Londoner attempt to get on the ladder!

mui

Yup I'm aware of what's being involved being a landlord... someone made a 4am comment which I was responding to. Thanks for the additional thoughts though.

And clearly yes our combined income would afford us a lot more than 200K but I'm not interested in maxing ourselves out unnecessarily... as I said moving out of London isn't an option, without going into the particulars of our industry - which seems unnecessary given the question.

Anyway, thanks for your help

lisyloo

Whats a 4am wake up got to do with anything?

There are numerous tasks as well as legal obligations associated with being a landlord, for example


repairs & maintenance (including urgent)
contracts/legals/deposit scheme including keeping on top of changing legislation
paying correct taxes including keeping on top of changing tax regime
doing legally required safety checks
setting up insurance etc.


It is NOT the same as putting money into a savings accounts or even having a stocks & shares portfolio (I delegate the work on mine for 0.5%)
I am well aware that you can delegate a lot of jobs but of course that eats into profits.


I do not know the OPs knowledge on the subject, but it's quite important I think that people looking into BTL for the first time understand the work/risks/obligations (which can be life and death) associated with the investment.
That of course also holds true for other investments as well.


I hope that explains the point (even though the OP appears to be aware).

need_an_answer

I picked up on the 4am thing simply because in the years I've been a LL ive never encountered a call out at that time...but I guess I must be lucky!


I'm also aware that potentially there was an air of jest in the original comment but it does seem from the original post the OP made that they were unaware of the logistics of the purchase yet then comment on being aware of all that being a LL involves....slightly mixed messages I guess.

Comms69

pollyanna24 wrote: »

Might be a case of always having lived in London, where all their family etc.

I was like that, but accepted what I could afford. Grew up in Zone 2, my parents then moved to Zone 4. I now live in Zone 7, so on the very outskirts. But you know what, it's much much nicer than where I grew up in Zones 2 and 4!!!

When I was in London zone 7 didn't even exist I think!

Comms69

mui wrote: »

Yup I'm aware of what's being involved being a landlord... someone made a 4am comment which I was responding to. Thanks for the additional thoughts though.

And clearly yes our combined income would afford us a lot more than 200K but I'm not interested in maxing ourselves out unnecessarily... as I said moving out of London isn't an option, without going into the particulars of our industry - which seems unnecessary given the question.

Anyway, thanks for your help

I'm slightly confused, if ownership isn't a priority, or at the very least is unnecessary, why would becoming a landlord be the alternative?


Investment in premium bonds would probably be the more sensible plan

lisyloo

I think it's important to be aware of the risks but also consider the likelihood.
For example many people have done very well out of property and it's not very often there are major problems with tenants.
Fortune does tend to favour the brave.


I don't own investment property but I am a director of a limited company and we do spend quite a bit of time on the legislation/tax regime side for example


making best use of dividend/pension allowances
keeping on top of budget changes around taxation e.g. changes dividend allowance, IR35
keeping accounts
doing SA returns, tax returns


I would imagine that being a landlord is a bit similar in terms of the best way to set things up, plan financially to take advantages of allowances and keeping abreast of legislative/budget/HMRC rules.

Comms69

lisyloo wrote: »

I think it's important to be aware of the risks but also consider the likelihood.
For example many people have done very well out of property and it's not very often there are major problems with tenants.
Fortune does tend to favour the brave. - On average there are approx. 45,000 evictions per year. That doesn't include people who do a runner.


I don't own investment property but I am a director of a limited company and we do spend quite a bit of time on the legislation/tax regime side for example


making best use of dividend/pension allowances
keeping on top of budget changes around taxation e.g. changes dividend allowance, IR35
keeping accounts
doing SA returns, tax returns


I would imagine that being a landlord is a bit similar in terms of the best way to set things up, plan financially to take advantages of allowances and keeping abreast of legislative/budget/HMRC rules.

The key aspect is, let's say the rent is £500 a month.
£25-50 goes to the agent
£25 towards a sinking fund / repairs etc
£80 for mortgage interest
£74 in tax
That's £246-296 left.


For 3-3.5k a year, is it worth the risk?


The tenant doesn't pay rent, trashes the property and absconds - the cost would well 3 years of profits.

sal_III

mui wrote: »

Thanks for the comments, much appreciated. We currently rent, yes. We can not live outside London unfortunately (kids are young, our working hours are long, commute = not seeing them etc.)

I have considered shared ownership, yes but haven't seen anything which suits.

I'm not looking to make money monthly, we can afford to cover mortgage repayments without a tenant so that's fine. I'm interested in longer term investment... and don't mind the occasional 4am wake up.

mui wrote: »

Yup I'm aware of what's being involved being a landlord... someone made a 4am comment which I was responding to. Thanks for the additional thoughts though.

And clearly yes our combined income would afford us a lot more than 200K but I'm not interested in maxing ourselves out unnecessarily... as I said moving out of London isn't an option, without going into the particulars of our industry - which seems unnecessary given the question.

Anyway, thanks for your help

Isn't paying the mortgage and the rent were you currently live going to max you out too? And if you can afford the extra money for the mortgage why haven't saved more for a deposit?

What do you mean by maxing out? Most lenders max affordability criteria leaves you plenty of spare cash especially at higher incomes which you claim to be in. It's not like you are going to be stuck to beans on toast etc.

So appears that you are not so much unable to afford to buy in London, you are unwilling to borrow enough money to do so. Not that there is anything wrong with that.

Shared ownership and HTB Equity loan are good options to get on the property ladder, although not without their own specific downsides, they are much better options than BTL, while you keep renting which achieves nothing.

What are you hoping to achieve by buying a BTL property, while you and your family keep renting yourselves? In most cases the rent only covers the BTL mortgage and there is little or no surplus and even deficit some times. The main gain is from capital gain from rising property prices. And here is the problem, at the moment the market is cooling down and even if there is not going to be a crash, the prices are definitely stagnating and are going to remain so in the next several years. As someone already mentioned you are better off investing in something else like premium bonds

mui

Thanks Sal_111

By continued renting and buying BTL I'm hoping we can get long term property investment without compromising current standard of living (our rent is far below market value, long story there). Yes we could save more for a deposit, this would be the aim but was looking at what we have atm. We can't afford to buy in our area as we are LTD directors so whilst technical income is higher with dividends what we can get mortgage wise would just get a one bed here.

So yes, monthly return I'm anticipating would be negligible, but longer term if we keep it for ten years or so I'm hoping there would be a return from rising property prices. As you say the market isn't great which is a big consideration. And yes, will def look into shared ownership also.

It was my understanding premium bonds is only up to 50K.

sal_III

As long a s you have the net income to fell comfortable repaying the mortgage being a ltd. directors (or having any other type of non-PAYE icnome) is not affecting your affordability with the correct lenders. Speak to a broker who will be able to pick the correct on for you. They know how to calculate your income ether based on company accounts or just a day rate if you are a contractor (like me).

Even at reduced rate the rent you are currently paying is !!!!ing money away if you can and want to live in your own property.