Is it wise to leverage and buy resi investment houses now?

Legacy_user

What would you do?

I've got property which I can use as leverage to buy more property. At the moment I have no mortgages or loans on residential buy to let property.

I am from down South and I can't see any long term growth for the next 10 years. Maybe a small amount but not large scale growth like it has been. Places like Manchester, Leeds, Sheffield and surrounding areas

AdrianC

Your business, your decisions.

How do you think the numbers work out for you?
Where do you think the market in your preferred areas are going? You might not be local to them, but you surely must have a good understanding of the individual cities - and areas within them - to even be contemplating this?
Where do you think interest rates and tax policy are going? Uncertainty is the time when the greatest profits - and losses - are to be made.

That's one seriously confused article - all over the world until the last century, when it looks at US rates, so even without the historical irrelevance, it's geographically irrelevant, since I don't believe that South Yorkshire is the 51st state yet.

ACG

Before you do anything, speak to an accountant.

Personally, I would rather have 2 houses finance free than 4 houses at 50% LTV. You need to look at whether you should be buying as an individual or as a limited company.

You then need to look at things like CGT, Stamp duty, legal fees, accountancy fees and so on.

Do the sums, I have done well out of property in the main. But I also bought a property just before 2007 crash, after ploughing in a small fortune to renovate the property I had to rent it out for 2 years in order to break even. That meant I had to deal with tenants, one of which I would not pull off a sinking ship and the other I would have to mull it over - and this was a nice property in a nice conservation area (who knew there were nice area in manchester eh!? :-P).

I would never in a million years be a landlord again.

SouthLondonUser

You seem to have a lot of confusion in your head. Interest rates since the Romans? If you mentioned it because you think it makes you feel particularly clever and well-informed, well, sorry, it doesn't. Saying that "rates will go up at some point" is a bit like saying that we will all die: the information is technically true, but totally useless unless you can specify when!

Also, what does it mean that you want opinions, but not advice?

Anyway, the key thing is you haven't said anything about your personal circumstances: age, income, other assets, tax and pension situation, time horizon you have in mind for this investment, etc. Do you need a regular income from this? Are you more interested in maximising future value (eg at retirement)? You haven't mentioned any potential alternative, nor why this plan would be better, so how can strangers possibly comment without knowing anything?

For example, will you need this money before retirement or is this your retirement plan? Have you maxed out your pension allowance? Why do you think that this strategy would be better than investing in a pension? Have you run some numbers on potential post-tax returns? BTL is taxed heavily, whereas pension contributions are tax free up to a threshold - this difference is quite a biggie.

If instead you do need a regular income from this, what alternatives have you considered?

How well do you know the market up North? Are you prepared to travel there to meet with potential tenants in person? I would never let out a property without meeting with the tenants face to face, but everyone is different.

Slinky

Not being funny, but having read your thread yesterday about OCD with somebody spitting near your paint when doing up a house, and you unbricking a fireplace to remove a fag butt, could you cope with several properties with tenants doing things to them that you can't control?

LandyAndy

Slinky wrote: »

Not being funny, but having read your thread yesterday about OCD with somebody spitting near your paint when doing up a house, and you unbricking a fireplace to remove a fag butt, could you cope with several properties with tenants doing things to them that you can't control?

This, this this.

AdrianC

paranoidandroid31978 wrote: »

Numbers: Well I've always liked property in that you can leverage it, you can rent it out, you can control it

You can rent it out OR you can control it. Not both. And, with your OCD issues, that is something that you REALLY, REALLY, REALLY NEED to understand.

and it's ... simple to understand

That's another warning bell, right there.

I'm thinking of going with repayment mortgages with low loan to values, something like 50% or 60%. I've never borrowed money on property before.

I thought you said leveraging was one of the advantages...?


Have you actually run the numbers?
Give us a breakdown - rough yields without borrowing, and taking the borrowing into account. What are you allowing for maintenance/repairs? What are you allowing for voids? What are you allowing for contingencies? What income tax rate are you paying?

SouthLondonUser

OP, for someone who brags about his attention to detail, what you have presented here is extremely shallow. I ask again: what is your situation, is this about retirement or do you need a regular income, what alternatives have you considered, why not maxing out a pension first, etc.

Many people THINK property is easy to understand but, in reality, underestimate the complexities of dealing with a very illiquid investment that requires periodic maintenance.

p00hsticks

paranoidandroid31978 wrote: »

and it's a passive income.

Your potential tenants are going to absolutely love you (not).
Being a landlord is a job. If you don't understand that, don;t do it.
Yes, you can employ a company to manage it, but the buck will stop with you.

AdrianC

paranoidandroid31978 wrote: »

All properties would be professionally managed so I wouldn't manage them and the houses would be in good condition to start with so just ongoing regular maintenance.

I admire your optimism...

The difficult areas are with the numbers. The area that I'm buying in doesn't have much voids and there's strong tenant demand. It's like saying are there going to be voids if you buy a house in Earls Court. No not really.

OK, your optimism just went past "admirable" into "full-fat denial of reality". Have you considered going for the soon-vacant job of PM? You're ideally qualified.

somethingcorporate

I'm not sure you've thought this all through in enough detail....