Thinking of Buy to Let

mikeopvc

Hi everyone,
my wife and I are thinking of entering the world of buy to let but just wondered if we could get some sound advice from these forums first.
We obviously are aware that there are risks involved but also some advantages. Were not afraid of a bit of hard work and thought we could get a interest only mortgage on a local property and rent it out for a little more than the mortgage, is this a good time to star on this type of project or should we wait untill the market gets a bit more stable?
Were not looking for a step by step guide here but just a few tips (good or bad) from people who may have done the same. I suppose we are hoping that if all goes well we might eventually aquire a couple more properties in the future to secure a decent retirement as we don't really go for pensions.
Any advice greatly recieved,

Thanks in advance

MIKE

pinkshoes

Look at mortgage required vs rent, and make sure the rent covers at least 130% of the interest on the mortgage.

I.e. if you have to borrow £200k, then the interest will be approximately £1000 a month (at 6% - don't forget it could go up much higher than this!), so you should make sure that the property is feasibly rentable at £1300/month.

Allow for property being empty perhaps 1 or 2 months every year.

Becks045

Also don't forget to budget for any things that need repairing, your annual gas safety landlord certificate, advertising for tenant and as was rightly mentioned, allow for an empty period of 1/2 months a year. Also, your time, how close will you live to the property so you may want to take into account your travel costs as well.

I try to encourage tenants to sign for a 12 month contract now, less hassle for me, by offering a small monthly discount but in the long-term works out much cheaper than finding new tenants and having properties empty for a month.

mikeopvc

We were thinking more on the lines of £100k property with a rental of approx £550 per month, is 6% the rate we are likely to get or do you think we could get a better deal?
Also do we have to put a deposit down on a buy to let or can we borrow 100%

sarkin

You need to put a 15% deposit down. If you dont have the deposit just remortgage your house for the deposit and associated fees, this is what most people do.

Your rate will depend on credit score, deposit, amount of income made from your letting. It used to be that the property would have to make 125% of the mortgage amount in rent. But as the figures did not add up for the lenders they are now doing 100% of the mortgage. So you are aloud to take on loss making propertys for the capital appreciation they will get over the next ten years. You then bail out and sell the property for a profit QED.

Since the credit crunch rates are hovering around 5.5% 6% but the sting is the fees about 1- 1.5 % of the mortgag total .

If you are looking the best type of property is new build flats as the builder will offer you a discount off the purchase price, throw in white goods and some times contribution to the mortgage or all 3 if you are lucky.

There are nearly 2,500 1 and 2 bed flats for sale here in Bournemouth so plenty to choose from.

Hope this helps and good luck with the investing

BTman

I think it's a great idea. There's never been a better time to get into BTL.
Why don't you get a few and really maximize your profit.

DGJsaver

pinkshoes wrote: »

Look at mortgage required vs rent, and make sure the rent covers at least 130% of the interest on the mortgage.

I.e. if you have to borrow £200k, then the interest will be approximately £1000 a month (at 6% - don't forget it could go up much higher than this!), so you should make sure that the property is feasibly rentable at £1300/month.

Allow for property being empty perhaps 1 or 2 months every year.

Rent at £1300 per month on a 200k property ?

He`ll be lucky:eek:

mikeopvc

BTman wrote: »

I think it's a great idea. There's never been a better time to get into BTL.
Why don't you get a few and really maximize your profit.

Thanks BTman but I can't help thinking that there is a hint of sarcasm in your quote, forgive me if I'm wrong. Perhaps an explanation of why you think there's never been a better time to get into BTL, especially since the final statement in the recent Panorama programme http://news.bbc.co.uk/player/nol/newsid_7220000/newsid_7228100/7228134.stm?bw=bb&mp=wm&news=1&bbcws=1 was that some experts are predicting a 35% price drop in properties in the next 5 years

DGJsaver

mikeopvc wrote: »

We were thinking more on the lines of £100k property with a rental of approx £550 per month, is 6% the rate we are likely to get or do you think we could get a better deal?
Also do we have to put a deposit down on a buy to let or can we borrow 100%

Where do you live Mike , that obviously will help dictate the rent you can expect


Dan

mikeopvc

I live in North Wales, we have checked the local papers and there are quite a few properties for sale at around £100k - £125K which we feel we could get £550 - £600 pcm for. These properties are obviously going to need a bit of work but we are prepared for this and more than capable of doing it ourselves as long as it's more cosmetic than structural.

Mike

DGJsaver

mikeopvc wrote: »

I live in North Wales, we have checked the local papers and there are quite a few properties for sale at around £100k - £125K which we feel we could get £550 - £600 pcm for. These properties are obviously going to need a bit of work but we are prepared for this and more than capable of doing it ourselves as long as it's more cosmetic than structural.

Mike

Fair play to you

fyi , where we live , Leighon Buzzard in Beds , a 170k two bed flat for example will end up being let for a figure of roughly £575 - 600


Shows how the market is so different area to area !