayment on top of that.



Shoot me down if you can on that conclusion

HugoSP

Letting agents will tell you which areas rent the best.

I was keen on buying cheap properties at auction until a letting agency warned me off most of them!

I eventually plumped for a flat the right side of town and it lets not problem.

We now let a number properties atm and may soon acquire another. Our own house is to be split into two, one dwelling will be let out then.

The flat is some 20 miles away and we let that through an agent who charges us 12.5% plus vat. That is good value for the service he provides.

The mortgage side is not as competitive as it is for owner occupier mortgages. Rates are typically .3 to .5% more. We are on a 5.89% 5 year fixed deal with UCB home loans for one property.

We have financed purchases via a remortgage on our own house before now, usually when the property purchased was unmortgageable, or when we could save money. However we are now in a position, mainly due to rising house prices etc where only one property is mortgaged and all the others, including the one we live in are unincumbered. So for the long term it has worked out well. Although we could save a few quid by carrying the mortgage on our own house it makes sense to put the mortgage on a property that we know we're not going to sell or muck about with.

The OPs approach is basically sound. Property prices may fall by 20% in the short term but in the long term they will rise. Every 10 years they have doubled up until now, and we have had some pretty major crashes.

In Cornwall alone they have identified the need for about 100,000 extra homes over the next 10 years.

ATM it is cheaper to rent that to buy, assuming a buyer would have to take out a 100% mortgage. Having said that there are some houses out there that will generate a high yeald, either because they are cheap for some reason or as Errata has said you can up the yield by turning a house into bedsits, or even student accomodation in the right areas.

But the OP is looking at the long term. He will benefit from capital appreciation.

One final note. Get wise WRT tax accounting for this. HMRC will allow exemption from CGT if it is your own home. Hence if the OP needs to sell he would do well to live in it for a short while before he does.

As far as tax is concerned, broadly speaking the OP can claim maintenance and renewals (EG replacement bathroom suite of similar standard) against rental income. However upgrades and improvements/development (EG extension or installation of £5k bathroom suite where there was only a cheap £200 suite before) would go against CGT.

Sometimes it all depends how you can present the expenditure.

10% of rental income can be deducted for wear and tear on furniture etc, or you can claim individual expenses. I tend to do the former as it is more lucrative. Most of the funiture etc we put in our places is usually what we have decided to replace in our own home, and hence would be worth next to nothing otherwise.

dannyboycey

I can't believe what I'm reading here!! We know that the majority of have-a-go buy to letters are losing money each month now. Most are on interest only mortgages, so things will get much worse if interest rates rise again, and the monthly deficit will increase. Just doesn't make any sense at all.

devils_advocate

edthedead wrote: »

I was in that fortunate position (my parents moved abroad to work... handy!). I brought a studio flat which was all I could get a mortgage to cover, did it up and sold it on. I did a few more properties and now (5 years and 5 properties later) I live a 2 bed house and have a flat that I let out....

It was hard work, but worth it!

The good thing about only owning one property is the tax position... you don't pay capital gains tax when you sell your primary residence and you can get a normal mortgage since it is your home... obviously this means that you have to 'live in it' while you do it up

Ed

I don't want to be a doom and gloom merchant, but the taxman could regard this as a business and impose income tax on the gains made.

mystic_trev

HugoSP wrote: »

The OPs approach is basically sound. Property prices may fall by 20% in the short term but in the long term they will rise. Every 10 years they have doubled up until now, and we have had some pretty major crashes.


But the OP is looking at the long term. He will benefit from capital appreciation.

You're looking at past performance, and as they say in the adverts, your Investment can go up as well as down.

I've had two BTL's for the past 11 years, ones nealy gone up four times in value the other nearly three times, do you expect that to continue? Property only forms a part of my Investment Portfolio and it's a part I think is grossly overvalued - I wouldn't dream of buying at todays 'yields' Although Property has done extremly well in the past decade, it's mainly for two reasons - Property was cheap in 1996 after coming out of the last 'Crash' Interest rates have been extremly low duringthat time, making afforability easy, but that's now played 'catch up'

Anyone who thinks Property will double in the next ten years has to be insane! That would make the average home worth over £400,000 and with the average payrise around 2% ( below inflation) who's going to be able to afford them?

The best scenarion for the housing market would be a Generation of fairly static prices, barely keeping up with Inflation. If there's a recession in that timeframe, expect a dramatic 'revaluation' of the Housing market, and I don't mean up!