Buy-to-let whilst still living at home?

chris9393

I'm 20 and have roughly £4000 in savings. I'm currently saving for a mortgage as I want to get onto the property market. I'm a good saver so I'm aiming to stretch my savings to around £8000 by the end of the year.

Looking at house prices as they are at the moment it looks like I wouldn't be able to afford to move out until I'm around 30!

So it seems like buying a property and have someone pay off my mortgage (from rent) whilst living at home will be a very good idea. Also lead onto myself buying more properties down the line and renting them out.

All I'm really asking is how realistic is this to me? How much money do I need to put behind me to cover any problems down the line in case of bad tenants or any other problems. Also, I will not be able to borrow enough money to afford a property around this area so will be looking for further out where it is cheaper.

kinger101

Just some things to bear in mind;

(a) you need 25% deposit for buy to let. Ideally 40% to get a decent interest rate;
(b) how do you parents feel about the fact you want to spend the foreseeable future living at home while you build up your BTL empire?

mildredalien

Remember you will actually be a landlord and have all the responsibility, costs and hassles that that entails. How long would it take you to save enough deposit for a BTL property? How much would you actually be able to rent a property for? Would this definitely cover your mortgage and maintenance costs? What is your plan once you have a BTL, save a second deposit or just wait and hope the price of your house rises and you can sell it to buy your own home? How long would that take? Are you just going to live with your parents forever as you buy a bunch of houses and let them out to other people?

I think there is a lot more here that you may not have thought about...

chris9393

kinger101 wrote: »

Just some things to bear in mind;

(a) you need 25% deposit for buy to let. Ideally 40% to get a decent interest rate;
(b) how do you parents feel about the fact you want to spend the foreseeable future living at home while you build up your BTL empire?

Is that 25% the best rate going for mortgages on buy to let?

Il only be living at home till around 25

Dan-Dan

Think you need to already have a residential mortgage to btl

tunnel

Dan-Dan wrote: »

Think you need to already have a residential mortgage to btl

I believe that's at least own your own home, with or without a residential mortgage.
I certainly don't have a residential mortgage but have several BTL's. I do own my own home though.

kinger101

chris9393 wrote: »

Is that 25% the best rate going for mortgages on buy to let?

Il only be living at home till around 25

25% seems to be the minimum deposit require for BTL at the moment. These currently have an interest rate of around 6%. As well as finding these costs, you'll need additional capital for fees, improvements, emergencies.....

It's great you're able to put away £4K per year at your age, but the sensible thing to do would be to save for the deposit on your own home. Whats the point of owning a BTL if you end up renting somewhere yourself in a few years? Seems to me the worst of both worlds;

(a) you end up paying higher interest rates;
(b) you have the stress and responsibility of being a landlord;
(c) fewer rights as tenant rather than owner;
(d) you lose out financially - higher interest rates, no capital gains tax relief for principal private residence.

kingstreet

If you're a FTB, the lender will check you could afford the mortgage on your own income, not the rental income.

Just in case you are tempted to move in, five minutes after completion takes place.

You'll normally need 25% deposit and for the rent to be 125% of the monthly mortgage interest, assuming a rate of perhaps 6% a year for a "normal" BTL if you are a homeowner with, or without, a mortgage.

mik82

chris9393 wrote: »

I'm 20 and have roughly £4000 in savings. I'm currently saving for a mortgage as I want to get onto the property market. I'm a good saver so I'm aiming to stretch my savings to around £8000 by the end of the year...

So it seems like buying a property and have someone pay off my mortgage (from rent) whilst living at home will be a very good idea. Also lead onto myself buying more properties down the line and renting them out.

You're only 20. Carry on saving, living at home, and you'll get a deposit together - you have a big advantage over someone who is having to spend money on rent and bills.

Why face the hassle of taking on a huge amount of debt and risk before you're even settled? You're also suggesting that someone else can pay off your mortgage for you because you can't afford to buy. It doesn't really work like that.

lynneinjapan

Most BTL lenders require you to have an earned income of at least £25K and already be a homeowner. Some are more flexible but your choice is going to be very limited.

The maximum loan to value that you'll get on a BTL mortgage is 85% at present (i.e. 15% deposit needed), and you'll pay premium rates at that level; for more competitive rates you need to keep the LTV below 75% and for the best rates below 60%.

SG27

chris9393 wrote: »

Looking at house prices as they are at the moment it looks like I wouldn't be able to afford to move out until I'm around 30!

What makes you think you will afford a BTL any earlier?

I started saving about your age and I bought my first house last year at 30. I saved 50% deposit + fees + emergency fund. Well worth the wait, I have a very low rate, very affordable mortgage.