Buying or investing?

kittenkicks

Hi folks, wonder if you might be able to help me. Hope you don;t mind me posting this here.

Wondering if I should put savings into paying off my mortgage or look into investing in a buy 2 let.

I'm 31, engaged and into the second year of the mortgage on our first property ( 153k)
We've been overpaying and have got our LTV down to 73%

I work in the arts and earn £23k a year, my partner earns closer to 40 pre tax.
Although I've never earned much, I've been a saver since I was young and now I have stored away around £55k. It's split between S&S ISA, other ISA's and savings accounts.

We're keen to pay out mortgage off within 15 years or so and we want to try to start a family soon.
I've always been fascinated by property and I live in the North West where renting yields can be high and property relatively cheap.

I was just after opinions on whether I should invest some of my savings into a small buy to let property. Would this be a wise move? Or should I just concentrate on over paying our current mortgage.

I would of course keep a 6 month rainy day fund and a fund for planned maternity leave. I would potentially like to go part time after having a child and thinking maybe a rental property could be a good move.

My mother has recently retired with a little pay out which she is keen to invest in some way too. Would it be wiser for us to maybe come together to purchase a small buy to let ( I'm talking a 55-80k flat in a decent area)

OR am I just getting in way above my head? Any thoughts appreciated.

Mrs36

As a landlord who is currently selling my BTL as I have just had enough of tenants taking the mick I would think very long and hard. What would you do if a tenant didn't pay the rent, or damaged the property? Can you spare the time to complete inspections, finding new tenants etc.

I don't want to put you off but there is nothing easy or simple about it, you really do have to treat it like a business.

I'm sure someone else will be along shortly with a link to G_Ms excellent posts on becoming a landlord.

Retireby40

Mrs36

If you don't mind me asking what type of property is your BTL? Is it in a good area or cheaper housing estate area?

The reason I ask is I have a BTL in a decent area where I live and for 3 years I have had no problems. ( I know they could crop up at anytime).

I was also looking at investing in another one in the next 2 years however it is likely I could only invest in a more undesirable area. Not a bad area but not somewhere where the tenants generally earn decent wages.

I would expect cheaper properties yield more problems in regards to tenants and behaviour/ treatment of house compared to those in better areas.

Mrs36

Retireby40 I have been a landlord to both at various points. The current one is a well presented family home in really nice area. I take your point, having previously owned a different btl in a very run down disadvantaged area.

With both, I suspect we have been unlucky with our tenants, despite carrying out all the referencing and checks available. Quite honestly I am fed up of the hassle of tenants who do nothing more than take advantage. If I could guarantee a long term tenant who would look after the property in return for a good landlord who won't rip them off, provides security of tenure and maintains the property to a good standard and repairs issues quickly I could have been persuaded to keep it, but at this point for various boring financial reasons it makes more sense for me to sell.

With the tax changes and restrictions on tenant fees I would honestly not recommend anyone to get into BTL without being full informed of what they are signing up to.

You only have to look through this forum to see that people think it is as simple as getting some tenants in to cover the mortgage, without really thinking about their obligations and what it actually entails. (this is not aimed at you o/p, or at you Retireby40).

Retireby40

Thanks for the information.

Yeah I have family who bought in a similar area as me and the tenants stopped paying and it was a whole hassle getting them out as they had a small baby. Then the boiler went and that was a big money repair so they were already started on a negative.

Saying that things have stabilised with the new tenants.

It's one of those that long term will generally be a decent enough investment but alot of the time you will think is it worth the hassle. And if it's only there to provide an extra boost when you retire or to leave to family it may seem not worth the hassle.

Luck plays a huge part. Like I said I have had 0 problems and I would estimate about £500 of repairs to do in those 3 years. However it could change easily enough.

For me while I know it isn't as easy as someone paying the mortgage it's just trying to find another thing to try to make the future a little more comfortable if anything was to happen work wise or health wise.

kittenkicks

Thank you all so much for being frank and honest about the pitfalls, made me think hard about all the time it will take, but not put me off entirely.

Mrs36 wrote: »

I'm sure someone else will be along shortly with a link to G_Ms excellent posts on becoming a landlord.

This sounds great, still learning to navigate the boards and couldn't find this. If anyone has a link I'd be mega grateful.

Thanks again folks

need_an_answer

I wont bother typing out my response to you as I tried something similar to this thread which is still current...lots of opinions on this thread about the pitfalls and success of joining the BTL market at the moment

https://forums.moneysavingexpert.com/discussion/5989137/are-we-mad-mortgage-free-or-buy-to-let

Personally we didn't join the BTL situation until our children were teens and personally if you have yet to start a family I would spend some time and money on that rather than the potential expensive hobby of a single BTL. It is a business and can quite easily drain rainy day savings.

kittenkicks

Thanks a million- really kind of you. There's lots to weigh up for sure, maybe it's something we should aim for further down the line.

Mrs36

Here is G_Ms excellent post. A must read for all potential landlords, IMO.

https://forums.moneysavingexpert.com/discussion/5180214/tenancies-in-eng-wales-guides-for-landlords-and-tenants

Thrugelmir

Retireby40 wrote: »

Luck plays a huge part. Like I said I have had 0 problems and I would estimate about £500 of repairs to do in those 3 years. However it could change easily enough.

Funds should be put aside every year into a contingency pot. Own a property long enough and you'll have some hefty bills to fund.

steampowered

I am not sure it would be wise to move 100% of your savings into a single property.

That is a high risk investment strategy since you are putting all of your eggs into one basket. It also means your savings are not accessible since they would be locked up in a tenanted property which you would need your mother's consent to sell.

You would also need to think about the tax implications. If your husband will own part of the BTL, that may well push him into the higher rate tax bracket if he gets a pay rise over the next few years.

Also note that the BTL would mean you have to pay the higher rate of stamp duty on a family home move if you move your family home in future.

All in all, there seem to be a lot more disadvantages than advantages. And the return on your S&S ISA will probably exceed the return you'd get on property anyway.

I suspect you would be better off putting your money into a pension and maximising your contributions to your S&S ISA.

Your S&S ISA should be generating a good return tax free. It is probably best to focus on making sure that is invested in the right place (i.e. a diversified low cost investment fund).