Buy to let advice

Tlc11

Hello all, hoping to get some advice from you knowledgeable lot please!

So we own our home, have about 25% equity in it now (we had more but took some out to do kitchen renovation and an extension). Can manage our mortgage payment comfortably. Our home is worth around 485k.

We have about 20k spread among 0% credit cards from the renovation which again we are paying off with no issues.

I have some savings that I would like to put down as a 25% deposit on a BTL. I would like to take a repayment mortgage and the rent I could charge covers the mortgage plus about 50% surplus to put aside for any repairs etc or to overpay on the mortgage.

Ideally I will then save again and buy another BTL until I have a few of them. I am looking at a purchase price of around 80k per BTL. My long term plan is that we will then have a few properties paid off, we can live off the rent and our pensions in retirement and my children can inherit the properties.

So my question is - given the info above, would I be able to get a BTL mortgage, given that I have debt? Would I be better paying off the debt ( I pay 0% for the debt but get interest on my savings)

Any advice appreciated, or feel free to correct me if I am completely off on what I have said! Thank you

Mutton_Geoff

Tlc11 wrote: »

we own our home, have about 25% equity in it now (we had more but took some out to do kitchen renovation and an extension)

Why would your equity % fall after capital improvements to the property?

Have you thought carefully about your new business venture? BTL is not the golden goose it was even 5 years ago.

Tlc11

Sorry I probably didn't explain that very clearly. We took 30k equity from the house and 20k in 0% credit cards (added 100k to house value) House value 485k. We owe 365k. Had we not taken the 30k we would have owed 335k (but then obviously the renovations wouldn't have been done!)

I know it's not as lucrative as it once was. But I know the area and the market very well and I am in it for the long term - retirement security and financial stability for my children, not to turn a quick buck.

Just not too sure how BTL mortgages work as I only have experience of residential ones.

Cakeguts

Which bit of the rental market are you aiming at with a property costing £80k? You need to think about what part of the market you want to let in rather than how much you want to spend on a property.



I say this because we let in the Greater Manchester area and our properties cost considerably more than £80k each so we get a choice of tenants and we hardly ever have any voids. In a not quite so good area you can buy a house for £80k but they are much more difficult to let and tend to have a high turnover of tenants. One of the reasons for this is because many first time buyers can afford to buy an £80k property so they don't need to rent one.

Gwendo40

Unless you've substantially increased the size of your property I wouldn't absolutely bank on the fact that £50k of improvements have automatically made it worth £100k more.

The government has gone some way to deterring over leveraged amateurs with with aspirations of being 'property entrepreneurs' with plans based on pie in the sky fantasy figures of possible valuations and potential returns, from getting into BTL.

It seems they've still got some way to go to deter the most determined and deluded.

pramsay13

I think you should look more into what it means to become a landlord and the legal responsibilities.
But if that does not put you off there is nothing stopping you trying one and seeing if it works for you.
Speak to an advisor about getting a Buy To Let mortgage.
Part of their work will be gathering information from you about what you earn and what outgoings / debt you have.
As someone else said I'm not sure about the wisdom of aiming at the bottom end of the BTL market with 80k properties.
For long term financial security maybe overpay your own mortgage first and reduce that.
How old are you?

AdrianC

Show us your business plan for the BtL empire... Show us the rent, your expected costs and allowances for voids etc, and what you think the net yield's going to be. Don't forget to allow for the SDLT and correctly factor the mortgages into your tax.

I assume you've got those to hand...?

What other investments have you considered?
If you're basing this on the long-term, then what are you expecting values to do over the next 5-10-15-20 years, relative to inflation, and how are you working those estimates?

Tlc11

Ok firstly to clarify, I came on to ask for some assistance in BTL mortgages, I'm not asking if you think I should or not. But to answer your questions...

80k or there abouts gets you a nice 3 bed house in the area I am looking at that I know very well, in Scotland. Where I live now I wouldn't even get a studio flat for that. People there tend to rent long term. I know this as I have friends and family who stay there. So I am not worried about that in the slightest. Bottom of the market there is 30-40k.

AdrianC - yes, I do have all of this information, and I won't be showing it to a stranger on a public forum. My question was specifically to do with obtaining a BTL mortgage. I feel you may have misunderstood my question.

Gwendo - I haven't banked on it. I remortgage my home to release equity and the bank valued it at 485k after the works. (Actually, a local estate agent valued at 500k and I know banks tend to value cautiously) I will ignore your comment in relation to 'the most determined and deluded', it's irrelavent and rude.

Pramsay - overpaying was my other thought process, I will consider this too, thank you.


If anyone has any information specifically on a BTL mortgage and if I should pay off my CC's before obtaining one I would be grateful. I am not here to ask anyone's permission!

AdrianC

You'll be wanting to pay a mortgage broker, then.

Tlc11

Adrian - my mortgage broker is paid by the lender, not me 😁. I didn't want to pester her with a question which I 'thought' could have easily been answered on here by someone who has been in the same situation.

Clearly not...

Crashy_Time

Gwendo40 wrote: »

Unless you've substantially increased the size of your property I wouldn't absolutely bank on the fact that £50k of improvements have automatically made it worth £100k more.

The government has gone some way to deterring over leveraged amateurs with with aspirations of being 'property entrepreneurs' with plans based on pie in the sky fantasy figures of possible valuations and potential returns, from getting into BTL.

It seems they've still got some way to go to deter the most determined and deluded.

Good point, in this market it may add no value whatsoever.