Buy to let?

Clur

I'm sorry if this has been talked about before but I haven't had chance to have a proper look through the forums yet.

I have just moved back to my parents after renting a house with my ex. At the moment I don't think in my local area I could afford to buy a house on my own even though I earn a reasonable salary.

A friend has told me that whilst I am at home (paying a tiny amount of housekeeping) and have more disposable income I should consider getting a buy to let property. Can anyone point me in the right direction of some good advice about this. I'm not sure if it would be possible in my situation and what the benefits/risks would be?

Thank you

beingjdc

The benefits would be that you'd be insulated from an increase in prices in terms of getting back on the so-called ladder. The risk is that if prices fall, you could end up losing a large chunk of your savings if you need to sell.

Apart from that, the question is whether you can make it stack up, in terms of renting somewhere out for more than the mortgage, insurance and letting agent's fees would cost. In most of the country, you can't do that, in some you apparently still can.

If you can't, you need to decide whether the amount you would have to sink in out of your own money each month is worth it as an insurance against prices going up.

Personally, I'd say going long on a spread betting site's house price index is a better way of getting that insurance right now, firstly because they're factoring in falls, and secondly because there's no cashflow or transaction cost implications.

Good places for advice if you decide you do want to go ahead with it would be landlordzone and singingpig.

Doozergirl

BTL is a business. If you fancy starting yourself a little business and the associated admin and can find something that actually pays you over you subsidising your tenants, then fine.

Otherwise, buy a house when you want one to live in.

How much does your friend actually know about BTL?

BMWobbleU

beingjdc wrote: »

The benefits would be that you'd be insulated from an increase in prices in terms of getting back on the so-called ladder. The risk is that if prices fall, you could end up losing a large chunk of your savings if you need to sell.

Apart from that, the question is whether you can make it stack up, in terms of renting somewhere out for more than the mortgage, insurance and letting agent's fees would cost. In most of the country, you can't do that, in some you apparently still can.

If you can't, you need to decide whether the amount you would have to sink in out of your own money each month is worth it as an insurance against prices going up.

Personally, I'd say going long on a spread betting site's house price index is a better way of getting that insurance right now, firstly because they're factoring in falls, and secondly because there's no cashflow or transaction cost implications.

Good places for advice if you decide you do want to go ahead with it would be landlordzone and singingpig.

Excellent post beingjdc, thanks.

Clur

Thank you for your replies so far, you've raised some interesting points to think about.

Doozergirl - my friend currently has 5 BTL's and still swears by them.

Definitely lots more to consider before I go ahead, this is the first time I've ever thought about it and having never bought my own house there is an awful lot I don't know.

PasturesNew

Buy to Let in a Nutshell

Find a house where the rent you get will pay 1.25% the interest only mortgage.
Pay all the costs of getting that house - including a 10-15% cash deposit, solicitors, possibly stamp duty, searches.
Redecorate the house, refit it, tidy it up.
Arrange for gas to be checked by a CORGI gas installer (legal requirement yearly)
Pay for Buy to Let buildings insurance + insurance for any contents that are yours.
Find a letting agent that fills you with confidence that they can find you a tenant.

Pay for the mortgage, council tax, insurance on the house while you wait for the letting agent to find you a tenant.

Pay for the mortgage, council tax, insurance on the house between a tenant being found and the date they move in (could be up to a month).

Pay letting agent for finding you the tenant.

Sit back and wait for calls to come through saying the tenant has a problem that needs fixing (electrics, gas, water, fittings/fixture). Have your already researched list of good tradespeople that can fix these problems. Pay for any repairs required.

Each month hope the tenant pays the rent to the letting agent.
Wait for the letting agent to receive that money, take their cut and pass the rest on to you.

Hope the tenant turns out to be a good one and doesn't end up requiring a court to evict them (no rent, you pay mortgage etc etc AND a solicitor/court to turf them out). Followed by making good the damage they probably caused.

After 6 months, hope the tenant has stayed on and you aren't starting again from scratch paying for the property while it sits empty.

Watch while house prices fall, your costs go up, the house you bought has problems you have to pay to fix.

Do this for 10 years if you can, while the market dips, you lose your job, the house stays empty, rents drop, a crack den opens next door .... and eventually the house is again worth what you paid for it.

Turf out the tenant, pay to have the house brought up to scratch, put it on the market, wait for it to sell, while you are paying the mortgage/council tax/insurance on it.

Pay estate agent, solicitor etc.

Look around you at everybody that didn't try to get rich quick and the fine houses they now own. Wish you'd never met your friend.

The end.

brit1234

I think Buy to let is dead. The time to jump in was 5+ years ago. Today the sums just don't add up. Rent not covering mortgages and negative capital gains. Thats if you even gaet a mortgage, many of the but to let mortgage companies have gone bust, withheld products or simply put costs up so much it is not financially viable.

If you don't believe me look at the flood of no chain one/two bedroom flats hitting the market. Landlords are simply bailing out in greater numbers with that figure likely to massively rise in April with the change in capital gains laws.

paintpot

Sorry if that has been your experience but it hasn't been mine. Yes there are problems and it isn't easy but it doesn't have to work out like that. I am managing properties belonging to others and sorting out problems just as you described, maybe worse but my own houses aren't like that, albeit the odd problem or two :rolleyes: .

It can work but only if you are willing to put the effort in researching and undertstanding the market before you dive in. And then put the work in once you have bought the BTL instead of expecting it all to be a bed of roses.

PasturesNew wrote: »

Buy to Let in a Nutshell

Find a house where the rent you get will pay 1.25% the interest only mortgage.
Pay all the costs of getting that house - including a 10-15% cash deposit, solicitors, possibly stamp duty, searches.
Redecorate the house, refit it, tidy it up.
Arrange for gas to be checked by a CORGI gas installer (legal requirement yearly)
Pay for Buy to Let buildings insurance + insurance for any contents that are yours.
Find a letting agent that fills you with confidence that they can find you a tenant.

Pay for the mortgage, council tax, insurance on the house while you wait for the letting agent to find you a tenant.

Pay for the mortgage, council tax, insurance on the house between a tenant being found and the date they move in (could be up to a month).

Pay letting agent for finding you the tenant.

Sit back and wait for calls to come through saying the tenant has a problem that needs fixing (electrics, gas, water, fittings/fixture). Have your already researched list of good tradespeople that can fix these problems. Pay for any repairs required.

Each month hope the tenant pays the rent to the letting agent.
Wait for the letting agent to receive that money, take their cut and pass the rest on to you.

Hope the tenant turns out to be a good one and doesn't end up requiring a court to evict them (no rent, you pay mortgage etc etc AND a solicitor/court to turf them out). Followed by making good the damage they probably caused.

After 6 months, hope the tenant has stayed on and you aren't starting again from scratch paying for the property while it sits empty.

Watch while house prices fall, your costs go up, the house you bought has problems you have to pay to fix.

Do this for 10 years if you can, while the market dips, you lose your job, the house stays empty, rents drop, a crack den opens next door .... and eventually the house is again worth what you paid for it.

Turf out the tenant, pay to have the house brought up to scratch, put it on the market, wait for it to sell, while you are paying the mortgage/council tax/insurance on it.

Pay estate agent, solicitor etc.

Look around you at everybody that didn't try to get rich quick and the fine houses they now own. Wish you'd never met your friend.

The end.

PasturesNew

paintpot wrote: »

Sorry if that has been your experience but it hasn't been mine. Yes there are problems and it isn't easy but it doesn't have to work out like that. I am managing properties belonging to others and sorting out problems just as you described, maybe worse but my own houses aren't like that, albeit the odd problem or two :rolleyes: .

It can work but only if you are willing to put the effort in researching and undertstanding the market before you dive in. And then put the work in once you have bought the BTL instead of expecting it all to be a bed of roses.

I have no experience. Buy to Let is not for me. It wouldn't suit my skillset. I had thought about it, but I'd have made a right pigs ear of it.

Clur

wow wasn't expecting to be told that i'd end up wishing i'd never met my friend!

I do however understand that there are great risks involved which is why I'm trying to do the research before jumping straight into it

thanks again for the replies

Tassotti

Pastures New has highlighted the expenses incurred when Buy to Letting, although missed a couple.

Actually , what a great insight for someone not involved in the property business..Impressed!!

BTL not a great investment at the moment...Rents don't match up to house prices!!!

Answer..increase the rents!! SIMPLE!!

Everything's getting more expensive...what a surprise....why not rent?

Someone answer me that?

Tass

Always happy sitting in my jacuuzzi with a laptop