Is buying property still a good investment?

N6xxy

Hi all,

Playing around with ideas with my husband for our future. We don't even know if it is even a viable option for us affordability wise but there was mention of releasing equity from our home to buy one buy to let as an investment.

Is this a good idea....now with second house tax, prices through the roof etc.

We have a mortgage of £158k house value is about £500k (14 year term left)

another property would be in the region of £250k

Does anyone have an idea of how much we would have to take from our current home and whether we'd even be eligible for another mortgage. Sorry complete rookie here

wages combined £58,500 per annum

Thank you for any insight

vacheron

I subscribe to a youtube channel by a very clued up financial planner called James Shack (also the name of his channel).

A few months ago he posted a video called "The UK Buy-to-Let Property Crisis Explained". 

It is well worth a watch in relation to current taxes you will face.  

My take on it was, If (like me) you would be a small personal investor with other taxable income who is borrowing to purchase a BTL now.... run a mile! 

theartfullodger

Like crystal ball gazing.  Very little crystal, an awful lot of balls.

I can tell you if it was in 5 years time.  

Anything else (including clued up financial planners) is but a guess.

Best wishes to all

Albermarle

Playing around with ideas with my husband for our future. We don't even know if it is even a viable option for us affordability wise but there was mention of releasing equity from our home to buy one buy to let as an investment

The first step is to be clear why you are thinking about doing this. If it is to try and generate money for later life/retirement, then you would almost certainly be better off adding more to a pension, for either of you, or both.
Unless you had already maybe good retirement provision by working in the public sector.

It would be much simpler and  less stressful than running a BTL, and most likely more profitable.

BTL is more for the landlords with experience/multiple properties and some good connections in the trades. The days of easy big margins are long gone. 

MEM62

N6xxy said:

Is this a good idea....now with second house tax, prices through the roof etc.

Generally speaking, no in my opinion.  It is not tax efficient as an investment, carries a high level of risk and the onerous legislation around the rental market is already far from landlord-friendly.         

Bigphil1474

I've got a good friend who has bought roughly one property a year for the last 10 years. His plan is quite simple, buy a fixer upper in a relatively cheap part of town, get his mates and contacts to help fix it up, rent it out, and because the property is relatively cheap (under £100k) the rent usually covers the mortgage. The same contacts do all the maintenance etc. so in 20-30 years time he'll have mortgage free properties which he can sell or live on the rental income. He did have to tighten his belt a lot in the first few years, and he occasionally moans about problem tenants, but his plan seems to work. Not sure he could say the same if he was just starting out now. 

Personally, I'd get the mortgage paid off asap, and when that's done, use the money you are saving to make investments based on your appetite for risk. I'm quite averse to risk though.

Albermarle

Bigphil1474 said:

I've got a good friend who has bought roughly one property a year for the last 10 years. His plan is quite simple, buy a fixer upper in a relatively cheap part of town, get his mates and contacts to help fix it up, rent it out, and because the property is relatively cheap (under £100k) the rent usually covers the mortgage. The same contacts do all the maintenance etc. so in 20-30 years time he'll have mortgage free properties which he can sell or live on the rental income. He did have to tighten his belt a lot in the first few years, and he occasionally moans about problem tenants, but his plan seems to work. Not sure he could say the same if he was just starting out now. 

Personally, I'd get the mortgage paid off asap, and when that's done, use the money you are saving to make investments based on your appetite for risk. I'm quite averse to risk though.

The comments highlighted in bold are important.

If you are in the building/plumbing/gas/electric trades or have mates in them, then BTL can start to make more sense, as you can keep costs down.
Also buying multiple run down properties in cheaper, more deprived areas with a higher rental demand, is a good strategy if anybody really wants to go down this road.

ReadySteadyPop

N6xxy said:

Hi all,

Playing around with ideas with my husband for our future. We don't even know if it is even a viable option for us affordability wise but there was mention of releasing equity from our home to buy one buy to let as an investment.

Is this a good idea....now with second house tax, prices through the roof etc.

We have a mortgage of £158k house value is about £500k (14 year term left)

another property would be in the region of £250k

Does anyone have an idea of how much we would have to take from our current home and whether we'd even be eligible for another mortgage. Sorry complete rookie here

wages combined £58,500 per annum

Thank you for any insight

Have you had a recent valuation, has a lender said that they would do this? The amount you need will depend on the BTL you buy, but could you make a good return from it, would you be better off in a savings account or money market fund? Personally I would look at Premium Bonds, money market funds and then stock/bond markets (one or two well chosen index fund for each) before trying to get onto BTL. The years when BTL was a good investment are many years ago now.

Mr.Generous

Buy-to-let mortgage only covers the interest, you can overpay by up to 10% of original loan value but most don't. I'm not convinced it still works if you have to finance 50% or more of the purchase value. But ... I'd also agree with Artful, who knows where the market is going? Rents could continue to climb and make it a good decision, the politicians can step in and make it a nightmare.

In times of 5% savings rates and 7% yields I wouldn't risk it. That's just my thoughts. Been a landlord 13 years.

I was able to buy outright and my worst yield is about 7.5% That's only ok when everything goes smoothly and the property requires no work. The best yield is 15% - because I bought it years ago!! That house under current sales value and in need of the work it required would be probably 5% yield. If you keep it 10 years plus and weather any storms it starts to look a great decision. You have to look long term especially if its a renovation project. Don't forget second home stamp duty and any mortgage fees when working the numbers.

ReadySteadyPop

Mr.Generous said:

Buy-to-let mortgage only covers the interest, you can overpay by up to 10% of original loan value but most don't. I'm not convinced it still works if you have to finance 50% or more of the purchase value. But ... I'd also agree with Artful, who knows where the market is going? Rents could continue to climb and make it a good decision, the politicians can step in and make it a nightmare.

In times of 5% savings rates and 7% yields I wouldn't risk it. That's just my thoughts. Been a landlord 13 years.

I was able to buy outright and my worst yield is about 7.5% That's only ok when everything goes smoothly and the property requires no work. The best yield is 15% - because I bought it years ago!! That house under current sales value and in need of the work it required would be probably 5% yield. If you keep it 10 years plus and weather any storms it starts to look a great decision. You have to look long term especially if its a renovation project. Don't forget second home stamp duty and any mortgage fees when working the numbers.

Or a recession could turn up and you might get people refusing to leave and not paying rent, could you cope with the legal process (financially and emotionally) to get the property back? As another poster said, if you still have mortgage debt on your own home why not pay this off before taking on the responsibility for someone else`s home?

N6xxy

@vacheron I have just watched the video and many more! Thank you, he is fab.