Best way to finance property valued under 50k

KO_Dub

Hi, my 1st post.- Would be grateful of any qualified advice. I'm looking at buying a cheap property to let out. I do not and have not owned any property myself, but live with my partner who owns the house we share. So a kind of investment for me. No plans at the moment to create any extended portfolio. Through not wanting to over expose myself, I'm looking at properties locally in the northeast, valued generally around 40k. But I had enquired about mortgages, and 40-50k seems to be absolute minimum loan amount, it has to be over an extended period, and not given on properties valued under 50k! All pointing to me investing more savings than I wanted or intended to, and acquiring a large personal loan of maybe 15-25k... Depending how much savings I put down. Alot of barriers it seems. Has anyone got any valid suggestions please,... Lenders to try,.. or indeed does the above scenario suggest I should drop or adjust my ideas on moving into the property market?! Thanks.

hazyjo

What kind of tenant do you think you'll get if the price and rent is going to be that cheap? Check out the roads, are there a lot of boarded properties?

MovingForwards

Speak with a broker who specialises in buy to let, to see what options are available.

Got to agree with hazyjo about the quality of tenant, reliability of them and what you will actually get for your money.

Have you read all the stickies about landlord responsibilities? It's not the cash cow it used to be due to tax.

KO_Dub

hazyjo said:

What kind of tenant do you think you'll get if the price and rent is going to be that cheap? Check out the roads, are there a lot of boarded properties?

The area's properties are commonly cheap, as is the region in general, somewhat  reflecting salaries in this part of the world. And of course rents too. A specific 40k 2 bed property I'm looking at will yield £400+ p/m rent.

[Deleted User]

KO_Dub said:

hazyjo said:

What kind of tenant do you think you'll get if the price and rent is going to be that cheap? Check out the roads, are there a lot of boarded properties?

The area's properties are commonly cheap, as is the region in general, somewhat  reflecting salaries in this part of the world. And of course rents too. A specific 40k 2 bed property I'm looking at will yield £400+ p/m rent.

Wait until a poster called AdrianC (or something like that) to advise you as he is landlord (from my memory) and knows his stuff.

dimbo61

Where to start ?
House or flat
Freehold or leasehold
Old or new 
Layout, size of rooms, location, condition, EPC, EICR, GSC, 
Type of tenant, local market
Managed by Lettings agents or Self managed.
Standard of property ?
Landlord laws and regulations ?
How to finance ?
BTL or loan or cash ?
Fees, licences, article 4, 
Different rules and laws apply in Scotland and Wales

Grumpy_chap

Quite likely that for BTL property at £40-50k, you will need to be cash buyer.

[Deleted User]

KO_Dub said:

Hi, my 1st post.- Would be grateful of any qualified advice. I'm looking at buying a cheap property to let out. I do not and have not owned any property myself, but live with my partner who owns the house we share. So a kind of investment for me. No plans at the moment to create any extended portfolio. Through not wanting to over expose myself, I'm looking at properties locally in the northeast, valued generally around 40k. But I had enquired about mortgages, and 40-50k seems to be absolute minimum loan amount, it has to be over an extended period, and not given on properties valued under 50k! All pointing to me investing more savings than I wanted or intended to, and acquiring a large personal loan of maybe 15-25k... Depending how much savings I put down. Alot of barriers it seems. Has anyone got any valid suggestions please,... Lenders to try,.. or indeed does the above scenario suggest I should drop or adjust my ideas on moving into the property market?! Thanks.

Who have you enquired about mortgages with?  A mortgage broker?  The board below this one on the forum specifically deals with Mortgage & Endowments so your question about financing your BTL venture may be better placed there.

GDB2222

KO_Dub said:

hazyjo said:

What kind of tenant do you think you'll get if the price and rent is going to be that cheap? Check out the roads, are there a lot of boarded properties?

The area's properties are commonly cheap, as is the region in general, somewhat  reflecting salaries in this part of the world. And of course rents too. A specific 40k 2 bed property I'm looking at will yield £400+ p/m rent.

Sounds good, doesn’t it, compared to under 1% interest in the bank.  Bear in mind that there’s a simple reason why the rents are a high proportion of property prices in your area. The repairs will Eat up a large part of the rent. A new boiler, for example, would be six months rent. The tenant trashed the carpets - that’s several months rent. And so on. 

So, even if the tenant is not a disaster, your return will be pretty variable, to say the least. 

AdrianC

£400/mo rent on a £40k property is 12% raw yield.

Just pause and wonder about why these absolute investment-gold-bargains haven't been snapped up already...?

KO_Dub

AdrianC said:

£400/mo rent on a £40k property is 12% raw yield.

Just pause and wonder about why these absolute investment-gold-bargains haven't been snapped up already...?

Yeh, I mean these are questions I've been asking myself. I have many reservations about stepping into the market obviously, but at the same time, I'm sure if everyone thinks back to their 1st leap it will also have been an uncertain time. Some risk has to be taken at some point as most would concede. Ideally that would be with as little of my own capital as possible, but that actually seems IMpossible with my numbers as they are. I'd either have to go even cheaper properties... (Yes they do exist) most of what I'm looking at with social-housing-level tenancy, or slightly higher up with a 40-50k BTL mortgage, putting in atleast15-20k of savings anyway LTV. Banks man! My ideal scenario would be less than 10k of my money, on a sub 50k property, so a BTL mortgage of maybe 30-35k. Own it inside 7-10years, with very marginal profits within that time, most of which could be absorbed, on paper atleast, through costs etc...  But I'd have something to sell on or base another acquisition on.
House prices are as low as they've been up here, alot of people quite desperate to sell... And I'm in some sort of position for once to potentially benefit from the situation. It's a big unknown, which I'm ok with learning about, but the initial finance is tricky. I think overall, a sub 50k property, can't lose much, will gain some, and leave me with an asset to my name, which I don't currently have. But thank you all for sharing some knowledge with me. I'll continue to assess. Ta