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Buying to let in Liverpool

I’m currently based in London and considering a buy-to-let investment in Liverpool, but I’d like to hear some real opinions from people who’ve actually done it.

I’ve run the numbers using a few online calculators and factored in:

  • 1 month annual void period
  • 5% mortgage rate
10% of rent for maintenance10% agent management feeservice charges where applicable5% from property price on cosmetic renovation Even after those deductions, the ROI still comes out around 6-7%, which seems surprisingly solid.

So, is this genuinely viable in practice, or just a bit of a gimmick being pushed by estate agents?
What hidden costs, local market risks, or management challenges might I be missing as a remote investor based in London?

«1

Comments

  • Sorry about broken formatting, below is tidier a version. 


    I’m currently based in London and considering a buy-to-let investment in Liverpool, but I’d like to hear some real opinions from people who’ve actually done it.

    I’ve run the numbers using a few online calculators and factored in:

    • 1 month annual void period
    • 5% mortgage rate
    • 10% of rent for maintenance
    • 10% agent management feeservice charges where applicabl
    • 5% from property price on cosmetic renovation 

    Even after those deductions, the ROI still comes out around 6-7%, which seems surprisingly solid.

    So, is this genuinely viable in practice, or just a bit of a gimmick being pushed by estate agents?
    What hidden costs, local market risks, or management challenges might I be missing as a remote investor based in London?

  • CliveOfIndia
    CliveOfIndia Posts: 2,618 Forumite
    1,000 Posts Second Anniversary Name Dropper
    BTL can be a viable investment, but you need to make sure you consider all the costs.
    One big issue with doing it "remotely" can be the repairs/maintenance aspect.  If the boiler breaks, or there's a plumbing leak, or whatever, you're reliant upon finding a trustworthy tradesman, who you don't know from Adam, to fix it.  If you're local, you can probably attend to minor issues yourself, or else use tradesmen you know and trust (or at least, you can vet them yourself in person).
    Yes, the letting agent may well have a team of tradesmen they can recommend, but you've still only got their word as to how reliable/fair they are.
    It may not be an issue, but it's worth bearing in mind.
  • ReadySteadyPop
    ReadySteadyPop Posts: 1,885 Forumite
    1,000 Posts Photogenic First Anniversary Name Dropper
    The only reason people piled into BTL was that the banks were giving out cheap debt to get them on board ( now you have someone on your books with a debt on their main residence and two or three other mortgage debts on top - Bingo! Bonuses all round!) they don`t lend money to make more sensible investments in the stock market. I just don`t see this as being worth the cost or hassle at all, with all the changes to work visas etc. and the major mood music shift on immigration the idea of only 1 month a year voids sounds like magical thinking to me ( more likely cynical marketing based on fantasy numbers)
  • poseidon1
    poseidon1 Posts: 1,777 Forumite
    1,000 Posts Second Anniversary Name Dropper

    Sorry about broken formatting, below is tidier a version. 


    I’m currently based in London and considering a buy-to-let investment in Liverpool, but I’d like to hear some real opinions from people who’ve actually done it.

    I’ve run the numbers using a few online calculators and factored in:

    • 1 month annual void period
    • 5% mortgage rate
    • 10% of rent for maintenance
    • 10% agent management feeservice charges where applicabl
    • 5% from property price on cosmetic renovation 

    Even after those deductions, the ROI still comes out around 6-7%, which seems surprisingly solid.

    So, is this genuinely viable in practice, or just a bit of a gimmick being pushed by estate agents?
    What hidden costs, local market risks, or management challenges might I be missing as a remote investor based in London?



    No indication in your modelling whether you are borrowing significantly to buy ( eg 75%) , whether buying personally or via limited company, and whether you are already a 40% tax payer  ( or higher ) on your other sources of income.

    Gross income before tax in my mind is not a good enough measure to determine whether BLT is a 'good thing'. Buying personally as a 40% tax payer impacts significantly on the net return after tax (effect of Section 24), which is part of the reason tens of thousands of BTL landlords have/are departing the sector.
  • Albermarle
    Albermarle Posts: 28,798 Forumite
    10,000 Posts Seventh Anniversary Name Dropper
    Although it is not guaranteed ( neither is the return from BTL), you can make about the same return investing in stocks and shares. 
    On the downside, the return will vary a lot from one year to the next, and you maybe unlucky and find the markets in a prolonged downturn. However if you hang on long enough, history shows a good return.
    On the upside, you do not have the hassle of renting out property. Just a few clicks on the computer and some initial reading and that is it. Very hands off.
  • ReadySteadyPop
    ReadySteadyPop Posts: 1,885 Forumite
    1,000 Posts Photogenic First Anniversary Name Dropper
    poseidon1 said:

    Sorry about broken formatting, below is tidier a version. 


    I’m currently based in London and considering a buy-to-let investment in Liverpool, but I’d like to hear some real opinions from people who’ve actually done it.

    I’ve run the numbers using a few online calculators and factored in:

    • 1 month annual void period
    • 5% mortgage rate
    • 10% of rent for maintenance
    • 10% agent management feeservice charges where applicabl
    • 5% from property price on cosmetic renovation 

    Even after those deductions, the ROI still comes out around 6-7%, which seems surprisingly solid.

    So, is this genuinely viable in practice, or just a bit of a gimmick being pushed by estate agents?
    What hidden costs, local market risks, or management challenges might I be missing as a remote investor based in London?



    No indication in your modelling whether you are borrowing significantly to buy ( eg 75%) , whether buying personally or via limited company, and whether you are already a 40% tax payer  ( or higher ) on your other sources of income.

    Gross income before tax in my mind is not a good enough measure to determine whether BLT is a 'good thing'. Buying personally as a 40% tax payer impacts significantly on the net return after tax (effect of Section 24), which is part of the reason tens of thousands of BTL landlords have/are departing the sector.
    https://www.propertywire.com/news/most-landlords-have-no-plans-to-sell-despite-upcoming-regulations/

    Who would they sell to anyway, increased borrowing costs now mean most people can`t afford a BTL on top of their main mortgage? I can only see downside for rents from here.
  • chrisw
    chrisw Posts: 3,826 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    Liverpool has a very big student population with two universities if you're thinking about the student market.
  • SiliconChip
    SiliconChip Posts: 1,883 Forumite
    1,000 Posts Third Anniversary Name Dropper
    poseidon1 said:

    Sorry about broken formatting, below is tidier a version. 


    I’m currently based in London and considering a buy-to-let investment in Liverpool, but I’d like to hear some real opinions from people who’ve actually done it.

    I’ve run the numbers using a few online calculators and factored in:

    • 1 month annual void period
    • 5% mortgage rate
    • 10% of rent for maintenance
    • 10% agent management feeservice charges where applicabl
    • 5% from property price on cosmetic renovation 

    Even after those deductions, the ROI still comes out around 6-7%, which seems surprisingly solid.

    So, is this genuinely viable in practice, or just a bit of a gimmick being pushed by estate agents?
    What hidden costs, local market risks, or management challenges might I be missing as a remote investor based in London?



    No indication in your modelling whether you are borrowing significantly to buy ( eg 75%) , whether buying personally or via limited company, and whether you are already a 40% tax payer  ( or higher ) on your other sources of income.

    Gross income before tax in my mind is not a good enough measure to determine whether BLT is a 'good thing'. Buying personally as a 40% tax payer impacts significantly on the net return after tax (effect of Section 24), which is part of the reason tens of thousands of BTL landlords have/are departing the sector.
    https://www.propertywire.com/news/most-landlords-have-no-plans-to-sell-despite-upcoming-regulations/

    Who would they sell to anyway, increased borrowing costs now mean most people can`t afford a BTL on top of their main mortgage? I can only see downside for rents from here.

    My friends have sold one of their rental properties to an owner/occupier and are waiting for a second to complete with a similar buyer.
  • poseidon1 said:

    Sorry about broken formatting, below is tidier a version. 


    I’m currently based in London and considering a buy-to-let investment in Liverpool, but I’d like to hear some real opinions from people who’ve actually done it.

    I’ve run the numbers using a few online calculators and factored in:

    • 1 month annual void period
    • 5% mortgage rate
    • 10% of rent for maintenance
    • 10% agent management feeservice charges where applicabl
    • 5% from property price on cosmetic renovation 

    Even after those deductions, the ROI still comes out around 6-7%, which seems surprisingly solid.

    So, is this genuinely viable in practice, or just a bit of a gimmick being pushed by estate agents?
    What hidden costs, local market risks, or management challenges might I be missing as a remote investor based in London?



    No indication in your modelling whether you are borrowing significantly to buy ( eg 75%) , whether buying personally or via limited company, and whether you are already a 40% tax payer  ( or higher ) on your other sources of income.

    Gross income before tax in my mind is not a good enough measure to determine whether BLT is a 'good thing'. Buying personally as a 40% tax payer impacts significantly on the net return after tax (effect of Section 24), which is part of the reason tens of thousands of BTL landlords have/are departing the sector.
    Fair point. The plan is to do it through a limited company. I'm planning to go ahead with a 25% deposit.

  • poseidon1
    poseidon1 Posts: 1,777 Forumite
    1,000 Posts Second Anniversary Name Dropper
    poseidon1 said:

    Sorry about broken formatting, below is tidier a version. 


    I’m currently based in London and considering a buy-to-let investment in Liverpool, but I’d like to hear some real opinions from people who’ve actually done it.

    I’ve run the numbers using a few online calculators and factored in:

    • 1 month annual void period
    • 5% mortgage rate
    • 10% of rent for maintenance
    • 10% agent management feeservice charges where applicabl
    • 5% from property price on cosmetic renovation 

    Even after those deductions, the ROI still comes out around 6-7%, which seems surprisingly solid.

    So, is this genuinely viable in practice, or just a bit of a gimmick being pushed by estate agents?
    What hidden costs, local market risks, or management challenges might I be missing as a remote investor based in London?



    No indication in your modelling whether you are borrowing significantly to buy ( eg 75%) , whether buying personally or via limited company, and whether you are already a 40% tax payer  ( or higher ) on your other sources of income.

    Gross income before tax in my mind is not a good enough measure to determine whether BLT is a 'good thing'. Buying personally as a 40% tax payer impacts significantly on the net return after tax (effect of Section 24), which is part of the reason tens of thousands of BTL landlords have/are departing the sector.
    Fair point. The plan is to do it through a limited company. I'm planning to go ahead with a 25% deposit.


    What is your plan to get the net rent ( after corporation tax ) out of the company each year without further dividend tax or PAYE?

     Is your 25% to be introduced to the company by way of shareholder loan or shareholder equity?

    Who will be handling your annual accounts , corporation tax  and Companies House compliance? If not you, is the cost of this annual compliance in your modelling?

    If your long term hope is for a decent capital gain on property, what's your plan to avoid a double tax charge on the same  property gain ( once within the company on sale and again on company liquidation).

    Limited companies sidestep the Section 24 problem with tax relief restriction on loan interest, but then throw up administration, compliance and exit tax issues of their own.

    Company BTL ownership is not the 'magic bullet' solution its cracked up to be, as a friend of mind is finding to his cost.
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