How would you achieve positive passive income with £150,000 and a 1 bed property?

AdrianC

Zockedi wrote: »

Yes. And you're completely right. The numbers don't stack up. That's actually why I posted in the first place. I couldn't make them stack up. Not for London anyway. If I look outside of London things make a bit more sense.

Have you included the cost of property management?

You work full-time. This is not going to replace your income. This is going to be a background thing for you.
Your parents aren't going to run out to the home counties every time a tap drips.

I don't think my preferences are blind as I have two landlords as parents.

I meant their preference being blind.

it is just that the role has become MUCH harder than my parents realise.

Exactly. They bought in when the market was much lower.

The government always ultimately protects property owners. Especially Tories. In fact their current penalising of landlords is exceptionally strange.

Not really, because they are protecting owner-occupiers.

Zockedi

Thrugelmir wrote: »

Not really, because they are protecting owner-occupiers.

Yes, but property owners and businesses were supposed to be pretty much the only two groups the Tories cared about. That and the top 1%.

I'm not a Tory, nor am I fond of Labour (I feel like I have no one to vote for but vote I still will...) but I would love to know why the Tories would go after the groups that are their traditional base.

Sorry, I am going off-topic and I know it.

I wonder what will happen to landlords /business owners if Labour get in.

letsbetfair

The obvious thing to do seems to be putting the money into buying the type of £425k property you want with a low mortgage. This will mean it's invested in property, and you could get somewhere with a room for a lodger that will let you generate income.

Changes to the tax system mean that you'll find it harder to make money with a BTL. It's also a pretty uncertain time to be investing in London - I wouldn't be taking out a large mortgage on London flats as a way to reduce my stress levels! Depends on your appetite for risk, I guess - you could potentially lose a good bit more than £150k, or make a large amount, depending on what happens with the property market and whether you get good tenants.

Zockedi

letsbetfair wrote: »

The obvious thing to do seems to be putting the money into buying the type of £425k property you want with a low mortgage. This will mean it's invested in property, and you could get somewhere with a room for a lodger that will let you generate income.

Changes to the tax system mean that you'll find it harder to make money with a BTL. It's also a pretty uncertain time to be investing in London - I wouldn't be taking out a large mortgage on London flats as a way to reduce my stress levels! Depends on your appetite for risk, I guess - you could potentially lose a good bit more than £150k, or make a large amount, depending on what happens with the property market and whether you get good tenants.

Yes, you're right. One of the reasons I want a two-bed is that if I have any unforeseen issues, I can rent out a room.

It is an uncertain time. But as has always been the case, people make a lot of money in uncertain times. That's when great reversals can happen - win big or lose big.

Right now it is a buyers' market. Estate agents are very nervous. I am seeing house prices come down and, if not, stay on the market indefinitely. Also I have noticed properties being given a rest and then reintroduced to the market as new...

That is happening a lot. The market seems pretty stagnant. People will sell because they need to sell and if you wait and are patient you can get a good deal. If you've no chain. I do believe that. Usually people are in a chain or need to buy quickly. I don't. I can watch and wait and will only buy when it makes sense.

I don't think the right time to buy is at the top of the market, where it has been for so long. I think when property prices go down that's an interesting time.

Obviously no one wants to buy a property and then get into negative equity. - so I am just waiting to see what happens with Brexit. No deal means the prices drop even lower. Even with the bad deal May has cobbled together, prices will fall; they'll be temporary boost and then they'll fall.

So it's a waiting game. My parents haven't stipulated a date and they recognise that this is a weird time. But London property really isn't a bad long term investment - you just have to hold onto it long enough and it rights itself. In the long, long term property prices always go up.

I don't plan to flip properties to make a quick bit of money. I want long term income and have no plans to sell. By the way I am just writing my thoughts - I don't see them as facts, they're just my assumptions based on current evidence.

letsbetfair

Property prices always go up long term? In real terms, I think that's also uncertain - see for example the comparators here https://www.ft.com/content/54f5f390-19af-11e9-9e64-d150b3105d21 Of course, people will always need somewhere to live (I've just bought a place myself) and priced could do much better long term.

You could do very well from a BTL investment, but think about how well you'd need to do in order to beat the £7500 take free income you could get from a lodger and the £3500 or so reduction in mortgage payments (also tax free) you'd get from using the money to get a 2 bed place with a smaller mortgage.

Zockedi

letsbetfair wrote: »

Property prices always go up long term? In real terms, I think that's also uncertain - see for example the comparators here Of course, people will always need somewhere to live (I've just bought a place myself) and priced could do much better long term.

You could do very well from a BTL investment, but think about how well you'd need to do in order to beat the £7500 take free income you could get from a lodger and the £3500 or so reduction in mortgage payments (also tax free) you'd get from using the money to get a 2 bed place with a smaller mortgage.

You are right, but I plan to do both. I want to rent out my home and then the place I move into will be a two bed and I can rent out a room. Maybe I need to move out of London in order to buy my new property. It's just about possible to buy a small house in East Anglia for £150,000. But I want to wait to see what London house prices do in the next few months.

The other option is that I could convert my current property (it has a large loft) into a bigger property to increase rental income from it.

Of course that would really eat into the £150,000. Unless I use my earnings from the dreaded contracting.

There are so many options, it's enough to make your head spin.

I notice no one has mentioned interest only mortgages as a way of enabling the £150,000 to buy a few BTLs and spreading the risk. But there's probably a good reason for that - like the fact that the market is sliding downwards. Any thoughts on this very welcome.

markin

Premium bonds, more you have more chance of winning.


You could buy in the north, nice 3 bed for 100K, but the pay back would start at 12 years not counting tax and then 8k a year not counting tax and maintenance, and hope its value doubles, property is more a long term retirement plan. Even if you got 2 homes the numbers probably wont stack up, and you won't see an income for 15 years

Gwendo40

Given you don't understand what the term ''passive income'' actually means, you've got a lot more reading up to do before you should consider becoming a landlord

letitbe90

Gwendo40 wrote: »

Given you don't understand what the term ''passive income'' actually means, you've got a lot more reading up to do before you should consider becoming a landlord

Sounds like OP is having a midlife crisis. If he sincerely believed he would be happier as a street cleaner than his current role because “I’m the boss”, he clearly has no idea that being a boss isn’t some relaxing role. It’s that Instagram teen mentality of “be my own boss” aspirations. OP, you’re not weird or different as you think, you have bought into a fantasy. Everyone would love to be the mythical boss who does things as and when he wants, goes on holiday whenever and have no one to account to - but in the real world, it isn’t so simple.

You have made clear you don’t like the stress and accountability in your current role, that alone tells me you don’t have it in you to be a landlord or boss.

Zockedi

Gwendo40 wrote: »

Given you don't understand what the term ''passive income'' actually means, you've got a lot more reading up to do before you should consider becoming a landlord

Thanks Gwendo, not only is that kind, but it's helpful too. Let's move on.