Buy to Let Property

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  • Miranda25Miranda25 Forumite
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    You will need 25 percent in you are planning to rent it out long term. Do you have 50k+ fees and stamp duty to hand for a £200k flat? Sounds like you only have £8 currently, which is not enough. Remember you cannot use the HTB ISA to rent out a property, so will not get the bonus. 
    Thank you. I have more money in fixed ISA.
  • NinjaTuneNinjaTune Forumite
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    Miranda25 said:
    NinjaTune said:
    Miranda25 said:
    Tom, 
    Firstly, legally it is my mum's property and not mine. 
    Secondly, I don't think I am going to use HTB as I cannot afford to buy new house here and I don't want a flat. 

    Have you actually looked at property prices in some of the areas you mentioned earlier?  You won't get a house in Bracknell for £200k, only a 1 bed decent flat or a 2 bed with a short-ish lease/in a less salubrious area.  Personally I wouldn't be tempted to live in Slough but, again, you will be restricted to flats with your budget.  Not familiar with Swindon so can't comment on that area.
    NinjaTune, 
    I don't want house in Bracknell, Slough, Swindon. I don't want to live there. I mentioned those areas because those areas are good for investments (from online sources). That's why I asked people which do invest into flats how they make their mind- do they follow researches or they have different way of thinking? :-)
    :smiley:
    Okay, so I'm confused about what is is you actually want to do.  You seemed to indicate those were areas you were considering and that you don't want to buy a flat.  Guess I've just misunderstood.
  • AlexMacAlexMac Forumite
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    You seem keen on the idea, and haven't yet been deterred, so to answer your original Q about location- how about looking at freehold properties in North Kent, just outside London- Dartford, Gravesend, Gillingham... lots of modest period terraced houses (or even better than that) along the rail and bus commuter links,  around  £200k or less, with rental values upwards of £800 pcm.  Use the property websites to identify likely ranges of prices and rents.   

    Having said that, I've got my doubts about whether it's right for you; given that rental values might be strong but you can no longer bank on Capital gains?  I've had a total of five second homes over the years and have done really well from the these and now, from the two remaining 2-bed suburban BTL London properties which I still own... but
    • both are sufficiently close to my home that I can keep an eye on 'em.  In fact, I still manage one myself to save agents' fees (I used to manage both after gaining enough experience but have now handed the other back to the Public Sector on a long-term licence to a Social Landlord - a Housing Association.  A very attractive option; less than market rent, but no fees or voids and no management nor maintenance problems; they even mend the boiler comission the annual gas safety inspections) 
    • they were very affordable; I bought one 20-odd years ago, then the second 10+ years ago when prices were really low locally; consequently I get a really good yield or ROI (return on investment).  In all but one case, my purchases have appreciated significantly in value.  See below for the success stories; the only one which lost me value was the one I bought before the market fell 20-25% in the crash of 2008
    • I was lucky enough (or careful enough) to never have a bad debt or problem tenant; but then I treated 'em right; washing machines, fridges, diswashers get replaced the moment they break and I even commissioned a boiler replacement by phone from abroad via a trusted builder when one failed while I was on holiday one year in Italy!
    I don't think I'd do it now, however, even if I was 20-30 years younger.  I'm not confident enough to go to areas I don't know well, and prices are silly locally.  So while I've benefitted from obscene capital Gain here due to a quirk of geography (one's risen 700%- yes, seven times in value -  in 20-odd years, the other's gone up 80%)  I simply wouldn't want to risk £300k-£500k for a return of £1.3-£1.5k pcm round here.   And I don't think anyone will enoy capital gains such these in the next 10-20 years - even more doubtful given the fall-out of the current crisis.

    But if you're braver, it might be worth you taking a day trip along the North Kent Thames corridor and asking a few Estate Agents?.
  • Miranda25Miranda25 Forumite
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    Miranda25 said:
    Thank you for summarising everything. You are all so helpful on the forum, thank you.
    Just to explain my situation better:
    I already have a nice flat back home where I don't live. So I don't want another flat in the UK. But I cannot afford to buy a house somewhere near London (as I have to travel to Central London daily for work). Or I just cannot figure out nice areas with affordable house prices. I looked at 1-bedroom houses with garden, not a lot on the market!
    I have HTB ISA with around £8000. I have a fixed rate ISA for 1 year. I want to find some extra income to my salary.
    Because I am not planning to live in the UK forever, I thought I can take mortgage from the bank and make this money work for me:-))
    I will have 25% deposit in one year time (if everything as it is now). Or I will start with CTL like it was recommended.
    I still have a lot of thoughts but I think my main purpose is: to find something which would bring me income in the UK while I live in another country. 
    Can I do investments in stock markets if I do not live in the UK in future? Thanks.
    Hi, as you already own a property, I'm pretty sure you are not entitled to benefit from "first time buyer" products like the HTB ISA. The fact that the property is outside the UK generally doesn't make a difference.

    It sounds like your financial goals are as follows:
    - Get as much of a return as possible on your investment.
    - Be able to use your investment when you leave the UK.

    I don't think a BTL investment is suitable for someone in your circumstances for all of the reasons in my last post - BTL comes with a lot of additional cost and tax that will eat into your investment returns.

    While you might be able to get a BTL mortgage, remember that you will be paying interest on that. The effect of a mortgage is to magnify both profits and losses on your deposit. There's a pretty good chance that you might lose money if you have non-paying tenants, or if house prices drop, or if you want to sell within a few years (given the costs you'll need to pay on acquisition - stamp duty; conveyancing costs; lender fees; and costs on sale - estate agent fees). 

    You can keep your stock market investments no matter where you live in the world. Unlike a tenanted property, stocks can be sold at any time. The only restriction is that you can't pay into a stocks & shares ISA while you are resident abroad (though you can keep what is in an ISA you have already paid into).

    If for whatever reason you wanted to have funds generated in the UK while you live overseas, you could consider a FTSE 250 tracker - though I'm not sure why you would want to do this? Most seasoned investors would recommend investing in a manner which is globally diversified - such as a Vanguard Global ETF which you'll be able to get through any investment platform.

    The return generated by the major stock markets over the past 50 years is on average 7-8% per year, so that's what you might expect on a long term stock and share investment (though some shares will be better and some years will be worse, it will average out).


    Thank you for all your help (and other Guys thank you too). I really appreciate your help.

    In terms of return generated, yes properties and stock markets are similar 7-8%.
    The difference is in the invested amount: 
    -I will invest my own money into stock markets (small amount)
    -I will invest lenders money into property (which is much larger amount)
    I just thought that larger amounts would give me larger returns in good case scenarios (not where I deal with tenants who is not paying me 6-12 months).
    And I am wondering why foreigners would want to invest in UK's properties in this case? For example I know one lady who has 5 flats in South-East England (all rented out).

  • Miranda25Miranda25 Forumite
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    AlexMac said:
    You seem keen on the idea, and haven't yet been deterred, so to answer your original Q about location- how about looking at freehold properties in North Kent, just outside London- Dartford, Gravesend, Gillingham... lots of modest period terraced houses (or even better than that) along the rail and bus commuter links,  around  £200k or less, with rental values upwards of £800 pcm.  Use the property websites to identify likely ranges of prices and rents.   

    Having said that, I've got my doubts about whether it's right for you; given that rental values might be strong but you can no longer bank on Capital gains?  I've had a total of five second homes over the years and have done really well from the these and now, from the two remaining 2-bed suburban BTL London properties which I still own... but
    • both are sufficiently close to my home that I can keep an eye on 'em.  In fact, I still manage one myself to save agents' fees (I used to manage both after gaining enough experience but have now handed the other back to the Public Sector on a long-term licence to a Social Landlord - a Housing Association.  A very attractive option; less than market rent, but no fees or voids and no management nor maintenance problems; they even mend the boiler comission the annual gas safety inspections) 
    • they were very affordable; I bought one 20-odd years ago, then the second 10+ years ago when prices were really low locally; consequently I get a really good yield or ROI (return on investment).  In all but one case, my purchases have appreciated significantly in value.  See below for the success stories; the only one which lost me value was the one I bought before the market fell 20-25% in the crash of 2008
    • I was lucky enough (or careful enough) to never have a bad debt or problem tenant; but then I treated 'em right; washing machines, fridges, diswashers get replaced the moment they break and I even commissioned a boiler replacement by phone from abroad via a trusted builder when one failed while I was on holiday one year in Italy!
    I don't think I'd do it now, however, even if I was 20-30 years younger.  I'm not confident enough to go to areas I don't know well, and prices are silly locally.  So while I've benefitted from obscene capital Gain here due to a quirk of geography (one's risen 700%- yes, seven times in value -  in 20-odd years, the other's gone up 80%)  I simply wouldn't want to risk £300k-£500k for a return of £1.3-£1.5k pcm round here.   And I don't think anyone will enoy capital gains such these in the next 10-20 years - even more doubtful given the fall-out of the current crisis.

    But if you're braver, it might be worth you taking a day trip along the North Kent Thames corridor and asking a few Estate Agents?.
    AlexMac, I brave enough :-)) I was away from parents home at age of 16 (distance between me & my parents was 6 hours flight) and I was by myself (not with relatives). I even was brave when I came to the UK without speaking English at all (as I learned French at school-university).
    You know I looked at prices in Dartford/ Gravesend as I want to find house for myself too. I noticed that prices are lower compare to other areas in south-east. But forumites told me that Dartford is not such a good area to live, although it might be fine for investment.
    Don't you think that it might be a good option for me to buy a property and pass it to a social landlord (to avoid maintenance problems)? Can I avoid squatting problems too? :-))

  • grumiofoundationgrumiofoundation Forumite
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    Miranda25 said:
    Miranda25 said:
    Thank you for summarising everything. You are all so helpful on the forum, thank you.
    Just to explain my situation better:
    I already have a nice flat back home where I don't live. So I don't want another flat in the UK. But I cannot afford to buy a house somewhere near London (as I have to travel to Central London daily for work). Or I just cannot figure out nice areas with affordable house prices. I looked at 1-bedroom houses with garden, not a lot on the market!
    I have HTB ISA with around £8000. I have a fixed rate ISA for 1 year. I want to find some extra income to my salary.
    Because I am not planning to live in the UK forever, I thought I can take mortgage from the bank and make this money work for me:-))
    I will have 25% deposit in one year time (if everything as it is now). Or I will start with CTL like it was recommended.
    I still have a lot of thoughts but I think my main purpose is: to find something which would bring me income in the UK while I live in another country. 
    Can I do investments in stock markets if I do not live in the UK in future? Thanks.
    Hi, as you already own a property, I'm pretty sure you are not entitled to benefit from "first time buyer" products like the HTB ISA. The fact that the property is outside the UK generally doesn't make a difference.

    It sounds like your financial goals are as follows:
    - Get as much of a return as possible on your investment.
    - Be able to use your investment when you leave the UK.

    I don't think a BTL investment is suitable for someone in your circumstances for all of the reasons in my last post - BTL comes with a lot of additional cost and tax that will eat into your investment returns.

    While you might be able to get a BTL mortgage, remember that you will be paying interest on that. The effect of a mortgage is to magnify both profits and losses on your deposit. There's a pretty good chance that you might lose money if you have non-paying tenants, or if house prices drop, or if you want to sell within a few years (given the costs you'll need to pay on acquisition - stamp duty; conveyancing costs; lender fees; and costs on sale - estate agent fees). 

    You can keep your stock market investments no matter where you live in the world. Unlike a tenanted property, stocks can be sold at any time. The only restriction is that you can't pay into a stocks & shares ISA while you are resident abroad (though you can keep what is in an ISA you have already paid into).

    If for whatever reason you wanted to have funds generated in the UK while you live overseas, you could consider a FTSE 250 tracker - though I'm not sure why you would want to do this? Most seasoned investors would recommend investing in a manner which is globally diversified - such as a Vanguard Global ETF which you'll be able to get through any investment platform.

    The return generated by the major stock markets over the past 50 years is on average 7-8% per year, so that's what you might expect on a long term stock and share investment (though some shares will be better and some years will be worse, it will average out).


    Thank you for all your help (and other Guys thank you too). I really appreciate your help.

    In terms of return generated, yes properties and stock markets are similar 7-8%. In theory in both cases
    The difference is in the invested amount: 
    -I will invest my own money into stock markets (small amount)
    -I will invest lenders money into property (which is much larger amount) you are borrowing this money 
    I just thought that larger amounts would give me larger returns in good case scenarios (not where I deal with tenants who is not paying me 6-12 months). You can’t make this assumption 
    And I am wondering why foreigners would want to invest in UK's properties in this case? To make money? For example I know one lady who has 5 flats in South-East England (all rented out).


    It’s not as simple as saying - I can invest 25k in stocks but the bank will let me invest 100k in a property” 

    Firstly you are borrowing the extra money from the lender, you have to pay interest on it (and repayments if repayment mortgage). You also have to paying all the other fees and costs associated with being a landlord. 

    Whereas investing in stocks and shares costs nothing to maintain once you have invested the capital. 

    You can’t assume you won’t get a tenant who won’t pay. 

    Have you actually worked out how much profit you would make as a landlord? 
    Have you worked out if you can afford voids (whether tenants not paying or property not let), how much of a bigger you will need for repairs, legal fees etc
    Have you read all the links posted earlier on your responsibilities as a landlord? 
  • Miranda25Miranda25 Forumite
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    Grumiofoundation, I remember you gave me good advises in "savings" part of this forum :-))
    I did not work out profit from renting as I even don't know which area to consider yet. But what I saw for now- monthly flat rent will cover monthly mortgage payment (which is fine with me even if I don't make any profit at all but can cover mortgage). Maybe on first flat I will not make any profit (just pay the mortgage) but profit should start come with second property (in case of economic stability). But how long to wait for this stability? 
    I definitely will read all the links posted earlier. Thanks.
  • Miranda25Miranda25 Forumite
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    Grumiofoundation,
    I also feel that I want to utilise mortgage "allowance" while I am in the UK- just not sure how to do it in a right way? 
    All my thoughts about investment are because I cannot afford to buy house in a nice area for myself :-))
    What would you do? Just give up the idea of taking mortgage or sacrificed and move to a worse area?
  • SlitherySlithery Forumite
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    Miranda25 said:
    But what I saw for now- monthly flat rent will cover monthly mortgage payment (which is fine with me even if I don't make any profit at all but can cover mortgage). Maybe on first flat I will not make any profit (just pay the mortgage) but profit should start come with second property (in case of economic stability).
    You're still failing to take into account all of the tax that you'll pay on the rental income, repairs and maintenance costs, agent fees, SDLT, void periods, etc etc etc.....
    Even if the rent payment is more than the mortgage you could still easily be losing money every month. Before taking this landlord idea any further you really need to work out a proper financial plan to see if it is viable or not. Have you actually read the sticked LL thread and all of its links that you've bee given several times already? As it really doesn't sound as if you have any idea what you're doing.
  • Miranda25Miranda25 Forumite
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    Slithery said:
    Miranda25 said:
    But what I saw for now- monthly flat rent will cover monthly mortgage payment (which is fine with me even if I don't make any profit at all but can cover mortgage). Maybe on first flat I will not make any profit (just pay the mortgage) but profit should start come with second property (in case of economic stability).
    You're still failing to take into account all of the tax that you'll pay on the rental income, repairs and maintenance costs, agent fees, SDLT, void periods, etc etc etc.....
    Even if the rent payment is more than the mortgage you could still easily be losing money every month. Before taking this landlord idea any further you really need to work out a proper financial plan to see if it is viable or not. Have you actually read the sticked LL thread and all of its links that you've bee given several times already? As it really doesn't sound as if you have any idea what you're doing.
    Slithery,
    It is a lot to read, the whole book :smile: Will do it, just prepare for my exams right now.
    Thank you for helping me to minimise my risks (just takes time to analyse all the information given).
    Maybe will buy 2-bedroom flat and take a lodger, would be less risky I assume? 

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