Buying a Flat to Rent Out

newlandlord555

Can anyone direct me to a forum where the actual OP question is discussed ? This site sucks !

AdrianC

newlandlord555 said:

I dont know of ANY other investments where i could get anything near 500 quid  a month. As i dont have  a mortgage or living expenses here , all the rent income would be profit after agent is payed off. 

Except it isn't £500/mo net, is it?

Because that's before you've paid the agent to manage it.
Then there's the service charge and ground rent on a flat.
Then there's the insurance and maintenance.
And the cost of finding and referencing a tenant.  
And allowances for voids (both loss of rent and paying CT), along with damage and redecoration between tenants.
And, of course, the costs of purchase.
Let's say it averages out over several years to £300/mo actually in your pocket - £3,600/year.
For a £90k property, that's 4% return. If you're very lucky.

And that's before you consider what happens when you do eventually want to sell it. The costs, the timescale for it sitting empty, the sheer delay when you realise that actually you want to spend your money on something else rather than an out-of-sight-out-of-mind business...

blue_max_3

newlandlord555 said:

Can anyone direct me to a forum where the actual OP question is discussed ? This site sucks !

Sorry to lose you, but thanks for the feedback.
Try here - very informative... https://forums.moneysavingexpert.com/discussion/6171581/buying-a-flat-to-rent-out/p1

newlandlord555

OK . So with a rent of 500 a month I get 300 in pocket plus a flat at the end of the day in 10 years say. Is that better than 0.25 % which is what the banks pay ? 

grumiofoundation

newlandlord555 said:

OK . So with a rent of 500 a month I get 300 in pocket plus a flat at the end of the day in 10 years say. Is that better than 0.25 % which is what the banks pay ? 

But you are comparing a safe bank account (can get 1% btw) with an investment with a risk of the tenant not paying and costs for repairs. 

A return of 4% plus any capital return when selling (don’t forget CGT which is incidentally currently being reviewed) will likely not be much higher than you would get in stock market especially including if can use tax relief in pension (obvs if you are abroad may complicate matters?).

As an aside you did buy a second property for yourself  for say 300k you would lose your first 2.5 years profit in stamp duty. 

You also have to consider the time investment you will need to put in, even if you get an agent to manage, you are still legally responsible. 

newlandlord555

grumiofoundation said:

newlandlord555 said:

OK . So with a rent of 500 a month I get 300 in pocket plus a flat at the end of the day in 10 years say. Is that better than 0.25 % which is what the banks pay ? 

But you are comparing a safe bank account (can get 1% btw) with an investment with a risk of the tenant not paying and costs for repairs. 

A return of 4% plus any capital return when selling (don’t forget CGT which is incidentally currently being reviewed) will likely not be much higher than you would get in stock market especially including if can use tax relief in pension (obvs if you are abroad may complicate matters?).

As an aside you did buy a second property for yourself  for say 300k you would lose your first 2.5 years profit in stamp duty. 

You also have to consider the time investment you will need to put in, even if you get an agent to manage, you are still legally responsible. 

If the tenant doesnt pay surely the law will protect the good landlord no ? 
Stock market  a better option...so 300 a month for 10 years is 36,000 plus at least capital return of 80,000. Your saying I can get more than 110,000 in 10 years on the stock market .??

Comms69

newlandlord555 said:

grumiofoundation said:

newlandlord555 said:

OK . So with a rent of 500 a month I get 300 in pocket plus a flat at the end of the day in 10 years say. Is that better than 0.25 % which is what the banks pay ? 

But you are comparing a safe bank account (can get 1% btw) with an investment with a risk of the tenant not paying and costs for repairs. 

A return of 4% plus any capital return when selling (don’t forget CGT which is incidentally currently being reviewed) will likely not be much higher than you would get in stock market especially including if can use tax relief in pension (obvs if you are abroad may complicate matters?).

As an aside you did buy a second property for yourself  for say 300k you would lose your first 2.5 years profit in stamp duty. 

You also have to consider the time investment you will need to put in, even if you get an agent to manage, you are still legally responsible. 

If the tenant doesnt pay surely the law will protect the good landlord no ? 
Stock market  a better option...so 300 a month for 10 years is 36,000 plus at least capital return of 80,000. Your saying I can get more than 110,000 in 10 years on the stock market .??

What does that even mean?? 

If you invested in the FTSE at the right time, around 10 years ago, you'd have doubled you money.

grumiofoundation

newlandlord555 said:

grumiofoundation said:

newlandlord555 said:

OK . So with a rent of 500 a month I get 300 in pocket plus a flat at the end of the day in 10 years say. Is that better than 0.25 % which is what the banks pay ? 

But you are comparing a safe bank account (can get 1% btw) with an investment with a risk of the tenant not paying and costs for repairs. 

A return of 4% plus any capital return when selling (don’t forget CGT which is incidentally currently being reviewed) will likely not be much higher than you would get in stock market especially including if can use tax relief in pension (obvs if you are abroad may complicate matters?).

As an aside you did buy a second property for yourself  for say 300k you would lose your first 2.5 years profit in stamp duty. 

You also have to consider the time investment you will need to put in, even if you get an agent to manage, you are still legally responsible. 

If the tenant doesnt pay surely the law will protect the good landlord no ? 
Stock market  a better option...so 300 a month for 10 years is 36,000 plus at least capital return of 80,000. Your saying I can get more than 110,000 in 10 years on the stock market .??

You NEED to research being a landlord. 

Yes the tenant will be legally required to pay rent - doesn’t mean they will. You can spend money and take them to court and get a judgement against them, if they don’t pay you can spend even more on baliffs and if the ex-tenants have no assets or money...? 

I’m not saying stock market is a better or a worse option. Obviously any investment carries risk so there’s no way of knowing what is ‘best’.

10 years is a short(ish) period of time to invest in stock market because when you come to withdraw may coincide with a drop. 

Bur figures for comparison - 800000 initial investment 

5% year (compounded) -  131k after 10 years 
6% - 145k
7% - 160k

Hasbeen

AdrianC said:

newlandlord555 said:

I dont know of ANY other investments where i could get anything near 500 quid  a month. As i dont have  a mortgage or living expenses here , all the rent income would be profit after agent is payed off. 

Except it isn't £500/mo net, is it?

Because that's before you've paid the agent to manage it.
Then there's the service charge and ground rent on a flat.
Then there's the insurance and maintenance.
And the cost of finding and referencing a tenant.  
And allowances for voids (both loss of rent and paying CT), along with damage and redecoration between tenants.
And, of course, the costs of purchase.
Let's say it averages out over several years to £300/mo actually in your pocket - £3,600/year.
For a £90k property, that's 4% return. If you're very lucky.

And that's before you consider what happens when you do eventually want to sell it. The costs, the timescale for it sitting empty, the sheer delay when you realise that actually you want to spend your money on something else rather than an out-of-sight-out-of-mind business...

As Above. But as you are starting a business, you have obviously already undertaken due dilligance? 
And: 
Solicitors fees.
Agents fees.
Landlord registration to council.
Electrical installation certificate.
Gas certificate.
EPC report.
legionella risk assessment. 
Smoke detectors, heat alarms, Carbon monoxide detector. All interlinked.
Fire extinguishers / fire blanket. 
Heating / boiler cover.
Building insurance.
Property maintenance. Plus ex council flats still some owned by council? External major repairs? share of costs. £££s
None paying tenants. No income. Legal fees.
Damage to internal. Decoration, appliances etc.

Just a few, I could think off but probably more? but more info here LINK

newlandlord555

Sure . I know of all those necessary things to get up and running. But if i get  a decent tenant long term in then it could be sweet . A lot safer that gambling it on the stock market anyway. The flat Im looking at will prob cost a few hundred to get rent legal. By the way where do I get the info about gas and elec. certs from ? Doesnt seem to be in the home report.