got the keys today for my first buy-to-let

PasturesNew

tucbiscuit wrote: »

yeah, but hopefully there will be some capital growth too

What are your projected capital growth figures for this area?
Based on what dataset?

Housing is grinding to a halt in many areas already. And there's a credit crunch on. Bloke on BBC News was saying yesterday that lenders will be insistsing on a big deposit from buyers in the future - and there will be a tightening of how much they can borrow for what they earn. So if that house is £82k when people can borrow 5x salary to buy it, what would its worth be if they were limited to 3x?

How many years do you expect to keep it?

You can currently get 6.7% on savings without looking too hard to find it. Without the risk and tying up the money for just 1 year.

Gorgeous_George

BobProperty wrote: »

Surely the potential tenants in those areas can buy at £80k ish? Minimum wage would give an income of about £23-25k for a couple so not much problem getting <4 times income mortgage? Maybe?

£500 pcm on £82000 is 7% return. You can get 6% in a bank without any hassle.

I agree with the last paragraph wholeheartedly.

On the first point, there are many people who do not want to own their own property for a variety of reasons.

Maybe their jobs are about to re-locate or they are hoping to move in the near future.

Maybe they don't want the costs of owning a house. Stamp Duty (but not a t £80K), EA fees, solicitor fees. You get the picture.

Maybe they don't want the stress of the English house buiying procedure with the risk of losing £££s when a sale falls through.

Gazumping and gazundering.

Maybe the risk of being stuck with bad neighbours.

Maybe the risk that their property will lose value while interest rates rise.

Maybe the risk that the tories will once again be in control.

Maybe they just like having a LL to blame when the boiler breaks down.

Maybe they are on HB or risk being so and know that the rent will be paid.

Maybe they fear repossession.

Perhaps the relatively small yield is acceptable while the OP becomes familiar with the BTL business. The knowledge gained will help when/if yields become more attractive. Those 6% returns from a bank may not be with us for long. The yield would remain 7% even if rates fall back down to 3 - 4%.

Good luck tucbiscuit. You won't get rich unlike some tenants believe but your gamble may pay for a holiday and, over the longer term, should prove to be a sound investment. It feels better than paying someone else to manage your savings in a pension fund and you are responsible for your own destiny.



GG

Gorgeous_George

izzybusy23 wrote: »

Hmmm.. another BTL house which is pushing up house prices out of the reach of FTB's... and at the peak of a credit crunch too. :rolleyes:

Low interest rates and a relaxing of the lending criteria have contributed to silly house prices far more than any BTL investor. Usually, a BTL needs to prove that it it makes some kind of financial sense whereas a FTB only needs to prove that they can repay the mortgage.

FTBers financial naivety is a far bigger cause of HPI than BTL. BTLers want to buy the house as cheaply as possible. Moreso than FTBers IMHO.

GG

noyk

Capital gains are probably not going to be significant -
http://www.home.co.uk/guides/house_prices_report.htm?location=Runcorn&startmonth=06&startyear=2006&endmonth=06&endyear=2007

tucbiscuit

PasturesNew wrote: »

How many years do you expect to keep it?

20-30 years

Generali

Any thoughts as to why returns are higher in that area? Generally, I expect higher returns as a result of taking greater risks. Is there a higher risk of losses (either due to voids/nonpayment of rent or due to capital losses) do you think? Or is it the market working inefficiently?

tucbiscuit

not sure, maybe because there is so much industry and very large employers who bring in staff from outside the area on 6 month/12month etc. contracts

apart from that not sure


prices do seem to be on the up though

Generali

I'd expect excess profits to disappear pretty quickly if there's no extra risk.

If it were my business, I'd be looking at exit too. If rents fall or prices rise to a point where I could make more money selling up and using the cash elsewhere rather than just blindly holding on forever.

It's not my business of course!