mortgage vs using capital savings

rachyfarmzo

We have got £100k and looking to buy 2 properties to rent out in an area with rental rates of £400-475 per month.
We dont know whether it would be best to sink all our savings into these properties or take out 2 mortgages to buy the properties with a small deposit and the rent cover the mortgage. We don't have a mortgage personally so we could cover the mortgages for periods the houses wouldn't be rented out. What would be anyones advice on this.

Thanks

HappyMJ

rachyfarmzo wrote: »

We have got £100k and looking to buy 2 properties to rent out in an area with rental rates of £400-475 per month.
We dont know whether it would be best to sink all our savings into these properties or take out 2 mortgages to buy the properties with a small deposit and the rent cover the mortgage. We don't have a mortgage personally so we could cover the mortgages for periods the houses wouldn't be rented out. What would be anyones advice on this.

Thanks

My advice....don't get into property. It's not a passive investment. You need to do a lot of work and the income is not reliable.

If I did invest into a BTL property business I would get an interest only mortgage for the highest possible amount I could get.

With £100k of cash in the bank you could earn £5,000 per year with very little effort just by splitting the money between you and putting it into various high interest current accounts.

If you're a higher rate taxpayer then investing into BTL property will probably create negative cash flow making it not worth doing at all.

AnotherJoe

You need to do the maths to see what the profits if any would be under both scenarios and the one you omitted,mid way between a minimal mortgage and going all in.

Factor in stamp duty, interest rates, repairs, void periods.

Thrugelmir

rachyfarmzo wrote: »

the rent cover the mortgage.

Repay the mortgage debt? Purely cover the interest?

What's your long term aim. Have you taken into account the changes that were announced in last summers budget.

rachyfarmzo

To be fair I haven't really thought about it that much. I know there are changes in stamp duty for 2nd homes but this only going to be £2k or so for the value off houses we are looking at, but if we can close the deal before the end off the month it would be better to not have to pay it obviously. We can carry out work ourselves so aren't buying anything too modernised. We honestly don't know and are confused about it all, as we are currently in the process off building a house too, we don't know if it would be better to use the £100k to build our home (rather than our monthly wages to build it) or invest in property. To be fair we aren't looking at this to earn a living off we just want our money in something that it is doing something. The mortgage rates would be £300 a month on the basis off interest rates rising a little. so the rent would cover paying this at repayment mortgage not interest only.

getmore4less

if you can buy £50k properties that rent out for £450pm thats over 10% gross yield.

Why are people not buying them to live in?