Buying a pre let investment

first78

I'm just starting to look at whether buying a second property to let would be a good way of adding an income to our household. Looking on rightmove I've seen a few terraced properties for around £40k which state they are 'pre let investments'. Does this mean they already come with tennants? They state the income is approximately £350 pcm. If I want to buy to let what sort of things would people suggest I need to consider?

Ozzuk

Do you want the hassle? That is the biggest question. I've toyed with the idea a few times but for me it's not worth the hassle, especially as a single higher tax rate payer.

On the figures you've quoted that a 10% return before tax, not bad, but also not that exciting when you think it's only 4250 a year. Broken boiler, missed months, bad tenants would soon wipe that out.

booksurr

are you buying outright or with a mortgage?

pre let would mean you have not selected the tenant yourself so have no idea of their background or what they can/have done

presumably a property you can buy for 40K that gives a 10% gross yield means it is poor quality and will attract the sort of tenant who has to live there rather than wants to.

no reason why it should not be a success, but you are very far from knowing what you are doing yet or what could go wrong and why.

eddddy

If you're buying a tenanted property, don't forget to check out the tenant thoroughly (as well as the AST etc) - you don't want to inherit a bad tenant.

Also, beware of scams. e.g. The market rent is £250, but the owner gets his mate (or some dubious character) to sign an AST for £350 to make the property sound more profitable.

As soon as the sale completes, the mate does a runner (or you have to evict the tenant because they're not actually paying £350), and you're left having to re-market the property at £250.

AdrianC

first78 wrote: »

Looking on rightmove I've seen a few terraced properties for around £40k which state they are 'pre let investments'. Does this mean they already come with tennants?

Yes.

If this is a company specialising in such "investments", you need to pause and ask yourself why they're selling such golden opportunities. The simple answer is usually that it's all a big fat hairy scam, with unrealistic numbers.

first78

Well I guess maybe I should leave this idea alone and try and come up with another way for boosting our income. Any suggestions?

Pixie5740

BTL is just one sort of investment, there are loads of other types of investments out there depending on your appetite for risk.

It's also worth looking at your expenditure rather than just focusing on boosting your income as generating wealth is as much, if not more, about what you don't spend.

Pixie5740

I wonder what sort of tenancies these pre-tenanted properties have. Are they AST or do they have AT? It makes a BIG difference to the value.

first78

Pixie5740 wrote: »

I wonder what sort of tenancies these pre-tenanted properties have. Are they AST or do they have AT? It makes a BIG difference to the value.

Hi, thanks for reply. I don't know what AT and AST mean.

What other types of investments would you suggest looking into? I'm not at all sure what's out there to be honest.

AdrianC

first78 wrote: »

Hi, thanks for reply. I don't know what AT and AST mean.

AT = Assured Tenancy
AST = Assured Shorthold Tenancy.

Sounds such a minor difference, doesn't it? It really, really isn't. It's the difference between being able to get shot of a tenant who turns out to be a slug, and not being able to. It's the difference between being able to keep the rent competitive for the area, and not being able to.
http://england.shelter.org.uk/get_advice/private_renting/private_renting_agreements/assured_tenancies

What other types of investments would you suggest looking into? I'm not at all sure what's out there to be honest.

http://forums.moneysavingexpert.com/forumdisplay.php?f=17

bris

Pre let investments tend to come with life tenants so they are protected from rent rises to a much bigger extent than short tenancies.


Most, if not all buy to let mortgage providers will not lend to this type of tenancy.


There is a reason the houses are 40k.