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Thinking about Buy to Let
adrian66
Posts: 16 Forumite
Hi All,
Sorry if this is a really basic question, I am really not sure how this works (I am trying to learn though!) or what the terminology is for what we are trying to do. Also, we don’t have anyone to ‘talk’ it through with to make sure we are not missing something major.
We bought a house 3 years ago for 172K.
We put down a 40k deposit.
Now the house has been valued at 205k and there is 125k left to pay on the mortgage.
With the equity we have, we would like to do a buy to let on a second house.
Assuming we have 80k equity, we would like to use 40k of the equity in our first home and put that towards a 90k house.(putting down 36k as the deposit and using 4k to fix it up). We are planning that the rental from the buy to let is at least 10% over the additional mortgage repayment in case of non-occupancy/repair work ect. The release of equity should increase our mortgage by about £240 per month which is within our limit as we have some loan repayments finishing soon
So far, I think I am making the correct assumptions!
What I’m thinking is 2 years after that, could we do another buy to let?
Would we use the remaining equity in our first home or could we use the equity in the second ‘buy to let’ property?
Is it the same case at that point as the first buy to let that we have to demonstrate that the mortgage repayments on the second buy to let would be more than covered by rental income and that at the same time, we could cover the extra cost on re-mortgaging the second property?
At that point, I anticipate that we have another large load that would be finishing so we would have the extra income to cover the second buy to let equity release.
Am I missing anything?!!
Thanks for any replies
Sorry if this is a really basic question, I am really not sure how this works (I am trying to learn though!) or what the terminology is for what we are trying to do. Also, we don’t have anyone to ‘talk’ it through with to make sure we are not missing something major.
We bought a house 3 years ago for 172K.
We put down a 40k deposit.
Now the house has been valued at 205k and there is 125k left to pay on the mortgage.
With the equity we have, we would like to do a buy to let on a second house.
Assuming we have 80k equity, we would like to use 40k of the equity in our first home and put that towards a 90k house.(putting down 36k as the deposit and using 4k to fix it up). We are planning that the rental from the buy to let is at least 10% over the additional mortgage repayment in case of non-occupancy/repair work ect. The release of equity should increase our mortgage by about £240 per month which is within our limit as we have some loan repayments finishing soon
So far, I think I am making the correct assumptions!
What I’m thinking is 2 years after that, could we do another buy to let?
Would we use the remaining equity in our first home or could we use the equity in the second ‘buy to let’ property?
Is it the same case at that point as the first buy to let that we have to demonstrate that the mortgage repayments on the second buy to let would be more than covered by rental income and that at the same time, we could cover the extra cost on re-mortgaging the second property?
At that point, I anticipate that we have another large load that would be finishing so we would have the extra income to cover the second buy to let equity release.
Am I missing anything?!!
Thanks for any replies
0
Comments
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BTL mortgages generally require the rent to be 125% of the mortgage payment and in some cases as high as 145%. Then there's the possibility that your current mortgage lender won't allow you to release equity for the purpose of purchasing a BTL.
How much research have you actually done about becoming a landlord or the costs and taxes involved in letting property? The government has taken steps to make BTL less attractive particularly to those who are highly geared and/or higher and additional rate tax payers. What other investment vehicles have you considered?0 -
Be careful with this, don't go in with your eyes closed, many people go into it with not much or zero idea of what being a landlord entails.
I wish you luck in what you do.0 -
In terms of other investments vehicles, none really as i'm a bricks and mortar kind of person! What would you recommend?! I've heard that commercial property investment gives better value than residential...BTL mortgages generally require the rent to be 125% of the mortgage payment and in some cases as high as 145%. Then there's the possibility that your current mortgage lender won't allow you to release equity for the purpose of purchasing a BTL.
Yea, it's definitely a possibility - we are definitely at the theoretical stage here! I will definitely have to look at the figures and I would always be conservative in estimating what things could cost - I didn't know it could be as high as 145% though so that's good to know. Thanks for that. Definitely something to consider :eek:
How much research have you actually done about becoming a landlord or the costs and taxes involved in letting property? The government has taken steps to make BTL less attractive particularly to those who are highly geared and/or higher and additional rate tax payers. What other investment vehicles have you considered?0 -
An accountant is usually a good person to speak to about this sort of thing, if you have one/know one, and obviously your mortgage provider as well to see exactly what they would be able to offer you.0
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Be careful with this, don't go in with your eyes closed, many people go into it with not much or zero idea of what being a landlord entails.
I wish you luck in what you do.
Thanks, I know it can be stressful and backfire and there's lots to consider. No one I know has done it (or would even think of doing it!) but I'd like to improve our future situation when we're older...and avoid making huge mistakes at the same time
0 -
So what sort of house can you buy for 90k? Where I am a landlord it will buy you a 2 bed terraced house.
http://www.rightmove.co.uk/property-for-sale/find.html?locationIdentifier=REGION%5E1134&maxPrice=90000&includeSSTC=true
Which would add to all of these waiting for tenants
http://www.rightmove.co.uk/property-to-rent/find.html?searchType=RENT&locationIdentifier=REGION%5E1134&insId=3&radius=0.0&minPrice=&maxPrice=&minBedrooms=&maxBedrooms=2&displayPropertyType=&maxDaysSinceAdded=&sortByPriceDescending=&_includeLetAgreed=on&primaryDisplayPropertyType=&secondaryDisplayPropertyType=&oldDisplayPropertyType=&oldPrimaryDisplayPropertyType=&letType=&letFurnishType=&houseFlatShare=false
We don't let ordinary 2 bed houses there are already too many of them.
Try looking in your area for 3 bed semidetached houses with driveways to let. Letting property is like any other business you are looking for a gap in the market.
You also need to make sure that you can pay both mortgages if you haven't got any rent coming in. It can take 6 months to evict a non rent paying tenant so you have to be prepared for that.0 -
In terms of other investments vehicles, none really as i'm a bricks and mortar kind of person! What would you recommend?! I've heard that commercial property investment gives better value than residential...
It's not for me to recommend investments to you. The point I was trying to make is that on a daily basis we see threads started by people who want to let property but haven't even done a modicum of research.....not even using the search function on the forum. If your serious about becoming a landlord you've got to crunch the numbers and do a lot more research.0 -
Hi All,
Ok, I get that there almost certainly are more hidden costs etc but...
Are my original assumptions still valid?0 -
So what sort of house can you buy for 90k? Where I am a landlord it will buy you a 2 bed terraced house.
Yes I was thinking that as a possibility so I see your point below
http://www.rightmove.co.uk/property-for-sale/find.html?locationIdentifier=REGION%5E1134&maxPrice=90000&includeSSTC=true
Which would add to all of these waiting for tenants
http://www.rightmove.co.uk/property-to-rent/find.html?searchType=RENT&locationIdentifier=REGION%5E1134&insId=3&radius=0.0&minPrice=&maxPrice=&minBedrooms=&maxBedrooms=2&displayPropertyType=&maxDaysSinceAdded=&sortByPriceDescending=&_includeLetAgreed=on&primaryDisplayPropertyType=&secondaryDisplayPropertyType=&oldDisplayPropertyType=&oldPrimaryDisplayPropertyType=&letType=&letFurnishType=&houseFlatShare=false
We don't let ordinary 2 bed houses there are already too many of them.
Try looking in your area for 3 bed semidetached houses with driveways to let. Letting property is like any other business you are looking for a gap in the market.
Agreed...but it could be a two bed as well, just in an area where there is high demand?
You also need to make sure that you can pay both mortgages if you haven't got any rent coming in. It can take 6 months to evict a non rent paying tenant so you have to be prepared for that.
Yes, OK, I do take that on board.0 -
Hi All,
Ok, I get that there almost certainly are more hidden costs etc but...
Are my original assumptions still valid?
Can't telll because there is too much information missing. For example whether you could pay the buy to let mortgage and your home increased mortgage without any extra income.0
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