Buy to Let - One for cash or 2 mortgaged?

Stevo2800

Hi all
For the first time in my life I have some cash to invest from an inheritance. Never had savings before.

In round numbers £100k, of which £10k will stay in Premium Bonds for the allowed 12 months.

I was looking at a buy to let flat for £70k and put the £15k into ISA and keep the £5k accessible.

The estate agent suggested I bought 2 flats with 50% mortgages as it would give more capital gain and soften the income shock if one stayed empty for any time.

Is this a good idea??

Thrugelmir

Stevo2800 wrote: »

4and soften the income shock if one stayed empty for any time.

Is this a good idea??

What's the plan if both are empty or do not generate income for some other reason at the same time? Risk and reward are relative.

JuzaMum

The more the estate agent sells the more money he makes.

You could buy one for cash and if in a year (or whatever time frame you chose) it is going well you can then get a mortgage on the property you own to use as a deposit on a second mortgage.

Stevo2800

Thats it. I'm not yet thinking instinctively like a saver. Thanks guys.

Pixie5740

Why any BTL properties? What rental yield are you going to achieve?

MortgageMamma

I think if this is your first venture into buy to let stick with one for the first year or so, and as you get more experience grow your portfolio gradually. It would be wise to keep a deposit for a second property in the bank

Stevo2800

£70k price on the details, I would hope to get at least enough knocked off to pay the stamp duty. Agent said £450 pcm rent which is 8% (less maintenance and management charges).

What else gives that kind of yield, plus capital growth? (although not in the short term I accept).

Cakeguts

70K sounds cheap to me. The problem with cheap properties is the kind of tenants that you sometimes attract. 450 pcm is alright if you get it all year and all years but if you have a lot of voids or a tenant damages the property you won't get 8% you will make a loss.

Did the agent tell you what kind of tenant you could expect to get for a 70K property?

For trouble free letting you have to buy the kind of property that allows you to do this in the area that you thinking of letting in. So before you buy anything you need to do a lot of research. What is your market in tenants?

Just buying any old property and expecting it to let easily is asking for trouble.

Stevo2800

WR postcode. I've lived here all my life and know the properties and people who have lived in them. £70k is about the going rate. This specific one has a sitting tenant.

ThePants999

I might have misunderstood something, but I believe that mortgage interest payments are deductible from rental income when determining liability for income tax (at basic rate). Buying for cash loses that minor benefit.

iantojones40

Wow, you certainly have a lot of faith in everything this entirely impartial agent tells you.

Can't understand why you even feel the need to come on here and ask further advice when you've got such a wise and trustworthy friend in your estate agent and you apparently already personally know and trust the tenants and the properties he's trying to flog to you.