Buying a flat at 24 to rent out

kteara

Hi all,

I have a plan of buying a flat at age 24 via a mortgage and renting it out, in order to pay off the mortgage and owning it outright. I am currently 20 years old and I am aiming to have £20,000 saved by then, in order to purchase it. I should be able to receive a mortgage on a flat if I have a 20k deposit correct? Is renting out the flat idea a good one? considering I can live with my parents rent free? I study IT management at university and I've just completed my first year. I have a part time job working at a supermarket.

This is my current plan and I just wanted to hear your thoughts as I'm focusing on making that 20k in the next 4 years.

slopemaster

I think most mortgage providers expect you to own your own home before they will lend on a property to rent out.

BrassicWoman

What do your parents think? Sounds like taking advantage to me

freeisgood

What will property prices be around your way in four years time? What do you think you will be earning and what prices are flats now (for what you are hoping to perhaps buy).

dancingfairy

I think if your parents are happy to support you then yes, go for it. You obviously need your parents support though. How are you going to pay to rent a place or are you planning to stay with your parents indefinitely?
Maybe buying a 2 or more bedroom place and taking a lodger in might be better?
df

Edi81

Rent free living at your parents? More fool them! That doesn't teach you anything about budgeting. You should be paying your parents something for living in their property.

RickyC_IFSWP

kteara wrote: »

Hi all,

I have a plan of buying a flat at age 24 via a mortgage and renting it out, in order to pay off the mortgage and owning it outright. I am currently 20 years old and I am aiming to have £20,000 saved by then, in order to purchase it. I should be able to receive a mortgage on a flat if I have a 20k deposit correct? Is renting out the flat idea a good one? considering I can live with my parents rent free? I study IT management at university and I've just completed my first year. I have a part time job working at a supermarket.

This is my current plan and I just wanted to hear your thoughts as I'm focusing on making that 20k in the next 4 years.

Good on you for having a savings plan.

In order to receive a mortgage, you have to jump through a series on hoops. Firstly, whether or not the £20k deposit will be sufficient will depend on the property price ("Loan to Value" ratio). Second, the maximum you can borrow will depend on your income (roughly 4 times annual income). Other factors include good credit score, mortgage providers willing to lend to first time buyer & first time landlord etc. You should also research into the responsibilities of a landlord as it isn't as simple as just collecting rent.

AlexMac

At 20 I didn't have a clue, so good on you! And if you do the homework suggested above, you'll acquire good planning and saving skills and self-discipline, so there will be secondary benefits. Even basic stuff (which you can read about on other MSE pages) like building a good credit rating by always being on the voters list, paying bills- even mobile contracts - on time, getting a credit card and paying it off in full each month... are good things to do anyway. And it won't hurt to buy a property as long as you get the numbers right.
I think its a great target and wish you luck! Wish I'd started earlier.

CC-Warrior

That's a great start financially and a good way to get ahead, if you could stay at home and save enough money you could potentially pay off the mortgage quite quickly.

kteara

So was I wrong for thinking I could pay the mortgage by renting out the flat? My plan is to pay the deposit in order to get the mortgage, and then pay off the mortgage by renting out the property.

Pixie5740

kteara wrote: »

So was I wrong for thinking I could pay the mortgage by renting out the flat? My plan is to pay the deposit in order to get the mortgage, and then pay off the mortgage by renting out the property.

To get a BTL mortgage, which is what you would need to let the property out then generally speaking you are looking at needing a 25% deposit and some/most BTL lenders require you to own your home too.

If you are able to get a BTL mortgage (a whole of market mortgage broker will be able to help you with this) then yes you could use the money you make from letting the property to pay off the capital. That would take years if not decades. Where would you live during that time? Still at home with mummy & daddy?

It's good to have a plan and that you're thinking about your financial future. What about buying somewhere for you to live in yourself and take in a lodger? That way you get to fly the nest and generate some extra income so that you can pay the mortgage off quicker.