Owning and renting vs owning and living in

steampowered

It's difficult to see the point of owning a flat in a particular area if you don't want to live in it.

You will be tieing up an enormous amount of your money in that flat, and you may not be able to release that money when you need it to fund a deposit to buy a house you actually want to live in. Not to mention all of the higher rate stamp duty and income tax and capital gains tax headaches you could be causing yourself.

BTL property is generally only suitable for longer term investment due to the transaction costs (conveyancing fees etc.) and higher rate stamp duty associated with it. If you might want to sell in a few years to get the equity out, you should look at other investments - such as stocks & shares ISAs (which are likely to generate a better return anyway). 

Buy a house you actually want to live in, when you want to live in it.

Comms69

Samsonite1 said:

Comms69 said:

Samsonite1 said:

Comms69 said:

Why would you want to be landlords? 

I dont understand why renting a flat you dont want to live in is somehow better than buying a flat you dont want to live in?

I don't want to buy a flat/leasehold, but happy to rent one.  There are lovely, large flats available to rent.  Don't want to own one and we would look to live in one for 3-4 years max.  But we would obviously want to buy a property with the money from selling the current London house.  Hopefully that makes some kind of sense?  If not, I apologise!

Why? Just stick it in other investments until your ready to buy surely?

The honest answer to that is that I have even less of a clue about what to stick several hundred thousand into from an investments point of view and I doubt I would get my OH on board with it, so that makes it a lot trickier.  We are still thinking that we may just buy a house that is not so close to school, but mortgage free and where we want to live (near family members).  We would just have to potentially work out a painful school run for a few years - not impossible by any means, but has the potential to be a daily stress point, which of course would be nice not to have.

Premium bonds, fixed rate bonds, gold, pensions - all provite a albeit smaller, passive income. The first two with no risk to your capital. 

Investing in property is a hands on business, and is literally putting your capital out of reach for significant portions of time. 

For example a landlord with a tenant currently in situ, is unlikely to get them evicted before 2022 - regardless of if rent is paid or not. 

Samsonite1

Comms69 said:

Samsonite1 said:

Marvel1 said:

Do you understand business of a landlord involves?

I actually rented out my house when I had to work abroad for a year, why?

Politely lots of people do that badly.

No doubt!  I suppose I did something like this already - I moved abroad and rented out my house.  When I moved back, I let the tenant stay as long as they liked and rented a flat.  When the tenant moved out, I then sold the house and bought elsewhere.
It was a positive experience for the tenant and for us, so I guess I felt I did a good job!

Samsonite1

Samsonite1 said:

Comms69 said:

Samsonite1 said:

Marvel1 said:

Do you understand business of a landlord involves?

I actually rented out my house when I had to work abroad for a year, why?

Politely lots of people do that badly.

No doubt!  I suppose I did something like this already - I moved abroad and rented out my house.  When I moved back, I let the tenant stay as long as they liked and rented a flat.  When the tenant moved out, I then sold the house and bought elsewhere.
It was a positive experience for the tenant and for us, so I guess I felt I did a good job!

I get your point about potential difficulties and perhaps now is not the best time to become a landlord if it is not necessary.

macman

There are plenty of investments where you could park your money for a reasonably safe return of around 3% at low risk. If you want to go into BTL for the purpose of making a profit, understand the responsibilities and the risks, and have done the financial modelling, then fine. But buying a house and letting it more in hope than expectation of covering your costs and getting an eventual (taxable) gain, and thereby becoming yet another hapless accidental landlord who naively thinks 'I'm not really running a business', is about the daftest thing imaginable in the current climate.

p00hsticks

Samsonite1 said:

  But we would obviously want to buy a property with the money from selling the current London house. 

Why ? If you're not going to live in it, I don't see that it's obvious at all.

Property isn't really the sure-fire investment it once was - you could leave the money from the sale in something more liquid and then if a property you like in the area you're looking at does come up in a year or two you'll be in a ready position to buy.

carefullycautious

I would buy the house you want to live in. There is no guarantee the children will get into the schools you want. 
Also you may be able to share the school runs or find someone who would be happy to take the children in with yours on a regular basis.

Scotbot

Samsonite1 said:

Marvel1 said:

Do you understand business of a landlord involves?

I actually rented out my house when I had to work abroad for a year, why?

When was that? I also rented a house but some years ago and tenancy laws have changed substantially recently,particularly in regard to ending tenancies and giving notice. Bottom line if a tenant defaults on the rent you are going to be far more out of pocket. Read the stickies at the top of the forum page.
I  agree with other posters BTL at present for a few years is likely to lose you money. Extra SDLT, higher mortgage rates and a probable fall in the value of the property short term.

[Deleted User]

I generally find that good schools are often in areas with good decent houses - not surrounded by flats. 

Id buy a really nice house near a really good school and get a mortgage. If you both work from home anyway, child care is not a daily issue anyway ? 

AdrianC

Samsonite1 said:

We currently live in London, but as we never go into central London, it is appealing to move elsewhere and we would like to be near family (for many reasons and it would even help with childcare as both sets of parents/grandparents live in the same area).
What I thought of was the fact that we could potentially buy a property without needing a mortgage (due to the price difference between London and where we would move).

Where are we talking about?

The main issue is that all of the good schools (target location) are in an area where there are no good houses to buy (mostly flats, little to no garden, no parking, etc.).
So to the question!  Would it make any sense at all to buy a house without a mortgage to rent out, then rent a nice flat near the schools - in the long term, as we would not have a mortgage, we could consider buying another property or moving into the house we were renting out - the kids are too young to send on the bus by themselves and so being near the school would matter for a few years.

Anyway, not sure if I am just having crazy ideas, but it almost makes sense (until someone talks more sense into me).  Otherwise, I am looking to buy a house as close as possible with all the things we want and as I say, there is nothing ideal at any price and you simply have to live at least 2 miles away from the schools.

So you buy a property in an area you don't want to live, and you rent it out...
You (presumably) pay an agent 10% to manage it.
You keep a pot for maintenance, voids, damages, bad debts...
You pay income tax on the profits.

Meanwhile, you pay to rent a flat you don't want to own, because you can't find houses you do want to live in...

So what happens when a house DOES come available? You can't leap for it, because all your equity is tied up in a business you're paying somebody else to run - and which may not even be particularly profitable.
Maybe you scrape together enough equity to make it mortgageable. Now you're paying +3% SDLT on top of mortgage interest... while you pay somebody else to run a business you don't even want.

Finally, you get the tenant out and put it on the market. But what if it doesn't sell for a while...?

It's not just a fairly iffy investment (relatively low maximum return, possibilities of losses and lots of stress), but it's so illiquid that it could jeopardise your chances of buying the property you DO want to own...

No, invest the money and be ready to move quickly when the house you want comes on. Sure, the return might be a bit lower than you could theoretically get from the rental property... but...