Buying to Let? Advice, help!

steampowered

Buying a BTL now is a nice thought, but a really bad idea in practice.

Here are a few reasons why: 
- When you buy a property of your own, you would need to pay higher rate stamp duty. This alone should be a deal killer.
- You can't afford it. BTL mortgages typically require a 25% deposit. As you have only saved £8k, this is nowhere near enough to pay both the deposit on a BTL property and a deposit on the property you want to live in.
- It is not a suitable investment for the timescales you are looking at. Due to stamp duty, conveyancing fees, letting agent fees and mortgage lender fees - you typically need to hold property for at least a few years to make it worthwhile. Not a few months.
- There will be lots of hassle involved - you'll need to find the property, manage solicitors, manage the letting agent, deal with tenant headaches, and fill in a tax return. 
- If you are taking out the largest possible BTL mortgage, you are unlikely to make much money from it. After taking account of tax and costs you could lose money. 

You will be better off sitting tight and buying a property of your own when you are ready.

In the meantime, if you are a first time buyer, you could consider putting some of the money you have saved into a Lifetime ISA. If you qualify that could get you a nice top up on your £8k from the government.

greatcrested

Good advice above. Just to be clear on your 'forever home' you'd pay the additional 3% 2nd property SDLT and could not reclaim it even by selling the BTL within 3 years as suggested above.

To give you an idea of what's invlved in being a landlord (on top of being a new mother!):

Post 7: New landlords (1):advice & information :see links in next post

Post 8: New landlords (2): Essential links for further information

grumiofoundation

greatcrested said:

Good advice above. Just to be clear on your 'forever home' you'd pay the additional 3% 2nd property SDLT and could not reclaim it even by selling the BTL within 3 years as suggested above.

Yep silly me, forgot the BTL wouldn't have been a previous main home (edited previous post). 

Grumpy_chap

If I read the OP correctly, the objective to have an investment to give a revenue stream and a little extra.  The OP is considering BTL to meet this need and is aware of the efforts and stresses and concerned it could be too much right now.

I do think that BTL can be a very good investment if it is entered into as a planned business purchase and with some financial resilience in case things don’t go smoothly.  The return is low to start with but increases as the rent rises over time but the original capital investment is unchanged.  Using a Letting Agent can take a lot of the stress and effort away but also impacts the nett financial return.

BTL is certainly something the OP could consider, but I am not sure that now is the correct timing for the OP.  If I understand the time-line suggested, the OP aims to:

·         Have the BTL before the baby arrives. 

·         Have a baby 2 months from now (assuming the baby is happy with that date).  .

·         Buy a “Forever Home” when the baby is a few months old – let’s say 10 months from now.

If that time-scale is correct, step 1 requires the OP to find a property, exchange, complete and let out all within 2 months or less.  That is a very quick timeframe and will be difficult to achieve.  I am also not sure where a suitable BTL can be acquired with the £8k deposit the OP suggested is available.  At typical max 75% LTV for BTL, that equates to a property price of £32k.

I sincerely hope that step 2 goes smoothly and everything with the baby is well.  They take a lot of time and seem to need masses of stuff. They also often mean a change in income.

Then there is the “forever home”, which will need second home SDLT if the BTL has been purchased (unless the Government change the rules).  Plus, how would the OP feel if they found the perfect “forever home” but £5k short of making it happen and that £8k had been used up as deposit for the BTL?  Feeling resentment won’t get rid of the tenant.

So, I do think the OP can reasonably consider BTL as part of their long-term strategy but it does not appear as though now is the correct time for this for the OP.

Good luck anyway

rik111

You also need to be prepared for the BTL to be totally trashed after the tenant lives there rent free for 6 months whilst you throw money down the drain trying to get them out. Happens a lot more than you think and don’t expect much help from a letting agent who is taking their 10% cut of your rent. When things go tits up your basically on your own.

thamesmatt

I’m an accidental landlord and after 15 years of this started to listen to the property hub uk podcast/ YouTube channel Lots of useful ideas on areas, types of property. iTunes etc.. normal places. Decided to see what I could do with remortgaging as interest rates are low. I realised I could take out £30k equity and pay the same each month. I’m now considering a 2nd buy to let maybe in liverpool leeds or Manchester which have capital growth potential as well as decent rental markets. So if you are willing to do a bit of research on area and create you plan then at least go for it. If you have done the research and the business case is sound and your heart is still in it then why not?

kzzhar0

Grumpy_chap said:

If I read the OP correctly, the objective to have an investment to give a revenue stream and a little extra.  The OP is considering BTL to meet this need and is aware of the efforts and stresses and concerned it could be too much right now.

I do think that BTL can be a very good investment if it is entered into as a planned business purchase and with some financial resilience in case things don’t go smoothly.  The return is low to start with but increases as the rent rises over time but the original capital investment is unchanged.  Using a Letting Agent can take a lot of the stress and effort away but also impacts the nett financial return.

BTL is certainly something the OP could consider, but I am not sure that now is the correct timing for the OP.  If I understand the time-line suggested, the OP aims to:

·         Have the BTL before the baby arrives. 

·         Have a baby 2 months from now (assuming the baby is happy with that date).  .

·         Buy a “Forever Home” when the baby is a few months old – let’s say 10 months from now.

If that time-scale is correct, step 1 requires the OP to find a property, exchange, complete and let out all within 2 months or less.  That is a very quick timeframe and will be difficult to achieve.  I am also not sure where a suitable BTL can be acquired with the £8k deposit the OP suggested is available.  At typical max 75% LTV for BTL, that equates to a property price of £32k.

I sincerely hope that step 2 goes smoothly and everything with the baby is well.  They take a lot of time and seem to need masses of stuff. They also often mean a change in income.

Then there is the “forever home”, which will need second home SDLT if the BTL has been purchased (unless the Government change the rules).  Plus, how would the OP feel if they found the perfect “forever home” but £5k short of making it happen and that £8k had been used up as deposit for the BTL?  Feeling resentment won’t get rid of the tenant.

So, I do think the OP can reasonably consider BTL as part of their long-term strategy but it does not appear as though now is the correct time for this for the OP.

Good luck anyway

I know this is an old response but the most friendly and helpful post I've received on these forums so thank you! Baby is doing great 😊