But-to-let advise please

rozeepozee

AuntyJean wrote:

If I buy him out and take out a mortgage for £80K I could do the house up and let it out. The income (I have been told by an estate agent who lets a house in the same street) would be £595pm less 10% for them managing everything. To pay interest only on £80K over 15 yrs will be £345pm. The only other costs I envisage will be insurance (approx £500) and gas/elect checks £60pa).

I am a landlord with 5 properties which I bought between 1999 and 2002. I won’t attempt to speculate about buy to let but here is a summary of my outgoings from the start of the year to give you an idea of the costs.

Jan 2005 Property 1 Annual Maintenance £1100
Properties 3-5 General Maintenance £100 (monthly)
Jan 2005 Property 2 Letting Agent Fee £110 (monthly)
Feb 2005 Property 3 Roof Repair £120
Property 3 Kitchen Unit Repair £120
March 2005 Property 2 3 new beds £184
April 2005 Property 4 Keys Cut £6
Property 4 Alarm maintenance £45
May 2005 Property 4 Water Leak – redecorate £545
June 2005 All properties Insurance £1035
Property 3 Gas Cert £60
Property 4 Gas Cert £70
Property 2 Electrician – switch broken £35
Property 1 Plumber Call Out £10
Property 1 Pump for Washing Machine £85
Property 1 Plumber £30
Property 1 Parking Ticket £70
July 2005 Property 1 New Washing Machine £400
All Properties Accountant £450
Property 2 3 new mattresses £250
Property 2 General repairs £150

Add to this the fact that one of my properties (which houses 3 flats) is currently undergoing unavoidable major maintenance (repointing/repairing the roof) at a cost of over ten grand. I don’t mind this too much as these three properties have increased in value considerably since I bought them 4 years ago but it’ll be an ongoing expense. I use a letting agent with Property 1, a student let, (when they tell you their fee is 10%, this is likely to be plus VAT) and manage the rest myself. If you do this you cannot claim indirect expenses like the cost of telephone calls, petrol, stationery, use of home etc unless you set up a separate management company (extra costs and admin!). It also takes up a lot of my time. I haven’t sold my properties because there’s a lot of hassle associated with it – but I haven’t bought anything since 2002 and I won’t be doing so for the foreseeable future. I agree with the comments on new builds. They are expensive and I have seen far less capital growth on my one new build compared to my other “secondhand” properties. I haven’t had too many problems with tenants (apart from one who forfeited their one and a half month's rent bond in its entirety!) but I have had about five or six months in the last five years when the properties have been unlet. HTH! :rolleyes:

rozeepozee

AuntyJean wrote:

I do not have much choice. My husband wants a divorce and is living in our marital home. I walked out with what I could fit into a taxi.

He now wants to sell up. The house as it stands has been valued at £130K. It will need a new kitchen (he is leaving the white goods which are 2-3 yrs old) and new bathroom (complete including tiling and shower). The rads all need changing and the combi working fine but about 12 yrs old.

If I buy him out and take out a mortgage for £80K I could do the house up and let it out. The income (I have been told by an estate agent who lets a house in the same street) would be £595pm less 10% for them managing everything. To pay interest only on £80K over 15 yrs will be £345pm. The only other costs I envisage will be insurance (approx £500) and gas/elect checks £60pa).

In other words I would not make a bean but at the end of 15 yrs I would only owe £80K. i could then either sell up to pay off the £80 or find some other way of mortgaging the property (perhaps at 65 I could take out another short term btl mortgage leaving the tenants in situe).

If I sell, I would get £65K less fees and have to find somewhere to store my personal possessions that I left at the house (there is no room where I am living now, unless I spend a couple of grand converting the loft). In addition, I cannot be sure that my relationship will last until the day I die and I could become homeless (I am living in my partners house).

The 'movement/disposal' of my personal possessions is clouding my judgement at the moment as is the fact that I may need somewhere to live at some time in the future.

Any observations please?

Another thought: Are you sure about the valuation? In this climate, a valuation may not count for much as it may not sell at that price and would have to be reduced. If you are set on staying in the property market, could you not sell your former matrimonial home (in which case you receive the true market value) take your portion and buy a much smaller property to let out. Granted, the rent may be smaller but you also have a smaller mortgage, smaller maintenance costs and as long as the rent covers this with some on top for the contingencies mentioned above, there is less risk. You should also have some of the possessions from the sale to help with furnishing it. And, dare I say it, you'll have less associations with your old life. If your new relationship ends, you can give your tenant notice and have somewhere to live. Good luck whatever you decide.

DrP_4

To pollocmc

Not strictly in line with the rest of the discussion but for BIG BUCKS knock pharmacy on the head and either stick with dentistry or consider optometry (shorter than dentistry, more money than pharmacy)