BTL Investments

kolaxy

Hi All,

I'm a newbie here. Pls kindly advice me from your wealth of knowledge and experience regarding BTL investments strategies. 5 years ago, my wife and I bought a 3 Bed residential house (up in the West Yorkshire area) for £130,000. Today, the house is valued at £177,000 (£186,000 on Zoopla) with a mortgage balance of £117,000 still outstanding, meaning we have an equity of £60,000. Aside this equity, we plan to save £40,000(40% saved already) by the end of November, 2023 God willing, when our next remortgage will be due, as we'll be able to pull out some equity. We both have a combine average gross income of £70,000 per annum. I'm hoping we can pull out at least £35,000 of the equity in our home plus the savings of £40,000 totalling £75,000.

Question 1: Should we buy a 2 bed house outrightly for £60,000 and use the remaining £15,000 for other costs plus refurb(new bathroom, kitchen, painting etc). Then refinance in order to pull out all or bulk of the investment capital out and then repeat the strategy. 2 Bed goes for £600 here. (Note: I've seen loads of £60,000-£70,000 houses up here). 

Question 2: Do you think we should instead invest the £75,000 on either 2 x 3Bed Standard BTL houses(@75% LTV) or 3 by 2 Bed Standard BTL houses(@75% LTV).
I really do apologise for the long 'stories'. Thanks for your time in advance.

tacpot12

As a general rule, borrowing to increase your BTL portfolio is the best, if you can get the mortgages. My sense is that 3 bedroom houses are in shorter supply (and so will have a higher yield), but I don't have any evidence to support this. Perhaps others will. 

kolaxy

tacpot12 said:

As a general rule, borrowing to increase your BTL portfolio is the best, if you can get the mortgages. My sense is that 3 bedroom houses are in shorter supply (and so will have a higher yield), but I don't have any evidence to support this. Perhaps others will. 

Thanks for your advice. Much appreciated. 

kolaxy

@tacpot12, thanks once again. 

The only problem is that, if I use all my capital as deposits for,  say 2 or 3 houses, I might struggle to get more funds to invest more. On the other hand, I if I buy one with cash, I can refurb and refinance, thereby pulling out all or most of the funds for reinvestment over and over again. 

HotPantsCruiser

kolaxy said:

@tacpot12, thanks once again. 

The only problem is that, if I use all my capital as deposits for,  say 2 or 3 houses, I might struggle to get more funds to invest more. On the other hand, I if I buy one with cash, I can refurb and refinance, thereby pulling out all or most of the funds for reinvestment over and over again. 

Would there be any limit to how often you could do this?

kolaxy

HotPantsCruiser said:

kolaxy said:

@tacpot12, thanks once again. 

The only problem is that, if I use all my capital as deposits for,  say 2 or 3 houses, I might struggle to get more funds to invest more. On the other hand, I if I buy one with cash, I can refurb and refinance, thereby pulling out all or most of the funds for reinvestment over and over again. 

Would there be any limit to how often you could do this?

If one is not lazy and work very hard to save enough money, nothing stops you from buying more...no limits.

Obviously_the_best

In my area, it tends to be that the smaller the property the higher the yield, however often on flats you then have to account for leasehold service charges and ground rents. Your option 1 of buying the smaller properties then releasing equity sounds like a better plan. Money makes money, so why not borrow some of someone elses to make yourself more.

kolaxy

Obviously_the_best said:

In my area, it tends to be that the smaller the property the higher the yield, however often on flats you then have to account for leasehold service charges and ground rents. Your option 1 of buying the smaller properties then releasing equity sounds like a better plan. Money makes money, so why not borrow some of someone elses to make yourself more.

Thanks for your input. Much appreciated. 

steampowered

Why have you decided that BTL is the best investment option, given all of the other investment options available?

Stocks & Shares ISA investments are lower risk, lower hassle, more flexible, lower transaction costs and returns are tax free. None of which is offered by BTL. The only advantage that BTL has is easier access to debt.

Go on over to the Savings & Investments forum before deciding on the BTL route.

kolaxy

steampowered said:

Why have you decided that BTL is the best investment option, given all of the other investment options available?

Stocks & Shares ISA investments are lower risk, lower hassle, more flexible, lower transaction costs and returns are tax free. None of which is offered by BTL. The only advantage that BTL has is easier access to debt.

Go on over to the Savings & Investments forum before deciding on the BTL route.

Thanks for your feedback. I planned to invest in shares, bonds and stocks in the nearest future but at the moment, investing in properties is my number one, in terms of investment priorities. Once again, thanks for your advice.