But-to-let advise please

mummytofour

Hello
I need some help, im wanting to buy a buy to let propety, but have NO idea where to start!

Im wanting to buy a propety as a long term investment (well three years to start with) im looking at buying something for aprox 100k which round here if im lucky i will get a 1 bedroom place for.

I dont have any money as deposit, so the plan is to get 15k out of my current house with a remortgage and then to get a buy-to -let mortgae based on the monthly rental income if possible or a self cert buy-to-let mortgae if there is such a thing!

I have seen something that could be a possible,which is in a good area within walking distance of the mainline station, the mataiance is £80 pcm but the seller will pay this for three years
The flat is very close by to where i live so i can keep an eye on it, the place has been re-fitted to so not much for me to do.
I spoke to a rental agent about this flat and they said it woudl get about £550 pcm in rent.

So please can i have some words of wisdom and pointers please

Also where is a good place to go for the mortgage?
TIA
Vxx

rrwfotr

Hi how much are you thinking of borrowing? You need to work out how much the mortgage will be etc as well as insurance and tax payments as income on a pay to let is taxable.

In resent years theres been a masstive increase in buy to lets on the market therfore there is a lot more competition out there now.

mummytofour

Im looking at borrowing aprox 85k.... can i borrow this based on the rental income? or do they look at dh wages? as im a sahm and dont work.

rrwfotr

Hi looking at:

http://www.bbc.co.uk/homes/property/mortgagecalculator.shtml

I put in 85k at 6% (buy to lets intrest rates are more expensive) and 25 years and the repaymenst came to £554.10 with household and letting insurance etc I reckon your monthly outgoings may be around £600.00.

You may need to also think about long periods when the property will not have any tennants agro with brokenthings etc

You need to look at all aspects before putting your home on the line by commiting to borrowing on your home.

I think the days when people made loads of money on buy to lets may be gone for a while. It may be a good long term investment if you are willing to top up the rent if possible/when required.

mummytofour

Hmmm i think this totally depends on the intrest rate i can get then.
The reason behind this idea of buy to let is we will need to move at some point but canT afford to its quite complicted really... we need a bigger house as we have four children and our house is small but all we can afford in this area is what we already have, we have looked at moving to another area but its not really what we want to.
On top of this i like the idea of the investment.
Its just trying to work the figures out to see if its possible...
How do other peopel manage to move up the propety ladder??

gravitytolls

I know several people who Buy to Let.

They don't make a penny (well not overall), on the rent, but it covers the outgoings, with alittle staying in the bank to cover odd months with no tenant - though that hardly ever happens.

They really are using teh scheme as long term investment, it'll be their nest eggs in 20 or so years, and if things are good, early retirement will be a viable option.

So I guess you need to get an idea of what the repayments would be, and check out rents on similar properties in similar areas to see if the bills can be covered.

Good luck.

Pheno

This sounds like a bad idea to me. You would be borrowing 100k (including the 15k remortgage) which would require payments of somewhere in the region of £650 per month over a 25 year period. Even if you could get 550 rent on a 100k 1 bedroom flat (unlikely in my experience), you would still have to pay £100pm.

On top of this, interest rates may well go up in the next few years, you may have a few months with no tennants and you will have to pay maintenance costs.

Even worse, house prices have stopped going up and even if you don't think they will crash, they will almost certainly not go up for a long while.

sneekymum

Got to agree with Pheno there - also have you considered the TIME it all takes - there's always something to do with a buy-to-let ....cleaning up after the last tennants....sorting out advertising for new ones... spending hours on the phone...showing people round...waiting for people who don't turn up... trying to get rent off people who won't pay because you haven't found time to do the repairs you promised...

Why do people want to do this?

You could always get a second job (or a first one) at least you'd know what your hours/pay is, you get time off, and if they give you hassle you can find a new one...

meanmachine_2

gravitytolls wrote:

I know several people who Buy to Let.

They don't make a penny (well not overall), on the rent, but it covers the outgoings, with alittle staying in the bank to cover odd months with no tenant - though that hardly ever happens.

Yes, but would they do it now, or did they buy back in 2001/2/3 when the sums still added up?

Why anyone would bother with BTL now is beyond me. So much hassle when you could track the FTSE and far outperform the property market.

And yes, I know the FTSE can go down as well as up, but if you think house prices can only go up then you must have been born before the last property crash.

nrsql

If you want to do this you'll have to learn to work out the figures for yourself.
Look at the rental income and the mortgage/insurance payments and any other monthly expenses involved.
The difference will be your maximum profit (or minimum expense) from the monthly payments (remember to allow for tax).

Then you have to factor in other expenses.
Initial mortgage fees, Advertising, decorating, failures, tenancy agreements, bad tenants, inventories, ...
Then you have to decide whether this is how you want to spend what could be a major part of your free time - or pay someone to manage it.

Use a spreadsheet to record all the info and decide what you think.
Increase/decrease in property value doesn't really mean much unless you sell or re-mortgage but it may affect the rental values which is what you are counting on.

meanmachine_2

mummytofour wrote:

Hello
I need some help, im wanting to buy a buy to let propety, but have NO idea where to start!

Im wanting to buy a propety as a long term investment (well three years to start with)

Three years is not a long term investment.

Seems to me you're confusing two entirely different things. You want to invest in a BTL (at probably the worst time in the history of the UK property market!), but want to move up the propety ladder.

If you take equity out of your current property the chances of you being able to move up the ladder are reduced, not increased.

It really does worry me that what, until recently, was a commercial venture undertaken by professional landlords, has become the latest investment bandwagon, like dot.com.

All investments carry some risk, but what is your contingency plan should both your current home and this new investment lose £15K over the three year period? Gearing can go in two directions, and if it turns negative you could be screwed.