Buy one of two properties?

Landlord2b

Hi everyone :-)
I am renting out a flat which is worth 180,000 I have a mortgage on it for 130,000 which is about £600 a month on a repayment basis. I receive £800 a month in rent. I have a long term tenant who looks after the place.
I have been living at a friends for the last few years but they now want to the room back.
I have managed to save 50k so I am thinking of buying another property to live in. After enquiring with my bank they can lend me 138k which gives me a budget of 188k although I have been told I will have to pay an extra 3% stamp duty and to allow for this.
The alternative is I could sell my flat for 210-220k using 20k of my savings to extend the lease. That would result in 110-120k as a deposit for my own place and a much bigger budget of 248-258k for where I will live.
I have asked advice from those around me and one view was "property always goes up, keep the rented flat and buy another with the savings". The other opinion is "buy to let isn't a good idea anymore - pay off your own residence first in any case before investing elsewhere".
Does anyone have a view on which route I should follow and why?
Thanks!

hazyjo

Word of advice - if that lease is low, the price to increase it will rise each year. I'd say do it anyway whether you let it, live in it, or sell it.


I wouldn't want to be a LL so would sell, get a mortgage and buy somewhere I'd be happy living for as long as possible.


No, property does not always go up, but in the long term, yes it does! You may find the increase will be more on one house worth a lot more than two lower priced flats. Without a crystal ball, or knowing where you live, I can't really say which would be the better investment. As I said, I'd much rather just own one and live in it as a home.


Jx

Old_Git

Landlord2b wrote: »

Hi everyone :-)
I am renting out a flat which is worth 180,000 I have a mortgage on it for 130,000 which is about £600 a month on a repayment basis. I receive £800 a month in rent. I have a long term tenant who looks after the place.
I have been living at a friends for the last few years but they now want to the room back.
I have managed to save 50k so I am thinking of buying another property to live in. After enquiring with my bank they can lend me 138k which gives me a budget of 188k although I have been told I will have to pay an extra 3% stamp duty and to allow for this.
The alternative is I could sell my flat for 210-220k using 20k of my savings to extend the lease. That would result in 110-120k as a deposit for my own place and a much bigger budget of 248-258k for where I will live.
I have asked advice from those around me and one view was "property always goes up, keep the rented flat and buy another with the savings". The other opinion is "buy to let isn't a good idea anymore - pay off your own residence first in any case before investing elsewhere".
Does anyone have a view on which route I should follow and why?
Thanks!

do you want to be a landlord ?
do you want to pay tax on the rent.
can you pay two mortages if you have a void period or a tenant who wont pay .

As for house prices ALWAYS go up ,have a look at Northern Ireland .
!0 years ago houses where selling at £30,000 over the asking price . I know of one house that sold for £190,000 . After 7 years the bank sold it for £65,000 .

Landlord2b

Thanks for the advice hazy and old git, the lease is below 80 years so the sooner the better right? Is there anyone who would advocate not extending a lease below 80 years?

As for tax I have been paying 20% of my profit, at the moment roughly 800 rent minus 300 interest = 500, so £100 a month at most.

As I'm already a landlord I have no problem with it, my tenant is quite reasonable and is not the type to call me unnecessarily about silly little things

Gigervamp

You haven't answered the question about being able to afford paying 2 mortgages during a void, or if your tenant can't pay the rent.

Your tenant may be a good one, but if for instance, they fell ill and needed to claim benefits for a while, you'd probably find that there would be a delay in their benefits coming through.

I would also increase the lease now, even if you're going to keep the flat.

frugalsmurf

I'd second the " can you afford both mortgage payments" question. You have a good remnant but life changes fast (&often when you least expect it)

Have you got insurance etc to cover if you're ill or unable to work-would this cover both properties?

Do you want to buy a bigger house/flat or would you be happy with two flats?

Long term-is your lifestyle going to change?-ie. Partners/children etc so would buying one bigger property suit you better?

Landlord2b

Hi yes could afford the mortgage for a few months if the flat was vacant. Obviously would need a new tenant asap and demand is very high in my area.
Is there a calculation to work out if your monthly income makes it a good investment? I've heard about yield and that's easy to work out but I'm not sure if the % changes if you have a mortgage or not?
As for capital growth I am confident this will grow especially if I extend the lease.
Thanks

Landlord2b

Well following your advice I have started the process to extend the lease, so that is out the way and I have two clear situations available to me:
Situation 1 ( keep let property as interest only )
-value 210k, mortgage 135k, rent 800, mortgage 280 pcm interest only
New residential property:
- value 200k loan 140k, mortgage 590pcm
Situation 2 (sold let property for 210k):
-buy new property 200k with £135k deposit and only 65k mortgage 265pcm

Is there an obvious choice here ? I just worry that there never is really a good reason to sell a property , especially as I am looking at it long term. Any more views welcomed

justme111

If you can afford mortgages on both properties and already have not only a hang of landlord issues but a good tenant as well why not to have two properties? If you pull all the money into one property what are you going to do with surplus money resulting from low mortgage payments? Keep it in cash? Not that a good idea imo beyond emergency savings. Spend it ? From what you say you do not have that money earmarked for anything so better not to spend.Invest ? Why disposing of one investment vehicle that you already have (property) just to put it into another (s&s)? Besides you will have two sets of fees if you both sell and buy instead of one (if you just buy). Later in life you may want another property anyway , why lose money on selling and then in a few years buying?

Landlord2b

Thanks justme, yes I am quite happy with landlord issues and if I did put all the money into one new property I would probably overpay that and aim to be mortgage free asap. However I'd still have no extra income other than wages that way. If I keep it I'll have the rent coming in. The only issue keeping it is the buy to let mortgage fees of 2k plus the stamp duty of 7.5k.

justme111

Aren't there btl mortgages without so high fees?
To give some meaningful opinion one would need to know your whole financial situation as well as your priorities. I looked at it from the point of view of someone who has spare money , wants provisions for pension/cushion to be able to afford working for less money/not work at all. If one is in different position than the answer could be different as well I suppose.