Is this a good long term investment?

Reece_Smillie

I'm 18 years of age, I am currently a Floor Manager which brings in roughly £900 after tax a month. However, this will soon rise as I will be getting promoted to a Shift Manager, this is expected to rise to about £1,200 a month after tax. I currently have £7,000 in my bank account


I would like to mortgage a house and let someone rent it out off me. Forget about the price and location, I can worry about that when I look into it in further detail. I would like to know if it's worth investing into?


So if I get a house mortgaged of £500 a month? I can charge the people who want to rent my house of £400 a month.
That means I would have to only pay £100 a month right?


The main question is, would someone of my age, and financial details benefit from mortgaging a house?


Thank you in advance

racing_blue

Hi Reece

I think the fact you are here asking this entrepreneurial question aged 18 is really positive

I would weigh the anticipated rental income against anticipated costs. Include mortgage interest as a cost, but not repayment of capital. There are lots of other costs too. Income may not always be achieved so build a margin of safety into your calculations. If projected income exceeds projected costs, and you can raise the funds, and get a good deal on the house, then it's a goer. & this is true for someone of any age.

racing_blue

PS Have you read "Rich Dad Poor Dad"? It might help your thought processes at this point I suspect

El_Torro

If you are receiving £400 a month in rent and paying £500 a month in mortgage repayments you are unlikely to get any bank to agree to give you a buy to let mortgage. It also shows it's a poor investment.

At your age I would have gone for stocks and shares, much less hassle to worry about. Even overpaying your pension, though the downside being that it will be decades before you can access the money. A S&S ISA might be more appropriate for you.

Especially with the upcoming changes to taxes on buy to let properties I would think hard about whether you really want to get into that.

chucknorris

Hi Reece, have you thought about buying a two bed place to live in, and renting out a room, in which case you would receive the rent from your lodger (not tenant, so you have more rights) tax free (up to £7,500 PA. Of course it wouldn't work if your domestic arrangements are too complicated, or you simply do not want to leave home yet.

economic

agree with Chucknorris. plus owning home you live in is free of capital gains tax when you do sell where a BTL would be subject to CGT. this plus the tax free rent from a lodger means it maybe a lot better financially then a BTL.

Cash-Cows

Reece_Smillie wrote: »

I'm 18 years of age, I am currently a Floor Manager which brings in roughly £900 after tax a month. However, this will soon rise as I will be getting promoted to a Shift Manager, this is expected to rise to about £1,200 a month after tax. I currently have £7,000 in my bank account


I would like to mortgage a house and let someone rent it out off me. Forget about the price and location, I can worry about that when I look into it in further detail. I would like to know if it's worth investing into?


So if I get a house mortgaged of £500 a month? I can charge the people who want to rent my house of £400 a month.
That means I would have to only pay £100 a month right?


The main question is, would someone of my age, and financial details benefit from mortgaging a house?


Thank you in advance

Don't forget you will be a landlord and are therefore responsible for repairs. If the boiler breaks, that's a big chunk of your rent gone. I also cannot see the logic of being £100 worse off each month.

planteria

i agree that it's positive to be asking,
and i agree that getting a pension set up and some money stashed into it is wise, and arguably the best thing to do for now..

El_Torro wrote: »

If you are receiving £400 a month in rent and paying £500 a month in mortgage repayments you are unlikely to get any bank to agree to give you a buy to let mortgage. It also shows it's a poor investment.

i understand why you say this, and it may well be possible to buy a property that will positive cashflow instead.. perhaps enabling increased pension contributions;).. however, a 'net Investment' of £100/m could also turn out to be very lucrative too, if the property and timing happen to be right.