Buy To Let, or just chill?

katerobbins2

Ditzy_Mitzy said:

Buy to let in your circumstances is pointless and you'll make a loss.  This calculator here:

https://www.vestaproperty.com/learn/calculators/buy-to-let-mortgage?annualInterestRate=4.6&loanAmount=258750&propertyValue=345000&termYears=25&monthlyRent=24000

gives you the basics.  

That is really useful - thanks so much for sharing.

_Penny_Dreadful said:

**I should qualify the above by saying that I am in no way qualified to give financial advice.

I appreciate your help! Thank you

brett19852010 said:

I agree with a lot of what you say. If I was to be starting out in buy to let today,  the yield would have to be enormous. Get it wrong and the outcome after all the hassle of being a landlord will simply be turning over huge amounts of tax to the government.

This is really good to know. Maybe the margins just aren't enough for this place. I am going to push back and see if the seller is willing to drop the price any more, considering the S20 works and a doubling ground rent clause, but I may also just wait and see what happens with the market and mortgages... 

lika_86

katerobbins2 said:

Ditzy_Mitzy said:

Buy to let in your circumstances is pointless and you'll make a loss.  This calculator here:

https://www.vestaproperty.com/learn/calculators/buy-to-let-mortgage?annualInterestRate=4.6&loanAmount=258750&propertyValue=345000&termYears=25&monthlyRent=24000

gives you the basics.  

That is really useful - thanks so much for sharing.

_Penny_Dreadful said:

**I should qualify the above by saying that I am in no way qualified to give financial advice.

I appreciate your help! Thank you

brett19852010 said:

I agree with a lot of what you say. If I was to be starting out in buy to let today,  the yield would have to be enormous. Get it wrong and the outcome after all the hassle of being a landlord will simply be turning over huge amounts of tax to the government.

This is really good to know. Maybe the margins just aren't enough for this place. I am going to push back and see if the seller is willing to drop the price any more, considering the S20 works and a doubling ground rent clause, but I may also just wait and see what happens with the market and mortgages... 

How often does the ground rent double? It may be unmortgageable.

mi-key

katerobbins2 said:

Ditzy_Mitzy said:

Buy to let in your circumstances is pointless and you'll make a loss.  This calculator here:

https://www.vestaproperty.com/learn/calculators/buy-to-let-mortgage?annualInterestRate=4.6&loanAmount=258750&propertyValue=345000&termYears=25&monthlyRent=24000

gives you the basics.  

That is really useful - thanks so much for sharing.

_Penny_Dreadful said:

**I should qualify the above by saying that I am in no way qualified to give financial advice.

I appreciate your help! Thank you

brett19852010 said:

I agree with a lot of what you say. If I was to be starting out in buy to let today,  the yield would have to be enormous. Get it wrong and the outcome after all the hassle of being a landlord will simply be turning over huge amounts of tax to the government.

This is really good to know. Maybe the margins just aren't enough for this place. I am going to push back and see if the seller is willing to drop the price any more, considering the S20 works and a doubling ground rent clause, but I may also just wait and see what happens with the market and mortgages... 

I have a feeling the seller isnt selling due to health problems. More likely it is due to the ground rent and their mortgage payments going up and they are no longer making any money from it

theoretica

I wouldn't go into property rental, personally.  How advanced is your pension planning?  Your ISAs? 

katerobbins2

lika_86 said:

How often does the ground rent double? It may be unmortgageable.

Every 25 years - currently it's £200 and the lease started in 2009 (for 125 years)

mi-key said:

I have a feeling the seller isnt selling due to health problems. More likely it is due to the ground rent and their mortgage payments going up and they are no longer making any money from it

Maybe so! But she has had some difficulties with responding quickly during the legals process, so it doesn't seem like she's hustling hard to get rid of it.

theoretica said:

I wouldn't go into property rental, personally.  How advanced is your pension planning?  Your ISAs? 

I really haven't given much thought to my pension, if I'm honest... I'm 31 and most of my friends aren't even in stable careers yet! I know that's probably against the ethos of this site, but I'm definitely prioritising money I can see/use now rather than in 40(?!) years... 

_Penny_Dreadful

katerobbins2 said:

theoretica said:

I wouldn't go into property rental, personally.  How advanced is your pension planning?  Your ISAs? 

I really haven't given much thought to my pension, if I'm honest... I'm 31 and most of my friends aren't even in stable careers yet! I know that's probably against the ethos of this site, but I'm definitely prioritising money I can see/use now rather than in 40(?!) years... 

Are you planning to still be working into your 70s? As a higher rate tax payer you really ought to look at your pension more. Get 40% tax relief putting the money in and then withdraw as a basic rate tax payer in the future. You’ve just made 20% right there and that’s before you get into the power of compound interest. Plus if your employer matches your contributions to your work pension that’s free money. 

michelle09

katerobbins2 said:

I think I need to read more about being a part time landlord, because I've probably been shielded from a lot of issues by renting my places to very chilled friends... Lots to learn for sure. 

Thanks again for the advice! I really appreciate the insights 

In your position I would plan for worse case scenario. What would you do if you buy the flat, the tenant stops paying and there's a falling out with one of your friends and the look for a reason to report you to the council? With 5 people in the house it's an HMO and probably a large HMO in most places. I'd make absolutely sure every bit of paperwork is up to date and make sure you have enough in the bank / insurance to cover a non-paying tenant. 

housebuyer143

_Penny_Dreadful said:

katerobbins2 said:

theoretica said:

I wouldn't go into property rental, personally.  How advanced is your pension planning?  Your ISAs? 

I really haven't given much thought to my pension, if I'm honest... I'm 31 and most of my friends aren't even in stable careers yet! I know that's probably against the ethos of this site, but I'm definitely prioritising money I can see/use now rather than in 40(?!) years... 

Are you planning to still be working into your 70s? As a higher rate tax payer you really ought to look at your pension more. Get 40% tax relief putting the money in and then withdraw as a basic rate tax payer in the future. You’ve just made 20% right there and that’s before you get into the power of compound interest. Plus if your employer matches your contributions to your work pension that’s free money. 

Pension is a fantastic idea if you have spare cash to put away until your 55. Some work places will put in much more than you if you pay a minimum (you pay 6%, your work might contribute 12%) so that's a lot of free cash and the higher rate tax relief right there. 
I would say you should contribute to one if your work has a generous scheme.

steampowered

katerobbins2 said:

I'm the first person in my family to really make decent money, and my friends don't own properties

There are other investment options which are not BTL. You don't usually find the rich holding BTL portfolios.

You are already very exposed to London property as an investment class, given that you own a 5-bed mortgaged property in London which is worth more than your entire assets. You should look at diversifying.

The easiest way of diversifying is to invest in a stocks & shares ISA. You can then invest into a diversified selection of stocks and shares. If you are quick you can do £20k this tax year and another £20k next tax year. This is especially valuable for you as a higher rate taxpayer because your profits within an ISA are tax free. 

If you are receiving £3,000 per month from lodgers you should be paying tax on that (40% on what you get above the tax free allowance of £7.5k pa as you are a higher rate taxpayer).

katerobbins2

steampowered said:

The easiest way of diversifying is to invest in a stocks & shares ISA. You can then invest into a diversified selection of stocks and shares. If you are quick you can do £20k this tax year and another £20k next tax year. This is especially valuable for you as a higher rate taxpayer because your profits within an ISA are tax free. 

Thank you for this! I will try to get a stocks & shares ISA set up today/tomorrow, and then another on April 6th. I currently don't really know what that actually means, but I'm sure research tonight will help me! 

I will definitely admit that I saw BTL as the easiest route to invest my money, so I'm genuinely appreciative for the insight here... and I'm grateful for any more info about next steps too!