Mortgage free - any advice 4 buy2let on low income

chocchomper

Is there anyone who could help before I embark on the scary world of brokers, building societies and banks? Or is this just going to be too much hassle?

I know I'm in a fortunate position in not having a mortgage (divorce settlement 17 years ago) and my flat is now worth around £250000-£275000. The problem I have is that I'm starting a new job next month but still on a low salary of approx £17500. My daughter (who is going into 2nd yr at Glasgow uni) is having a problem finding somewhere to live and I wondered whether on my income with a £40000 deposit whether I would be in any position to buy somewhere to let? If I bought a 2 bed flat but also rented out the lounge as a 3rd bed then I could get a rental income of around £850-£1000. Due to my income my daughter gets the full bursary etc and she would still pay towards the rent.

I would be grateful for any advise on this; particularly what could I borrow, whether I should even be thinking about it (good investment as no pension) or don't even go there as it's far too much hassle?

Many thanks

italia

hi,

i personally think its a good idea, but i am no expert, i have a buy to let as a pension long term investment.

you dont mention if the 40K deposit is something u have to hand or if that would be a remortgage on your home to free that up?

if its spare that is 40K and then you would get at least 3.5 times your salary as a mortgage (£61250), so total 101K. alot depends on the house prices in glasgow, something i am not familiar with. buy to let mortgages sometimes want 20% deposit or more frequently now it is dependant on the rental income you would expect to get. i.e self serving buy to lets where your income doesn't matter as the rental would cover the mortage so they aren't so bothered what you earn. if I were you i would have alook at the prices of the properties you are thinking of and the rental you could expect to get. does this cover the mortgage adequatly?

go on charcoalonline and search for a buyto let morgage, see what it offers you.

there are rules when renting something out, electric certificates etc so i would make sure the property is in good order. i don't know the rules in scotland or the prices of the properties

good luck, this is something alot of parents have done when there kids go to uni, also u have someone living in the flat to keep an eye on it!

andrewbrydon

Hi

Speak to a broker for some advice first of all
Based on brief details includigng income this sounds feasible
Good Luck

chocchomper

Hi,

Thank you both for your responses and advice. I do have the 40k to hand and have since spoken to a broker who's advice was to mortgage my own property (as you can't get a buy2let mortgage if a member or your family will live in it) and based on my income this would raise 70k. So, in effect I would be able to buy a 110k flat with cash and it be mortgage free, that's if one exists!

An interest only mortgage would be approx £360pm and if I bought a one bed but made the lounge into a 2nd bed then there would be a rental income of approx £600 - this produces an income for me of £240 - wicked:rotfl:

Thanks again, need to search for that elusive property!

JoeK_3

I have to disagree and clarify that you can have a buy to let mortgage and let it to family members.

Your broker is not clued up or you have misunderstood.

JoeK

chocchomper

Well, that's interesting, thank you. He definitely told me I couldn't have a buy2let mortgage if a member of the family would be living there, that's why he went down the route of an interest only on my own flat?! This was London & Country as recommended on Martin's site. I knew I was entering a minefield, the very word mortgage seems to bring on a headache! So would a buy2let mortgage a better deal then, just before I go any further with this?

Cheers

frugalista_2

chocchomper wrote: »

Hi,

Thank you both for your responses and advice. I do have the 40k to hand and have since spoken to a broker who's advice was to mortgage my own property (as you can't get a buy2let mortgage if a member or your family will live in it) and based on my income this would raise 70k. So, in effect I would be able to buy a 110k flat with cash and it be mortgage free, that's if one exists!

An interest only mortgage would be approx £360pm and if I bought a one bed but made the lounge into a 2nd bed then there would be a rental income of approx £600 - this produces an income for me of £240 - wicked:rotfl:

Thanks again, need to search for that elusive property!

I live in glasgow near the university. I think it is optimistic to expect £600 per month in rent from a £110k flat. I rent a brand new flat in the heart of the west end with two bedrooms, a large lounge and two bathrooms for £650. It is worth about £195k.

frug.


frug.

JoeK_3

chocchomper wrote: »

Well, that's interesting, thank you. He definitely told me I couldn't have a buy2let mortgage if a member of the family would be living there, that's why he went down the route of an interest only on my own flat?! This was London & Country as recommended on Martin's site. I knew I was entering a minefield, the very word mortgage seems to bring on a headache! So would a buy2let mortgage a better deal then, just before I go any further with this?

Cheers

You need to discuss the taxation implications with an experienced and knowledgeable adviser before embarking on this project.

In my opinion a commercial project should be kept separate from your own private property, as things could go wrong and adversely affect your own assets.

JoeK

chocchomper

frugalista wrote: »

I live in glasgow near the university. I think it is optimistic to expect £600 per month in rent from a £110k flat. I rent a brand new flat in the heart of the west end with two bedrooms, a large lounge and two bathrooms for £650. It is worth about £195k.

frug.


frug.

Oh, I thought this was too good to be true. Reckon I'll just invest my 40k, forget about the flat, seems far too much hassle and my daughter will just have to try and find a room in a shared flat near the Uni. I was going on a friend of hers one bed flat, which is pokey, no lounge (rented as a bedroom) bathroom and kitchen which they share at £600 pcm. Perhaps you have been exceptionally lucky or these two friends have been ripped off?

I'm not so bothered about an income, though it would be nice as my own is low, but it was really just somewhere where my daughter could stay and maybe if house prices continue to rise (however slight) then I wouldn't lose money if I sold in 3years when she graduates. Thanks though, it's good to get different peoples experience and knowledge.

chocchomper

JoeK wrote: »

You need to discuss the taxation implications with an experienced and knowledgeable adviser before embarking on this project.

In my opinion a commercial project should be kept separate from your own private property, as things could go wrong and adversely affect your own assets.

JoeK

Oh heavens, taxation! I did wonder about that, and wonder I will.........I reckon I am going to abandon this idea and try invest 40k, which no doubt will open up another minefield! Or I'll do the easy option - nothing, leave it in the BS. Many thanks for your response, really appreciate what you've highlighted to me.

frugalista_2

chocchomper wrote: »

Oh, I thought this was too good to be true. Reckon I'll just invest my 40k, forget about the flat, seems far too much hassle and my daughter will just have to try and find a room in a shared flat near the Uni. I was going on a friend of hers one bed flat, which is pokey, no lounge (rented as a bedroom) bathroom and kitchen which they share at £600 pcm. Perhaps you have been exceptionally lucky or these two friends have been ripped off?

I'm not so bothered about an income, though it would be nice as my own is low, but it was really just somewhere where my daughter could stay and maybe if house prices continue to rise (however slight) then I wouldn't lose money if I sold in 3years when she graduates. Thanks though, it's good to get different peoples experience and knowledge.

I think the friends have been ripped off, as students often are unfortunately. I did haggle my rent down from 700pcm but I looked at other stuff which was on for between 575 and 650pcm and it was around the same quality as the one I've got.

If you do go for the flat, you will also have to consider what will happen over the summer period, will your daughter and her friend stay in Glasgow or will you have a 3-month void period? Then you've got tax implications, transaction costs, maintenance, letting agent fees etc.

I worked out that my landlord is getting less than 4.25% gross annual yield on the flat, before all these costs -- you can get more in a savings account, with no risk to your capital and no other costs. So what's the point of BTL? IMHO this is not the time for non-professional landlords to get into BTL.

frug.