Starting my empire! Buy to Let mortgage.

UK007BullDog

Mortgages on studio flats are higher, not every lender will lend on it. Classed as risk. People do want a bedroom. So you will have a lot of coming and going.

Check to see how many flats are offered and what the rents are. Even for a seaside resort area £500 for a studio flat are OTT.

dunstonh

beingjdc wrote: »

That rent assumption looks very odd to me. I don't know anywhere in the country where a studio flat rents out for £500 a month but can be bought for £70k. Whereabouts are you?

The rental yield does seem too high. My guess is that the estate agent has inflated it to get the sale.

Retired_I.F.A.

OK do the math £10,500 over 10 years is gonna be about £100 pm. £59,500 interest only mortgage is gonna be around £300 pm, giving a total of £400 PM. say you make towards the top end of your estimate, £500pm. Time loans are paid you've got £100 pm left to pay agents fees - 10%-15% of the £500, say £50, Ground Rent, maintenance and buildings insurance likely to be another £50pm. Without allowing for voids at best you are going to break even.

Reality is worse than that. You need to find a tenant who will stay there long term really and they are few and far between as they could buy it themselves for cheaper. Otherwise work on the average of 40 weeks a year it'll be rented out. Theres also the likelyhood that you'll want out yourself at some time to buy your own place to live in so expect it to be on the market for some time too. Hopefully you will find a buyer but the market by most accounts is in decline so dont expect a pofit.

Borrowing money to buy property in the hope your mortgage will be covered by the rent and that the property increases in value and you can sell easily is as Isaid a mugs game it's worked for some but their bubble is about to bust along with the others who have found themselves made bankrupt or got out owing more than they they dreamed of making.

BTW It has naff all to do with my circumstances as some idiot with a spring up his backside thinks.

InMyDreams

UK007BullDog wrote: »

So you will have a lot of coming and going.

Check to see how many flats are offered and what the rents are. Even for a seaside resort area £500 for a studio flat are OTT.

Would £500pm be £125 per week as a holiday let, given its seaside location? Ie *lots* of coming and going, lots of empty weeks and lots of work/expense.

brightbuy

Good for you to be so determined. I was like you at 21 and thankfully I chose the right areas that are still growing this year.

There are quite a few areas in the country I can think of with those yields BUT my first piece of advice is do not take an estate agents advice on rental income. It’s all about your own research. Do some online searching using the property postcode to see what other flats in the area are going for. Some websites even give you the ‘rented’ price.

A loan to secure the deposit on the property is not recommended and a previous poster mentioned that cashflow is King. This is very true and always has been. Only the foolish buy property and just meet the mortgage payments in the hope it will be worth twice as much next year.

Drill down all the figures, all the way, and include everything on a monthly basis. Have you thought about landlords insurance? Management fees? These could add another £80 per month. Next work out what it would cost you during the void periods to maintain those monthly payments on the loan and mortgage. Can you afford it still? Does it still look attractive?

Not to put you off - I am always for property investment. Just make sure you have done all your own research.

Gorgeous_George

dunstonh wrote: »

The rental yield does seem too high. My guess is that the estate agent has inflated it to get the sale.

Might not be miles out.

My property could be worth £80K-ish and brings in £420 per month. I could get £450 (estimated market value) but I have decided to hold the rent for a further 12 months and reward my perfect tenant.

Remember - Renting saves much more than just the mortgage. In a falling market, renting makes even more sense.

GG

dunstonh

I would have 450 as the upper end although I am basing that purely on average yield. There are of cource exceptions which can be lower or higher.

I wouldnt trust the estate agent for a reliable yield though. Their primary concern is to offload the property for their client. They have little or no responsibility towards the buyer.

sarkin

I live in Bournemouth and know the area well. Yes the reef will bring a lot of people into Boscombe and the town will go back to how I remeber it as a kid, Vibrant. But this is going to take time. Property in and around the Pier will start to rise in value first. If you buy a studio flat North of Christchurch road it will fall in value as it is to far from the beach.

Here is a link to studio falts in Boscombe

As you can see they start at 80,000 i think you would be looking at close to 100,000 for a studio. Rental income for a studio will be aroun 425- 475 as 1 bed flats kick in at 500.

So yes in theory a flat in Boscombe close to the pier will hold up well, but as they start at 300,000 you will be looking at North of Christchurch road. Which means you will be in the same situation as all the new entyr BTL speculators, dead in the water.

All the gold has been dug out of the hills now, only fools gold left. If you have not noticed, every where you look there are for sale signs up out side new build blocks

sarkin

Here you go from another thread

http://forums.moneysavingexpert.com/showthread.html?t=747481

Sigibbons

Thanks you guys for all your help! Really brought my plan into new perspective. I think the wise thing to do is save up £10-15k over the next year or two and then i am expecting prices to have dropped so i may see more oppertunitys for a bargain, (assuming prices will rise again).
Like Sarkin said i cannot afford more than about £80k at the moment so the Studio would be only rented out for maybe 450 max which makes it pretty much more than the mortgage cost so it just doesnt add up.

Back to the drawing board.........

Thanks!