Help getting into property investment

BoBoDobie

Its been a long time goal to get into buying property to rent out as a long term investment for when I retire but saving up a 25% deposit has been out of my reach and up to now I've been concentrating on paying off my mortgage.  I met someone (in property) yesterday who said that was the wrong thing to do.  She advised to take out an extra £50k on my mortgage to use as a deposit and put that down on a buy to let HMO property.   Get that on an interest only mortgage I think she said so I'm paying less.

I'm now seriously rethinking things.  Its scary to think of taking out that much extra when I've been concentrating on getting it down.   Its currently £70k left and my house is worth around £285k so to borrow another £50k would take my mortgage to £120k with 24 years left.   I don't see how else I would get a big enough deposit but then if I have a larger mortgage on my own house, I'm not sure if a lender would lend me another £150k to put down on a buy to let property.   I earn around 30k a year.

daveyjp

Unless you have a lottery win or save for many years you can't enter the world of property investment without borrowing money.

If you find it scary to only borrow £50k to start a property investment company it may not be for you.  Part of running a business is taking risks.

BoBoDobie

daveyjp said:

Unless you have a lottery win or save for many years you can't enter the world of property investment without borrowing money.

If you find it scary to only borrow £50k to start a property investment company it may not be for you.  Part of running a business is taking risks.

Thank you Daveyjp.   I've taken risks before, left permanent secure jobs to start my own businesses etc.  Its just this is a complete 180 from what I have been doing ie I had the goal of being mortgage free by 50 and now I'm looking at nearly doubling it lol!  I suppose cutting through the waffle, it boils down to would they lend me the money.   Would they lend me an extra £50k on my mortgage to mean I'm up to around £120k......probably I'd imagine.  But then the real crux is would a lender let me have a buy to let mortgage for £150k when I only earn £30k a year.  I've never been exposed to buy to let so do they have the same lending criteria's?  If it were all on one mortgage I know they wouldn't let me borrow the combined sum of 150 + 120 and have a £270k mortgage so have I any hope of even doing it at all?  

It is scary, I have a young daughter to consider so would always be cautious of doing anything to jeopardise our finances.  I would just like to bring us some security in the long term.  I'm happy with risks as long as they are thought through.  Feel the fear and do it anyway!    

Section62

Lots of experienced BTL investors are getting out of their investment, and managing a HMO is more tricky than a basic BTL.

You might want to ask yorself why you want to go into an area of investment that experienced investors are leaving.

user1977

What other investments do you have and why have you focused on BTL? I think general advice is to do things like max out your pension entitlements before considering starting a BTL business.

BoBoDobie

Section62 said:

Lots of experienced BTL investors are getting out of their investment, and managing a HMO is more tricky than a basic BTL.

You might want to ask yorself why you want to go into an area of investment that experienced investors are leaving.

I'd not heard that?

macman

Because you are dealing with multiple tenants, which multiplies the risk of non-payment, damage to the property...higher insurance and mortgage, greater dilapidations, the need to obtain HMO licensing...the list is endless.
There are about 70 statutory and regulatory requirements to comply with as a landlord, and more for an HMO: have you familiarised yourself with these and calculated the cost and likely return?

grumiofoundation

BoBoDobie said:

Its been a long time goal to get into buying property to rent out as a long term investment for when I retire but saving up a 25% deposit has been out of my reach and up to now I've been concentrating on paying off my mortgage.  I met someone (in property) yesterday who said that was the wrong thing to do.  She advised to take out an extra £50k on my mortgage to use as a deposit and put that down on a buy to let HMO property.   Get that on an interest only mortgage I think she said so I'm paying less.

I'm now seriously rethinking things.  Its scary to think of taking out that much extra when I've been concentrating on getting it down.   Its currently £70k left and my house is worth around £285k so to borrow another £50k would take my mortgage to £120k with 24 years left.   I don't see how else I would get a big enough deposit but then if I have a larger mortgage on my own house, I'm not sure if a lender would lend me another £150k to put down on a buy to let property.   I earn around 30k a year.

I am always wary of receiving financial advice from people I have just met. However I assume this person had a detailed knowledge of your wider financial position e.g. as mentioned above other investments, pension provision. Because anyone offering financial advice (of course I am also assuming they are regulated to do so) without this information would not be someone I would be listening to at all before I even considered any bias they may have towards property versus other simpler to manage ways to save for retirement.

BoBoDobie

grumiofoundation said:

BoBoDobie said:

Its been a long time goal to get into buying property to rent out as a long term investment for when I retire but saving up a 25% deposit has been out of my reach and up to now I've been concentrating on paying off my mortgage.  I met someone (in property) yesterday who said that was the wrong thing to do.  She advised to take out an extra £50k on my mortgage to use as a deposit and put that down on a buy to let HMO property.   Get that on an interest only mortgage I think she said so I'm paying less.

I'm now seriously rethinking things.  Its scary to think of taking out that much extra when I've been concentrating on getting it down.   Its currently £70k left and my house is worth around £285k so to borrow another £50k would take my mortgage to £120k with 24 years left.   I don't see how else I would get a big enough deposit but then if I have a larger mortgage on my own house, I'm not sure if a lender would lend me another £150k to put down on a buy to let property.   I earn around 30k a year.

I am always wary of receiving financial advice from people I have just met. However I assume this person had a detailed knowledge of your wider financial position e.g. as mentioned above other investments, pension provision. Because anyone offering financial advice (of course I am also assuming they are regulated to do so) without this information would not be someone I would be listening to at all before I even considered any bias they may have towards property versus other simpler to manage ways to save for retirement.

It was a property investor I met, she has a portfolio and I was interested how she got into it.

GDB2222

I don't think you need take seriously the comment "I am also assuming they are regulated to do so", except to the extent that the advice from the property investor was not to be relied on. Neither, for that matter, is the advice on this forum to be relied on.

When you apply for a BTL mortgage, the application is based on the rental income of the BTL property, not your own income. So, this might be feasible, but you'll need to think about the risks. 

BoBoDobie

GDB2222 said:

When you apply for a BTL mortgage, the application is based on the rental income of the BTL property, not your own income. So, this might be feasible, but you'll need to think about the risks. 

Ahh ok thank you that's helpful :-)