buy to let. a good idea?

myright

Hi guys

I own a house outright.

I am thinking of buying a house on the basis of buy to let.

For those who have experience in this or have done this. What are the pro and cons? Did the rent money you earn cover your mortgage repayments monthly??

i dread to be in a situation where I'll have to use the rent income to pay for maintance work all the time and not making enough cash to atleast cover some of the mortgage payments. In this case I might aswel stick to the house I am living in and forget the headache

Thrugelmir

If you expect property letting to be straightforward and hassle free then its probably not for for you. As you'll be running a business so will have all the risks and rewards that go with doing so.

Cornucopia

myright wrote: »

i dread to be in a situation where I'll have to use the rent income to pay for maintance work all the time and not making enough cash to atleast cover some of the mortgage payments. In this case I might aswel stick to the house I am living in and forget the headache

This is good enough reason not to do it.

BTL is like any other form of investment - it is a balance between risk, effort and return. IMHO, BTL is low risk, medium-high effort, medium return. (To set this into context, a Bank savings account with £80k in it would be zero risk, low effort, low return).

BTL is unusual in being a leveraged investment, and in having some tax advantages. On a small scale, it works best when you have the skills and the time to do some of the maintenance yourself.

myright

can you elloborate mate.

And btw I am of opinion that there are alot of risks involved such as finding tennants. tennants not paying etc. I am aware of all this.

G_M

All the above is true, though BTL is more like a business than an investment.

An investment, you stick your money in and wait for it grow (or plummet).

A business takes work too. It needs managing.

New Landlords (information for new or prospective landlords)

Letting Agents (Tips for selecting, and tips for sacking them)

myright

I think I can rusell together about £20k deposit.

I probs aim to buy a property around 80k.


Could some one break down what repayments should look like? what costs in addition need to be adressed to the cost of house.

Road_Hog

It's free money if you do it right.

myright

Round Hog give me some tips mate. I probs can get £20k deposit sorted by the next few months.

ognum

Road_Hog wrote: »

It's free money if you do it right.

Sorry RH I disagree, it is never FREE money.

You don't know if your investment will go up or down, there are lots of external factors that can influence the value of your property.

No property is maintainence free, whether you do it yourself or pay someone else it has a cost.

Even unfurnished let's need new flooring, white goods etc.

Tax has to be paid on your income ( minus some expenses)

Capital gains has to be paid on and growth of the value of the property.

You are never off duty, even using a letting agent needs your input into problems evn if you are out of the country!

Buying inane selling has costs, stamp duty, solicitors fees, EA fees, Letting fees.

Mortgage interest (if property is not owned outright)

Loss of interest (if bought with cash)


Just some of the things that impact what RH suggests is FREE money

Road_Hog

myright wrote: »

Round Hog give me some tips mate. I probs can get £20k deposit sorted by the next few months.

Research the market first, understand whether you are going for capital growth (London) or rental yield/income and somebody paying your mortgage.

Don't get attached to the property, think of it as a commodity. You want a vanilla property and decorated in magonlia. Don't go furnished, because the tenants will trash everything.

Allow pets and smokers and then you won't (unlikely) end up with void periods. Make sure that you can cover the mortgage in the event of void periods.

Make sure you have LL insurance and you have the yearly gas check done. Be in it for the long term, which is how the best gains are made.

Don't think about it as a property that you'd like to live in, talk to EA's and LA's and see where you can buy property cheaply but where there is high rental demand.

Oh, and at £20K deposit, I wouldn't buy a property over £80K, don't overstretch yourself. And don't forget to pay tax, HMRC will eventually catch up with you.

If you do it right, over the long term, you can end up with a house paid for by the tenants and a bit of profit as well. Which will end up as a nice top up on your pension fund.

ognum wrote: »

Capital gains has to be paid on and growth of the value of the property.

It does, and I'm a little out of touch with the exact rates, but from memory, it used to be £6K pa and if you're married (as I am) then you get £12K pa. It's got to be some serious increase to go over that threshold.

ognum

[QUOTE=Road_Hog;63735574

It does, and I'm a little out of touch with the exact rates, but from memory, it used to be £6K pa and if you're married (as I am) then you get £12K pa. It's got to be some serious increase to go over that threshold.[/QUOTE]

I bought one of my BTL properties 9 months ago, three of the same houses have come on the market since in worse condition and have all sold for 30k more than I paid.

I am in my properties for the long term but it can be quite easy to make a 10k gain on some property!