Property Investment Question

Sausfest

Hey all, I'm very new to property investment, as you're about to find out. But as a concept, I simply don't understand how anybody makes money doing this. My primary interest is in the BTL market, I know many entrepreneurs that pursue this as one part of their portfolio, I would ask them, but I don't really want to seem as clueless as I am.

For example: Let's say that I have a job that pays £20,000 p/a and have a goal to own multiple properties to accumulate passive income over time to replace my job. Let's say, 10 - 20 years.

I find a property selling at £60,000 and also assume that I can rent this for £450 per month. Mortgage repayments of £161 p/m on a BTL 75% LTV. It would take 11 years and 1 month for this to pay for itself. At which point, this would be pure profit and I own an asset worth £60,000.

However, during this 11 year period, it's unlikely that a bank would loan me more money to buy another property and at the end of this period, i'm stuck with an asset which makes me a small amount of money with most of my money locked into a brick and unable to spend.

My understanding is the above, could somebody help expand my knowledge or point me in the right direction, please.

00ec25

go down the library and get a book out for free

to get you beyond a few random answers on a forum you need to do a lot more reading
https://www.amazon.co.uk/Successful-Property-Letting-Buy-Let/dp/1472119940

there are many other such titles available as books...

Pixie5740

Sausfest wrote: »

Hey all, I'm very new to property investment, as you're about to find out. But as a concept, I simply don't understand how anybody makes money doing this. My primary interest is in the BTL market, I know many entrepreneurs that pursue this as one part of their portfolio, I would ask them, but I don't really want to seem as clueless as I am.

For example: Let's say that I have a job that pays £20,000 p/a and have a goal to own multiple properties to accumulate passive income over time to replace my job. Let's say, 10 - 20 years.

I find a property selling at £60,000 and also assume that I can rent this for £450 per month. Mortgage repayments of £161 p/m on a BTL 75% LTV. It would take 11 years and 1 month for this to pay for itself. At which point, this would be pure profit and I own an asset worth £60,000.

However, during this 11 year period, it's unlikely that a bank would loan me more money to buy another property and at the end of this period, i'm stuck with an asset which makes me a small amount of money with most of my money locked into a brick and unable to spend.

My understanding is the above, could somebody help expand my knowledge or point me in the right direction, please.

Passive investment :rotfl:

There will always be a demand for private rented accommodation but it's not as profitable as it once was. There is more to it than just paying off the mortgage so any rental income after 11 years and 1 month in your example would not be pure profit.

Sausfest

00ec25 wrote: »

go down the library and get a book out for free
to get you beyond a few random answers on a forum you need to do a lot more reading
there are many other such titles available as books...

Thanks, i'm already listening to multiple e-books on the subject, just trying to get a headstart on my studies by finding out key words to look for. For example, Lease Options keeps coming up.

Sausfest

Pixie5740 wrote: »

There is more to it than just paying off the mortgage

Thanks for the reply, like what? Could you point me in a direction or elaborate?

Pixie5740

Sausfest wrote: »

Thanks for the reply, like what? Could you point me in a direction or elaborate?

That sounds American.

Search the forum. The are almost daily threads from Property Investment Wannabes on this board. You can also search the Mortgages & Endowments board for information about BTL mortgages.

Pixie5740

Sausfest wrote: »

Thanks for the reply, like what? Could you point me in a direction or elaborate?

Read the Tenancies in England/Wales: Guides for Landlords and Tenants sticky at the top of the board.

Bossypants

In a nutshell: In order to do what you want to do, you need more money.

BTL as investment generally has a pretty poor yield as compared to stocks and shares, as you are finding. The attraction of BTL for many small time investors is the long game. The idea is that, for a relatively small monthly investment (while interest rates stay low at least...), at the end of 25 years they will have a fully paid off asset which can be sold for a nice lump sum to help them in retirement. In order to have any hope of living comfortably off the income, you'd need a fairly significant starting pot, probably getting close to a million or possibly even more. Most BTLers putting in only 25% will be lucky to break even most years, especially if getting a cheaper property (poorer quality buildings typically attract less reliable tenants, and both of these factors are likely to increase your outgoings).

G_M

Sausfest wrote: »

Thanks for the reply, like what? Could you point me in a direction or elaborate?

As 00ec25 said above:

go down the library and get a book out for free

to get you beyond a few random answers on a forum you need to do a lot more reading

Random answers to random questions is not the way to go.


And either the investments board, or mortgage board would in any case be more appropriate.


My sticky at the top of this board may help but focusses more on the legalities than on the investment issues.

00ec25

Sausfest wrote: »

Thanks, i'm already listening to multiple e-books on the subject, just trying to get a headstart on my studies by finding out key words to look for. For example, Lease Options keeps coming up.

no sorry but you are just looking for a list of facts

facts that are readily available in books that take hundreds of pages to explain said facts, not a few words on a forum for a few random words whose meaning you have not yet read up on.

Sausfest

Ok, thanks all. I'll come back with a more structured question after much more reading.