Buying a property for buy-to-let worth it?

COYI123

Hello everyone , I am looking to buy a first buy-to-let property for myself and my partner, the property is £200000 and the deposit will be £50000, we are looking to get a interest only mortgage , with payments that will come to around 450-500 pounds . We are looking to get an estate agents guaranteed rent scheme for 5 years , the current average rent value for the property is around £1000PCM, Me and my partner are just wondering if this is a good investment and could be a good outcome after 5 years , thank you ! 

dimbo61

If only it was that easy.
So you going to Invest your life savings of £50,000 into starting a BTL business.
Partnership with your partner or limited company ?
Do you own your own home ?
Have you got a mortgage broker to search the market for the best deals.
Have you any idea of the costs involved ?
If you manage to get a BTL mortgage your then going to hand your Two hundred thousand pounds property to a Lettings Agents under a Rent to Rent scheme for 5 years with little control but all of the legal responsibilities of being a Landlord.
Your figures are so way off I can't begin to explain how much more it costs to run a BTL.
Just done our tax return today.
Please have a look on the Shelter website, check out the NRLA, Justice for Tenants, 

housebuyer143

COYI123 said:

Hello everyone , I am looking to buy a first buy-to-let property for myself and my partner, the property is £200000 and the deposit will be £50000, we are looking to get a interest only mortgage , with payments that will come to around 450-500 pounds . We are looking to get an estate agents guaranteed rent scheme for 5 years , the current average rent value for the property is around £1000PCM, Me and my partner are just wondering if this is a good investment and could be a good outcome after 5 years , thank you ! 

Are you sure you can get a loan of £150k on that rent amount?  Have you run the numbers by a broker? I would think at that loan the repayments on interest only are likely to be closer to £550-600.

Look into the guaranteed rent scheme, you pay a premium and it does not always work how you think, with payments made in arrears and then an excess so the first payment isn't made, so that means no payment for two months and then the company will begin eviction proceedings right away, they will not keep them there for 5 years not paying. Might not be your policy, but that's the one the major estate agent I worked at used. 

Then deduct from your rent, tax, maintenance, estate agent costs at 12%+ etc, additional stamp duty, You are not really making huge money for a lot of stress.

I think the BTL time has passed as there is so much regulation, landlord hate and taxes.

theartfullodger

COYI123 said:

Buying a property for buy-to-let worth it?

Ask us 5, 10, 20 years after buying it, with copies of your accounts, and we'll tell you.  Otherwise crystal ball gazing: Very little crystal, an awful lot of balls.

Done ANY training in how to be a landlord & landlord/tenant law please?? Only 100+ laws & regulations landlords may need to comply with.

"Guaranteed rent" scheme/scam?? Walk away.  An even nastier mine-field.

macman

Compare your net (not gross) yield on those figures to what you could earn by each putting £20k each into an S and S ISA on which you will pay no tax, and could confidently expect to earn 5%+. 

tacpot12

Unless you intend to invest a lot more into residential properties to let, I would agree with macman that investing the money via a Stocks and Shares ISA is a more sensible route to go down. You probably won't make quite the same returns, but you will have a lot fewer sleepless nights.

I have one property that I own to rent out. I've just bought out my partner from it, so I know that she had a return of about 9% pa over the 10 years she owed her share, but we have been very lucky with our tenants -  we did have one couple that stopped paying, but they disappeared when served them with a Section 21 notice, which is incredibly lucky. We also bought a flat that didn't have a cladding problem and is has an EPC rating of C, which was also very lucky as we didn't know about the problems that Grenfell and the governments decarbonising plans would create at the time we bought it. It could have very easily gone against us.    

Zoe02

Not as favourable as before 

rent to rent schemes do not always end well

Do your research a lot of things to consider.

_Penny_Dreadful

I wouldn’t touch a guaranteed rent scheme with a 10’ barge pole. 

What’s the EPC for this £200,000 property and is it freehold or leasehold. 

The gross yield looks ok but what is your net yield and can you do better with other investment vehicles? My gut feeling is yes, you could do better elsewhere. 

MEM62

COYI123 said:

Hello everyone , I am looking to buy a first buy-to-let property for myself and my partner, the property is £200000 and the deposit will be £50000, we are looking to get a interest only mortgage , with payments that will come to around 450-500 pounds . We are looking to get an estate agents guaranteed rent scheme for 5 years , the current average rent value for the property is around £1000PCM, Me and my partner are just wondering if this is a good investment and could be a good outcome after 5 years , thank you ! 

It is nothing that would tempt me. 

The numbers first, you will be taxed on that income.  If you pay 20% Tax that takes £200 out of your income.  You would then be able to claim some relief against your mortgage interest with brings your tax bill to around £100.  Out of the £400 you have left each month you will need to pay you estate agent fees (10% or higher these days) insurances and make an allowance for maintenance and repairs.  My guess is that your net income will be around £250 if you have good tenants and no issues.  If you pay 40% tax the numbers are even worse.  

When you get to the point where you want to bail out of the market you need to realise that, as a landlord, you are the one party that cannot end a tenancy.  It can only be ended by your tenant or a court.  A tenant that does not wat to leave will cost you both time and money.  And finally, when you sell the property you will have a capital gains tax bill.       

Ditzy_Mitzy

Worth it for one property?  No chance.  In five years' time, all things being equal, you'll have made £60,000 gross income.  Subtract from that £50,000 as that's the initial investment.  You've got £10,000.  Subtract from that £30,000 as that's the mortgage interest.  You've got -£20,000.  Subtract from that income tax, repairs, maintenance, insurance, legal fees for conveyancing and establishment of tenancy and God only knows what that you haven't accounted for.

Add nothing, because you've got an interest only mortgage and haven't done anything to reduce the capital sum borrowed.  You still only own a quarter of the house; the mortgager owns the rest.  

_Penny_Dreadful

£10 to a housing charity of your choice says that once you've signed up to this rent guarantee scheme the letting agent then sublets it to Mears or Serco.