Buying a cheap house while renting

bigmaz

Hi guys

We currently rent our house, so not on the property ladder. We would like to be on the property ladder, but the problem is, to get a mortgage that would be equal payments to our rent, we would have to downgrade big time. So my thinking is this:

To buy a cheap 1/2 bedroom flat locally, maybe on a 10 year mortgage, the mortgage payments being less than the potential rental income. Is there anyone else on here that has done something like this? We could afford to cover the small mortgage payments while the property is not occupied. Is this a good path to go down? I am thinking within 10 years of renting out the property we would have property worth more than what we could save in that time.

Thanks in advance.

caprikid1

"maybe on a 10 year mortgage, the mortgage payments being less than the potential rental income"

Where is this possible with good tenants ?

bigmaz

caprikid1 wrote: »

"maybe on a 10 year mortgage, the mortgage payments being less than the potential rental income"

Where is this possible with good tenants ?

It will be a cheap place to rent, and you just have to hope you get decent tenants. Not all people on low incomes are bad tenants

caprikid1

Have you identified somewhere and done the figures ?

I reckon 10 year repayment BTL cannot be done easily.

bigmaz

caprikid1 wrote: »

Have you identified somewhere and done the figures ?

I reckon 10 year repayment BTL cannot be done easily.

I have seen a few properties on Rightmove that are very cheap.

I just done quick searches on a compare site to get BTL repayment figures.

Might notbe possible or a good idea, its just a thought, so came on to ask if anyone else has gone down a similar route to get on the property ladder.

Cautious_Optimist

Don't forget the service charges for flats.
Don't forget that flats devalue as their lease length reduces.
Remember that tenants cannot or do not always pay their rent.

What size / percentage deposit are you planning to put down?
How much is your current rent?

How come you can afford a deposit on a BTL mortgage, but not on a residential mortgage?

bigmaz

Cautious_Optimist wrote: »

Don't forget the service charges for flats.
Don't forget that flats devalue as their lease length reduces.
Remember that tenants cannot or do not always pay their rent.

What size / percentage deposit are you planning to put down?
How much is your current rent?

How come you can afford a deposit on a BTL mortgage, but not on a residential mortgage?

The flats are going for around £30k. Its a cheap area. But the house that we are in now would cost about £170,000 to buy. So its a massive jump in deposits and mortgage payments. As I have already mentioned, I could afford to cover the mortgage payments when there is no tennants, or non payers :P

Cautious_Optimist

I don't know much about your situation, but I would advise caution.
There's no guarantee this will be a property "ladder" for you.

Can you buy a cheaper house to live in yourself?

What would the annual rent be on the 30k flat?
Why aren't more experienced LLs buying them up?

bigmaz

Cautious_Optimist wrote: »

I don't know much about your situation, but I would advise caution.
There's no guarantee this will be a property "ladder" for you.

Can you buy a cheaper house to live in yourself?

What would the annual rent be on the 30k flat?
Why aren't more experienced LLs buying them up?

As my original post, to buy something it will mean downgrading big time, which is not something I am going to do. So I thought, this way, after 10 years I will own a flat/asset worth £30k (hopefully more). That will hopefully be mostly paid for through renting. I dont see a negative there?

The same flats in the street are being rented out for more per month than what a 10 year mortgage monthly repayment is.

Nobbie1967

bigmaz wrote: »

As my original post, to buy something it will mean downgrading big time, which is not something I am going to do. So I thought, this way, after 10 years I will own a flat/asset worth £30k (hopefully more). That will hopefully be mostly paid for through renting. I dont see a negative there?

The same flats in the street are being rented out for more per month than what a 10 year mortgage monthly repayment is.

Voids, absconders, repairs, high service changes, lease renewals, tax, insurance, agents fees.

When you factor all those in, see if it's still such a great idea, plus the potential stress if you get bad tenant in.

If it seems to good to be true, it generally is, and if the flats are only going for £30k, they obviously aren't very desirable and so won't attract reliable tenants.

Cautious_Optimist

bigmaz wrote: »

I dont see a negative there?

Apart from all the hassle and risk of becoming a LL...

I'm not saying it can't be done, but I would advise do your homework and consider whether it is the right option for YOU.
Presumably you have never owned property or been a LL before?
Presumably you are in England?

You will only consider buying a house worth >170k, so presumably you don't have savings of more than 17k (for a 10pc deposit)?

A lot will depend on your income, knowledge, skills, profession (eg estate agent? builder? solicitor? etc), contacts, family circumstances etc.

I would seek further free advice before doing anything else.
Speak to any family or friends about their experiences as a LL.
Speak to local estate agents and letting agents about the flats.
Who are the tenants? Who are the LLs?
Speak to your bank manager about BTL mortgages.

I would also consider increasing your income and / or alternative investment options for your deposit.