Help getting into property investment

housebuyer143

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.

Lenders don't really care if you have s resi mortgage, most actually prefer it. It does not come into affordability though as your BTL should be self sustaining. 

BTL mortgages are higher than residential, so it actually makes sense to take out more money on your residential and less on the BTL. Debt is debt. It seems silly to have no debt on your residential when it's cheaper and instead take out a larger loan on the BTL. 

A HMO might not be the best option for your first rental though.. As a first time landlord, you may struggle with lender options if you also have a HMO with no experience, as lots of lenders do not lend to this type of person 

p00hsticks

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

If it's been that long since you first came up with the goal, I suggest you first go back and revisit the reasons why you first felt it was a good idea and see if they still stand up in the current climate. As many existing landlords often point out on these boards, there is more and more legislation around it, often in favour of the tenants, and not necessarily the potential capital gains still available that investors who have been in the game for decades may have seen.

blackshirtuk

p00hsticks 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

I would suggest you re-visit the rules and regulations with regards to letting as a lot has changed fairly recently, with more changes to come. eg EPC changes and the government white paper.

sidneyvic

A lot of people are under the impression a BTL investment is money for nothing. No risk, no work, no outlay and just results in a nice fat income once their portfolio grows to dozens of properties.
Returns these days on BTL are low single digits and with rising interest rates and a slowing market there are going to be a lot of busy fools at best breaking even. These are usually the ones going round bragging about their property portfolio.....

Mr.Generous

sidneyvic said:

A lot of people are under the impression a BTL investment is money for nothing. No risk, no work, no outlay and just results in a nice fat income once their portfolio grows to dozens of properties.
Returns these days on BTL are low single digits and with rising interest rates and a slowing market there are going to be a lot of busy fools at best breaking even. These are usually the ones going round bragging about their property portfolio.....

The current sale prices are making BTL less attractive for new investment, but those who purchased a few years ago have benefited from the huge rise in value, which is the main reason many of them are getting out now. A house that cost me £73k 4 years ago with some renovation work and fee's etc - so in it for about £80k, has rented out for £8k per year, so paid back 25k so far and owes me 55k - but its valued now at £150 - £160k. You can see why so many are getting out. If I wanted some cash to blast rather than a regular income I'd join 'em. Buying 5 properties has done me well, but I'm struggling to find anything else to invest in at the moment, the prices are so high. Yield wise my best is 14% and worst 7%, I'm looking at property at the moment that would be about 5% so you're not wrong.

My cash savings pay 1.5% though as a comparrison, and I doubt they will rise in value as fast as the properties I bought. It's not all plain sailing, some great sence of satisfaction turning a wreck into a lovely house, some bad times when things go wrong, but there is money to be made. I think the real money is made buying the right house at the right price. Good luck if you go for it OP.

lr1277

I would caution you with the following. FYI I gave some of these warnings a year or 2 ago to someone else who wanted to get into property investment.

You say you want to get into this to fund your retirement. As some people get older, they lose capacity either mentially or physically and can no longer manage one or more properties. I speak as the son of a landlord who lost capacity and am now managing the property on his behalf.

I don't know your age, but please remember someone can lose capacity at quite a young age, say in their 40's or 50's. Or say have a car accident at any age, which incapacitates them.

Make sure you have a backup person who will manage the property if you are not able (for the rest of your life). If appropriate, give that person POA on your financial and property affairs. Say you are married, don't assume your wife will be allowed access to your sole accounts, whilst you are still alive; even if you are mentally incapacitated. Another cautiounary note is that my mum has POA for my dad's affairs, But she is also his main carer. So she is not willing to leave dad alone  to go to a bank or a building society to sort out any issues. At this stage you could say use internet or telephone banking. Our problem is that dad set up all the relevant passwords but mum doesn't know what they are. And dad can't help. So whilst dad can still sign letters, we are writing to financial institutions to sort out any issues.

Whilst you are at it, get a will that details how any investment properties are distributed on your passing.

Now you may remain as fit as a fiddle till the day you die, in which case you are in a great position. But I would urge you to take the above steps just in case; whatever your age and health status now.

Like you would for any investment, have an exit plan, whether that be shares, property or other.

Oh and another point of caution. I don't know if you plan on buying freehold or leasehold properties. If leasehold, some allow you to become a director so you can influence decisions and hence costs. My dad did this, but the terms of the governing document say only an owner can become a director. So even though I have POA over my dad's affairs, I cannot stand in for my dad as a director of the property. Which is no bad thing, but depends on how much control you want to exercise over your property.

HTH