Compare two different ideas with 150k

jamels2

Lets say i have 150k and need a place to live...
1. I could buy a small flat for the whole amount and have no mortgage. I would need to work enough to pay bills and living costs.
2. I buy 3 flats each with 50k deposit. I receive 850 rent from each and the mortgages are 300 each interest only. Total income 2550 and 900 out. Thats 1650 a month lets say 1250 after costs. I then rent a flat myself for 750 and have 500 to live on. Thats without working.
Is there a winner here?

economic

Lots of risks with 2 if you do it long term. Interest rates, taxation, property damage, hassle, reduced tenant demand and lower rents

It is always best to buy own home.

davidmcn

BTL lenders like borrowers who are (a) owner-occupiers and (b) have income other than the rent from the properties being secured. You don't say whether you have a job (though your previous thread mentions you already have at least one other BTL property).

Bear in mind larger initial costs for buying three properties (including stamp duty, voids etc).

tiredoflife

I'd opt for option 1. Option 2 seeks like a potential ball ache, but that's just me, anything for a quiet life!

tom9980

Option 3. Buy a 3 bed with mortgage, rent out spare rooms tax free using the rent a room scheme. When you get a partner and kids you have a home already.

Option 4. Buy a flat with mortgage with half your savings, invest the rest in diversified portfolio in your pension or stocks and shares ISA so your total assets are not overly invested in property.

You are aware of the s24 tax changes coming right?

AnotherJoe

jamels2 wrote: »

Lets say i have 150k and need a place to live...
1. I could buy a small flat for the whole amount and have no mortgage. I would need to work enough to pay bills and living costs.
2. I buy 3 flats each with 50k deposit. I receive 850 rent from each and the mortgages are 300 each interest only. Total income 2550 and 900 out. Thats 1650 a month lets say 1250 after costs. I then rent a flat myself for 750 and have 500 to live on. Thats without working.
Is there a winner here?

No. Out of that £500 you have to pay not just for your everyday living expenses which I think would be considerably higher than £500,(mine certainly are anyway) but also accumulate money for large one off expenses, such as new boilers, renovation after tenants damage, voids.

E.g. All the stuff that wouldn't be covered by your back of a fag packet maths, because as soon as you have a void, for example, you've now got £300 a month taken out of your very non luxurious £500 a month living budget.

Also, how come you can rent a flat for £750 but you will be letting yours out at £850? Why aren't your tenants in the £750 one ? If the answer is, you are Ina smaller worse one Ina worse area, well that's another cost you've imposed upon yourself.

I think you'll also find that running 3 flats is a job in itself. Perhaps not as full on as 9-5 5 days a week, but then again it's very poorly paying one, £500 a month. You might as well buy a nice flat and take a part time job that will pay more.

Cakeguts

It doesn't work like that. To retire on these rentals you will need at least 5 rental properties. That is to cover the voids. It would be extremely bad luck to have all 5 vacant at the same time if you have done a massive amount of research into where and what tenants want to rent in your area.

anselld

jamels2 wrote: »

Is there a winner here?

Option 2 ... the winner is the tax man.

ALPedro

Option 3 - buy a house, invest in a portfolio. you get diversification, income and a place to live!

flashg67

other BTL costs - Insurance, tax, void periods, repairs, damage, agents tenant finding / management fees etc . From experience, if you go with option 2, I'd moderate your expected income by 30-50% less than the simplified 'rental less mortgage = profit' model.

BTL providers usually want a provable income of £25k.