Buying a cheap house while renting

Cautious_Optimist

You need to talk this over with your own bank manager.

bigmaz

Cautious_Optimist wrote: »

You need to talk this over with your own bank manager.

Ok, explain what the problem is please. Why wouldnt I be able to buy a house to let if I get the necessary deposit required for a BTL mortgage?

kingstreet

Having had a quick scan;-

property value too low - below minimum for BTL lenders

not an existing homeowner - lenders who will consider (many won't) will base affordability on personal income, not on rental income, to prevent borrower bypassing residential affordability rules when they want a property to live in

type of property - ex council flat likely to cause issue

condition of property - must be readily lettable, not a renovation project for flipping

deposit - minimum 25% required

rent - must be at, or above, 125% of monthly mortgage interest assuming a rate of perhaps 6%pa.

Such propositions should be discussed with an independent broker to establish their viability.

bigmaz

kingstreet wrote: »

Having had a quick scan;-

property value too low - below minimum for BTL lenders

not an existing homeowner - lenders who will consider (many won't) will base affordability on personal income, not on rental income, to prevent borrower bypassing residential affordability rules when they want a property to live in

type of property - ex council flat likely to cause issue

condition of property - must be readily lettable, not a renovation project for flipping

deposit - minimum 25% required

rent - must be at, or above, 125% of monthly mortgage interest assuming a rate of perhaps 6%pa.

Such propositions should be discussed with an independent broker to establish their viability.

Great, thank you for your expert advice, very much appreciated

Income, deposit and rent being 125% of mortgage payment wont be a problem. Interesting about "below minimum for BTL lenders". What is the risk to them lending on low value property for renting, out of curiosity?

kingstreet

The mortgage is unlikely to ever be profitable, nor cover the cost of actually setting it up, estimated at £4k a few years ago.

bigmaz

kingstreet wrote: »

The mortgage is unlikely to ever be profitable, nor cover the cost of actually setting it up, estimated at £4k a few years ago.

Ah yeah. Cheers. Thanks for the heads up.

But the principle would work though? Maybe not on this property.

We are just not in a position to buy the kind of house we rent, the repayments would be double our rent payments. And through personal choice we have decided not to downgrade just to buy a house, might seem crazy to some people, but it works for us . But we would still like to invest in property. Hence the idea.

Pixie5740

If you can rent the property you want to live in for less than it would cost you to own it then carry on renting, especially if you have a good relationship with your LL.

I have been considering doing something similar as I don't know if I want to live where I am long term so I'm thinking about getting a BTL or three instead.

caprikid1

I was chatting to a friend of mine at the weekend who's mother had a few BTL's over the years.

He mentioned an EX LA flat she had, paid a very low price for it. Never managed to rent it, ended up selling it for the same price they bought it for have improved it.

Some property is just cheap for a reason, blocks can go downhill in a short space of time IMHO they rarely get better.

Presonally never buy anywhere you would not be willing to live in.

Start saving into an ISA, I think you will do far better than your proposed scheme.

bigmaz

Pixie5740 wrote: »

If you can rent the property you want to live in for less than it would cost you to own it then carry on renting, especially if you have a good relationship with your LL.

I have been considering doing something similar as I don't know if I want to live where I am long term so I'm thinking about getting a BTL or three instead.

Yeah, we are not going to move from where we are. The house is great and as you say, we have a great relationship with the LL. It will hopefully be the home our kids grow up in.

Good to hear someone else is thinking about this. So you would be renting the place you live in, and then buy other property to let out?

Pixie5740

bigmaz wrote: »

Yeah, we are not going to move from where we are. The house is great and as you say, we have a great relationship with the LL. It will hopefully be the home our kids grow up in.

Good to hear someone else is thinking about this. So you would be renting the place you live in, and then buy other property to let out?

Yes, I currently rent in Aberdeen but I'm thinking about getting some BTL in Glasgow. Aberdeen has been experiencing a boom time which has pushed the price of property up. However, the price of oil has dropped to $85/bbl so I'm not sure how long the boom will last. I like the idea of being able to pack up and move overseas should I have to in order to find work. If I owned a property I could maybe let it out, assuming there was still a demand for rental property, but I don't think I would be comfortable with someone else living in my home, even though I know it'll be their home whilst they're renting it...if that makes sense.

So until I find somewhere I want to live long term I'm thinking about buying some property in my home town instead as I know that market better and will get a better yield.