buy to let. a good idea?

Cornucopia

myright wrote: »

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.

That sounds doable in the right part of the country.

A typical outline purchase budget looks like this:-

Deposit: £20000
Property Price: £80000
LTV: 75% (need to get to this level for most lenders)

Mortgage Rate: 4% (say: 3yr Fix, Interest Only)


Monthly Budget:-
Rental Income: £500? (pick a realistic value for the property & area)
Mortgage Payments: £200
Gross Profit: £300

Agency Fees: £40-60 pm (though it may be payable 6-monthly or annually).
Landlord's Building Insurance: £20 pm
Landlord's Contents Insurance: £10 pm (though you may choose to self-insure)

Don't forget any service charges for the property.

I disagree about furnished properties - a small property (1-2 beds) is easy and cheap to furnish between 2nd Hand and Ikea. When you let a furnished flat, there is a flat-rate tax deduction of 10% for wear & tear, which makes it easy to complete your tax return.

myright

some top advice there folks. I like the fact that you have given me an insight to both sides! exactly what I was after

Just some clarifications if the property is under £100k, isn't stamp duty irrelevant?

And as to tax on income. What rate is it at? and does it take into account the wage aswel where I am employed?

Lastly is it essential to have a LA? can you not ct of the middle man?

Cornucopia

myright wrote: »

some top advice there folks. I like the fact that you have given me an insight to both sides! exactly what I was after

Just some clarifications if the property is under £100k, isn't stamp duty irrelevant?

Yes.

And as to tax on income. What rate is it at? and does it take into account the wage aswel where I am employed?

HMRC will add the taxable income from your BTL to your wages, and then tax the whole lot at the relevant rate(s).

Lastly is it essential to have a LA? can you not ct of the middle man?

You are highly advised to have LA for a first let. They will help you through the various legal requirements for tenancy agreement, gas cert, EPC, etc. etc.

floopnoodle

Cornucopia wrote: »

Mortgage Rate: 4% (say: 3yr Fix, Interest Only)

Are all BTL mortgages interest only?

Cornucopia

floopnoodle wrote: »

Are all BTL mortgages interest only?

No, most are though. It just makes the whole process much simpler.

(You'd otherwise have to account separately for Interest & Capital repayments).

AlexMac

As well as the replies above, there are many hundreds of posts on this topic, so try a few trawls through the Forum search, above.

I've enjoyed being an amateur (DIY, i.e. self-managing) landlord, especially as my 1st little 2-bed flat was v cheap 15 years ago, but in an inner London suburb, so fantastic return on the investment. So when I had a bit of spare cash 2 years ago, I bought an a second, identical one. Albeit that this coast almost 5 times more by then, the ROI is about 6-7% gross, which is what matters (especially as I've done a 3-year deal with a Housing Association, so no voids, repairs, gas certs costs or fees for that period, albeit maybe a bit more repairs at the end).

And you can 'cut out the middleman' and do the whole thing yourself, although for the 1st ten years I always used an EA to find, reference check (landlord/bank/employer/credit-rating), set up the AST and sort the statutory Deposit Protection; This, I felt, got me off to a good businesslike start in terms of relationship with the tenant.

And if the boiler breaks, the plumbing leaks or the fridge dies, you have to be able to sort it immediately- i.e. - fork out £2k if necessary to a fast, Gas Safe installer as I've had to do for both flats!

But if you're up for it, and if you really can buy for £80k , in an area of strong rental demand, and achieve, say £450 per month rent- go for it

Road_Hog

Cornucopia wrote: »

You are highly advised to have LA for a first let. They will help you through the various legal requirements for tenancy agreement, gas cert, EPC, etc. etc.

What he said^.

Go with a letting agent for the first year. They'll find you a tenant and get the right amount of rent. It'll cost you about 10% + VAT. But it will be worth it in the short run.

Road_Hog

ognum wrote: »

Sorry RH I disagree, it is never FREE money.

No need to apologise, all opinions are welcomed. However, I just wanted to point out your two statements that seem to disagree.

ognum wrote: »

but it can be quite easy to make a 10k gain on some property!

myright

Fantastic advice guys!!! I know local AE will be the best places to look for properties. Can anybody recommend some online methods?

ognum

Road_Hog wrote: »

No need to apologise, all opinions are welcomed. However, I just wanted to point out your two statements that seem to disagree.

A paper gain is just that, I have made no gain until I realise it and even then I will have worked to maintain a property etc, etc, etc and paid all the taxes, certainly not free money