Would you bother with BTL?

Luke86

Hey All,

I bought my first property about 18 months ago. Been looking at moving from my 3-bed maisonette and trying to grab a 3-bed semi or similar. The yield would be around 6.2% on current value, but around 8% on what I paid for it. But then there's the opportunity cost of putting a bigger deposit down on my new house, to reduce the rate.

There would be around £250 after converting to BTL and landlord insurance etc. I could cover the mortgage if there was a problem tenant, although not exactly ideal!

My parents did well from BTL (overall), but I'm thinking it's just too much hassle and with all the extra tax laws/stamp duty, it's not really worth the stress?

Anyone else in a similar boat?

Thanks

wine_night

We have three properties that we let.

Even if you have a agent fully managing the property, BTL isn!!!8217;t a hands off investment. You still have the admin associated with dealing with agents and making sure they!!!8217;re doing their job and not ripping you off.

You also have to keep accounting records and complete annual tax returns- although it looks like this will be quarterly from 2019 under the making tax digital initiative.

If you don!!!8217;t really want to be a landlord then why bother, unless you think there!!!8217;s going to be a significant uplift in the value of the property and you want to hold it for capital gains? Can you put the money to better use?

The yield you mention is pretty good though so may be worth doing your sums and asking some local estate agents what their tenant demand is for properties like yours to see whether it could be viable.

Cakeguts

You can't really get into buy to let this way if you want to be successful. What you have to do is to start it like any other business. So you buy the property to let because it will be in the right area and will make a successful buy to let property. Trying to turn a property you used to live in could work but the chances are that it won't because owner occupiers are more prepared to compromise on something than tenants are. Tenants don't need to compromise so much because if they don't like where they are they can move easily. So what you want in a but to let property is something that appeals very much to a tenant so that they don't want to move. To be successful in buy to let you have to have long tenancies. Everytime a property is vacant it costs you money.

lisyloo

Simple answer - No - but then I don't like the work involved.


It's a job not a hobby with people's lives depending on it (carbon monoxide) and wanting fast service (in the case of emergencies, loss of hot water, heating etc).


The hassles have increased along with the costs.
The housing market is now falling in some areas.


Sure some have done well in the past because of capital rises due in part to emergency levels of interest rates. I'm not a bear but I think those good capital gains are gone for the time being.


So - it's a NO from me.

scaredofdebt

I probably wouldn't bother for 6% return, is that net or gross?


But if you do some research you can greatly improve on that depending on what type of property you buy and where, don't simply buy something on your doorstep. For example where I live I would get a return of around 5% if I bought a similar property to what I am living in, ie large, 4 bedroomed detached house.



However, if I bought a 2 bedroomed terraced house about 6 miles away I could get more like 12% gross.


This may not work depending on the part of the UK you live in, you may need to look a bit further afield.


The other issue is your tenants. I am very lucky to have good tenants, other than a new oven every couple of years (I don't know why they break them so frequently) they haven't been a jot of bother and have been in situe for 5 years now, no missing rent payments, no breakages (other than ovens!) and they even help out with minor repairs. Obviously you cannot guarantee your tenants and some can be a nightmare!


So, rule of thumb is try to get BTL properties that are at the cheaper end of the market, in good order but still command a reasonable rental income.

ReadingTim

The general direction of travel in respect of BTL is to try and discourage small time amateur/accidental landlords, so unless your overall plan is to treat it like a business, and grow it like a business, you're probably better off out of it - the golden years of easy money are over I'm afraid.