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  • FIRST POST
    • Dhrucku
    • By Dhrucku 9th Apr 18, 1:59 PM
    • 127Posts
    • 21Thanks
    Dhrucku
    Looking at BTL property ***Advice needed***
    • #1
    • 9th Apr 18, 1:59 PM
    Looking at BTL property ***Advice needed*** 9th Apr 18 at 1:59 PM
    Hi,


    Im currently looking at buying a property to rent out in my area but am looking for some guidance and help amongst this community.

    Myself and OH have been able to set aside some money (25k) as a deposit for a house within Gillingham. We have our own property which we mortgage as usual but are looking to invest in something else such as the three bed terraced housing near us which is possible to pick up for around 200kish with work needed to be done.

    We would of course prefer to buy cheap, do a bit of work to it (funds are available to us up to for a three bed terrace) and then put it up for rent and cover the mortgage of it from the renters. We both earn over 40k in our jobs and therefore are in top bracket in terms of tax paying.

    Is there anything here you think Ive missed in my very basic logic and things I really should think about before making a jump for a new property.

    NOTE: We are not looking to move from our current mortgaged house for at least another 4 years
    Last edited by Dhrucku; 10-04-2018 at 3:47 PM.
Page 1
    • tom9980
    • By tom9980 9th Apr 18, 2:06 PM
    • 1,312 Posts
    • 3,890 Thanks
    tom9980
    • #2
    • 9th Apr 18, 2:06 PM
    • #2
    • 9th Apr 18, 2:06 PM
    Given the trend of anti landlord feeling, more tax, and lots more regulation on the way I can only advise any potential landlord to find something else to invest in.
    In order to change, we must be sick and tired of being sick and tired.
    • Dhrucku
    • By Dhrucku 9th Apr 18, 2:07 PM
    • 127 Posts
    • 21 Thanks
    Dhrucku
    • #3
    • 9th Apr 18, 2:07 PM
    • #3
    • 9th Apr 18, 2:07 PM
    Is this really current sentiment in the market?
    • pmlindyloo
    • By pmlindyloo 9th Apr 18, 2:15 PM
    • 11,827 Posts
    • 13,689 Thanks
    pmlindyloo
    • #4
    • 9th Apr 18, 2:15 PM
    • #4
    • 9th Apr 18, 2:15 PM
    Have you checked Buy to Let mortgages?

    My understanding is that you will need a bigger deposit for a Buy to Let mortgage.

    https://www.moneysupermarket.com/mortgages/buy-to-let/?p=0&cicp1=&source=MIC-3B92F1EC&mckv=MOj7SAKC|dc_pcrid_74972958622275_mty pe_be_kword_buy%20to%20let%20mortgages_2764ri91898 0&uuid=9422D25F-F2AA-4DF3-813D-38B8CE6278B6&Device=c&engine=bing&utm_term=buy+to+ let+mortgages&utm_campaign=MON_Mortgages_Buy+to+Le t_Misspells_PC_%5BM-MON-MOMORT%5D&utm_medium=cpc&msclkid=141bcecf3aae15508 e0394045c18bee7&utm_content=Buy+to+Let+-+Mortgage+Typo+-+Exact&utm_source=bing
    • Smodlet
    • By Smodlet 9th Apr 18, 2:26 PM
    • 3,991 Posts
    • 7,229 Thanks
    Smodlet
    • #5
    • 9th Apr 18, 2:26 PM
    • #5
    • 9th Apr 18, 2:26 PM
    Have you even begun to consider the legal obligations and implications of becoming a landlord (LL)? Try reading just a few of the myriad threads on here from tenants of private LL's and the horrendous treatment they are subjected to. As far as I know, with the exception of a very few private LL's who post on here, almost all of them are absolute scum. They certainly were when I had to rent privately.

    I would make most of them live in the disgusting dumps they expect their tenants to live in if I could. One LL on here actually expects her tenants to fork out 100+ to have her gutters cleaned in their third floor flat! Her property, her responsibility, imo and in law, I'm pretty sure.

    What are you going to do when your tenant reports that repairs need doing? Ignore them? Leave them in a damp, mouldy, disgusting hellhole? Or are you actually going to put your hand in your pocket and maintain your tenant's home to the same standard you would your own?

    Have you ever heard of a gas safety certificate? I suggest you read G_M's guides to being a LL before you even think about becoming one.
    Last edited by Smodlet; 09-04-2018 at 6:00 PM.
    What is this life if, sweet wordsmith, we have no time to take the pith?
    Every stew starts with the first onion.
    I took it upon myself to investigate a trifle; it had custard, jelly, soggy sponge things...
    • Pixie5740
    • By Pixie5740 9th Apr 18, 3:56 PM
    • 12,979 Posts
    • 18,660 Thanks
    Pixie5740
    • #6
    • 9th Apr 18, 3:56 PM
    • #6
    • 9th Apr 18, 3:56 PM
    The title of the thread is misleading. You are looking to get into buy to let rather than looking to rent a property yourselves.

    Are you hoping to purchase a 200k property using as a BTL? If so then your 25k deposit is half of what it needs to be plus you'll need another 7.5k for SDLT plus more for a solicitor, surveys, etc.

    How much do you expect to be able to let the 200k property for?
    • saajan_12
    • By saajan_12 9th Apr 18, 4:15 PM
    • 1,434 Posts
    • 1,048 Thanks
    saajan_12
    • #7
    • 9th Apr 18, 4:15 PM
    • #7
    • 9th Apr 18, 4:15 PM
    Hi,


    I!!!8217;m currently looking at buying a property to rent out in my area but am looking for some guidance and help amongst this community.

    Myself and OH have been able to set aside some money (25k) as a deposit for a house within Gillingham. We have our own property which we mortgage as usual but are looking to invest in something else such as the three bed terraced housing near us which is possible to pick up for around 200k!!!8217;ish with work needed to be done.- if you're renting the second property out, you'll need a 25% mortgage, yours looks like 12%. Plus you'll need money for stamp duty (higher rate), solicitors costs, survey fees, renovation costs.. So you'll need much higher deposit or remortgage your current home as well.

    We would of course prefer to buy cheap, do a bit of work to it (funds are available to us up to for a three bed terrace) and then put it up for rent and cover the mortgage of it from the renters. You might choose to "cover the mortgage from rent for cashflow purposes,
    but the capital repayment part of the mortgage isn't an expense for income tax purposes as you are retaining that value as increased equity in your house say.
    We both earn over 40k in our jobs and therefore are in top bracket in terms of tax paying.-
    As higher rate tax payers, you only get 20% relief on funding costs (ie mortgage interest). So pay tax on rent income less other expenses at 40%, then get 20% tax relief on the mortgage interest, 0 on capital repayment part


    Is there anything here you think I!!!8217;ve missed in my very basic logic and things I really should think about before making a jump for a new property.

    NOTE: We are not looking to move from our current mortgaged house for at least another 4 years
    Originally posted by Dhrucku
    There's lots of LL responsibilities you need to understand, for which you can do your own research. Just to correct specific things you're misguided on rather than just missed out:
    1) BTL mortgage deposit min 25%, you have 12%

    2) BTL mortgages are usually interest only - will you have the funds to pay off the mortgage eventually? You can do this by selling the property but is that what you want?

    3) Higher rate stamp duty, solicitors costs, survey fees, renovation costs.. all payable upfront

    4) Rent covering mortgage will mean you run a loss monthly due to other costs: mortgage & bills during rental voids, letting agent costs, tenant referencing costs, repair costs, gas safety cert costs, landlords insurance, tax.. Will market rent in the area cover all these plus mortgage?

    5) You pay income tax on rent income less other direct costs at 40%. Then you get tax relief on mortgage interest only at 20% from 2020 (until then we are in a transitional period but use that as the conservative value if its a long term investment). No tax relief on capital repayment part of mortgage as this isn't a cost, but will affect cash flow.
    • Cakeguts
    • By Cakeguts 9th Apr 18, 4:53 PM
    • 4,903 Posts
    • 7,280 Thanks
    Cakeguts
    • #8
    • 9th Apr 18, 4:53 PM
    • #8
    • 9th Apr 18, 4:53 PM
    There are 118 3 bed upwards properties to let in Gillingham on Rightmove what is going to be different about yours which will make people prefer it?

    To start a successful rental business you have to look at a gap in the market. The gap in the market in Gillingham is detached houses with off street parking. See if you can find one on Rightmove to rent.

    If you buy a cheap house in a cheap area you will not attract the best tenants. They want a nice house in a nice area. If you can't attract the best tenants you need to make sure that you can still run your business if you don't get any rent for more than 6 months while you are waiting to evict your tenants. There is a market for problem tenants but you need to be a very experienced landlord to deal with it and you need to expect for your property to be vacant a lot and no rent coming in.

    200k ish looks to me to be too cheap for where you want to let and 350k would be better. The 200k houses are at the bottom of the market in the less popular areas.

    Basically this isn't going to work unless you can pay both mortgages for over 6 months without getting any rent. The EPC of the property has to be at least an E.
    • Slinky
    • By Slinky 9th Apr 18, 5:01 PM
    • 5,449 Posts
    • 25,622 Thanks
    Slinky
    • #9
    • 9th Apr 18, 5:01 PM
    • #9
    • 9th Apr 18, 5:01 PM
    Advice? If you do go down this route, try living in the house yourselves for at least a couple of weeks, even if that means camping out in the house as we did with an airbed and fold up chairs. We discovered a whole heap of little things which needed fixing on top of what we already knew about. We were able to get them sorted before a tenant moved in. If we had just paid for trades to go in and do the electrical, plumbing, decorating and flooring work we wanted doing, we wouldn't have found the issues. We would then have had a whole load of calls from the tenant about problems. He would have driven us nuts with all the complaints. We'd have driven him nuts with all the things that needed fixing. As it was the tenant moved in and we haven't heard a peep of a problem in 5 months.
    • ognum
    • By ognum 9th Apr 18, 6:10 PM
    • 4,588 Posts
    • 7,211 Thanks
    ognum
    Hi,


    Im currently looking at buying a property to rent out in my area but am looking for some guidance and help amongst this community.

    Myself and OH have been able to set aside some money (25k) as a deposit for a house within Gillingham. We have our own property which we mortgage as usual but are looking to invest in something else such as the three bed terraced housing near us which is possible to pick up for around 200kish with work needed to be done.

    We would of course prefer to buy cheap, do a bit of work to it (funds are available to us up to for a three bed terrace) and then put it up for rent and cover the mortgage of it from the renters. We both earn over 40k in our jobs and therefore are in top bracket in terms of tax paying.

    Is there anything here you think Ive missed in my very basic logic and things I really should think about before making a jump for a new property.

    NOTE: We are not looking to move from our current mortgaged house for at least another 4 years
    Originally posted by Dhrucku
    1. You do appreciate you will be paying 40% tax on your profit from your rental business

    2 really 12% deposit is not enough investment in the property.

    3. Mortgage tax relief will be phased out soon

    4. Do you understand all the costs involved in letting houses and the responsibilities.

    5. Do you have spare funds for repairs, voids and replacement.

    I havent looked at the expenditure yet on my BTL properties for this year but I do not expect more than 65% of the rent as profit by the time I have paid fees, maintainance and repairs and I have no mortgages. I then pay tax on that!

    My properties are in an affluent area I keep them well maintained and I have professional tenants. Write up a thorough buisness plan, know your market and your competition. It is not guess work!
    • Mulder00
    • By Mulder00 9th Apr 18, 9:36 PM
    • 488 Posts
    • 431 Thanks
    Mulder00
    Based on a true story - make sure you can cover the mortgage when your tenants stop paying rent and have enough money to repair the place when they damage it to the point that agents refuse go near it.
    • Dhrucku
    • By Dhrucku 10th Apr 18, 3:34 PM
    • 127 Posts
    • 21 Thanks
    Dhrucku
    To open up with, we would be looking to buy something similar to the below:


    https://www.zoopla.co.uk/for-sale/details/46923834?search_identifier=8a83111fe562d0df722e0a7 2b8133dc2#dtwVasVwrbXM6ciC.97


    I've lived in this area all my life and am familiar with where I feel this area is suited to going. This specific property is literally around the corner from the Railway Station but has one less bedroom than I'd like. My target market would be for a professional commuter (couple) into London as the links into Central London are excellent from Gillingham (and Medway Towns in general) - 50 or so minutes). I've seen a lot of the properties which once housed families turn into renting couple households so am trying my hand at following suit.


    I would aim to come in for something like this at 165k, with around 10k reserved for some notable improvements making it a high - end accommodation for the target market.


    From having a look at the rental market in the area, I see rent coming in around 1000 (take this as an example https://www.zoopla.co.uk/to-rent/details/47005464?search_identifier=5b82bf716b5f3352cc740b0 7b898a23e#LOpwpvE5b3X0BacJ.97)


    If my maths serves me well the income wouldn't be huge but I'm looking at it as a supplement to our current income with the view to keeping this property for a long time. Monthly running costs at worst would be circa 900 with mortgage, insurance, energy, council tax, water factored in.


    Have you checked Buy to Let mortgages?

    My understanding is that you will need a bigger deposit for a Buy to Let mortgage.
    Originally posted by pmlindyloo

    Yes I stand corrected as our current deposit would not satisfy. As I am looking to buy in the region of 165k I would be required to stump up around (20-40%) being 33-41k. There is no reason why we couldn't get this by end of year.


    Extra costs that I can identify for upfront are Landlord Insurance, Stamp Duty (5%), Agent Fee (yet to check). All in all I'd probably need a ball park figure of 50k.

    Have you even begun to consider the legal obligations and implications of becoming a landlord (LL)? Try reading just a few of the myriad threads on here from tenants of private LL's and the horrendous treatment they are subjected to. As far as I know, with the exception of a very few private LL's who post on here, almost all of them are absolute scum. They certainly were when I had to rent privately.

    I would make most of them live in the disgusting dumps they expect their tenants to live in if I could. One LL on here actually expects her tenants to fork out 100+ to have her gutters cleaned in their third floor flat! Her property, her responsibility, imo and in law, I'm pretty sure.

    What are you going to do when your tenant reports that repairs need doing? Ignore them? Leave them in a damp, mouldy, disgusting hellhole? Or are you actually going to put your hand in your pocket and maintain your tenant's home to the same standard you would your own?

    Have you ever heard of a gas safety certificate? I suggest you read G_M's guides to being a LL before you even think about becoming one.
    Originally posted by Smodlet

    I'm thinking your opinions have been somewhat skewed by your experiences. From my personal perspective, my father in law is heavily into property (Portfolio of 5 in London together with a hotel investment in Dubai) it is the tenants that can be the problem! He treats his tenants with respect as I've accompanied him on visits and I'd also want to conduct my service like a proper business with everything done by the book (I am a project manager by trade so would like my approach to be fair and meticulous). Like I said, I'm in this for a long run investment as this could be our pension in the future.


    Again, going from what I've seen, there is the option of getting an agent to "look after the house" for you which will incur a fee I'm aware but I'd be OK with that as I do have a day job and am not really fully into becoming a full blown LL with a large portfolio.

    There are 118 3 bed upwards properties to let in Gillingham on Rightmove what is going to be different about yours which will make people prefer it?

    To start a successful rental business you have to look at a gap in the market. The gap in the market in Gillingham is detached houses with off street parking. See if you can find one on Rightmove to rent.

    If you buy a cheap house in a cheap area you will not attract the best tenants. They want a nice house in a nice area. If you can't attract the best tenants you need to make sure that you can still run your business if you don't get any rent for more than 6 months while you are waiting to evict your tenants. There is a market for problem tenants but you need to be a very experienced landlord to deal with it and you need to expect for your property to be vacant a lot and no rent coming in.

    200k ish looks to me to be too cheap for where you want to let and 350k would be better. The 200k houses are at the bottom of the market in the less popular areas.

    Basically this isn't going to work unless you can pay both mortgages for over 6 months without getting any rent. The EPC of the property has to be at least an E.
    Originally posted by Cakeguts


    I will have access to surplus funds should I need them but I don't think the examples you've picked out are really representative of the gap in the market for the area. The gap I'm going for is a high - end terrace house for an individual or couple that enables easy access to central London (i.e. for commuting purposes).


    Thanks to all for the contributions so far as I'm learning the subjects nuances as I go along. Think the next step would be to understand the percentage yields and really explore the figures in detail.


    I may set up a meeting with a local estate agent to see what (in their eyes) the area offers for me in my current situation.
    • hazyjo
    • By hazyjo 10th Apr 18, 4:05 PM
    • 10,897 Posts
    • 14,364 Thanks
    hazyjo
    If you go for that one - get someone to take a very close look at the electrics (raised sockets and hardly any of them), and damp (second from last pic looks somewhat dodgy!).
    2018 wins: Single Malt Whisky; theatre tickets; festival tickets; year of gin(!); shoes
    • Dhrucku
    • By Dhrucku 10th Apr 18, 4:07 PM
    • 127 Posts
    • 21 Thanks
    Dhrucku
    If you go for that one - get someone to take a very close look at the electrics (raised sockets and hardly any of them), and damp (second from last pic looks somewhat dodgy!).
    Originally posted by hazyjo


    Not going for it as it was an illustration.


    As part of the checks I'd do on any property I end up investing in I'd ensure a full electrics check of course.
    • Pixie5740
    • By Pixie5740 10th Apr 18, 4:13 PM
    • 12,979 Posts
    • 18,660 Thanks
    Pixie5740
    If you could buy a property for 165k and let it for 1,000 pcm then the gross rental yield would be ok. However, the 1,000 pcm property is larger than the 165k property. Can you realistically buy a 3-bedroom property in the area for 165k or let a 2-bedroom property for 1,000 pcm?
    • steampowered
    • By steampowered 10th Apr 18, 4:14 PM
    • 2,865 Posts
    • 2,834 Thanks
    steampowered
    It doesn't sound like a bad idea to me, assuming you read up on your obligations as a landlord.

    Make sure you have funds set aside to cover void periods or unexpected damage. Or consider purchasing insurance to cover these costs. If the boiler breaks, as the landlord that is going to be your cost.
    • Hillwalker11
    • By Hillwalker11 10th Apr 18, 4:50 PM
    • 26 Posts
    • 117 Thanks
    Hillwalker11
    You appear to have a reasonable attitude to the BTL market. The minute you raise this,a lot of people will try to put you off. Yes you may get some grim tenants, you may have void periods, but then again you may not.
    My son who lives in Hong Kong has a BTL near Manchester He had no choice as he wanted to get on the housing ladder over here and residential mortgages are a no no for ex pats. He employs a managing agent who is excellent. Small company so you deal with one person all the time, not a big organisation that propels you from pillar to post. They do all the viewings and vet the tenants. He has had it for 18months and so far ,apart from a few minor problems things are ticking along. He certainly doesn't bank a fortune, but his mortgage is paid by the tenant which is what he wants. He is lucky that in HK his company pay his rent so should he have void periods paying the mortgage is not too much of a problem. He is a good landlord and looks after his tenants well. He would certainly not expect them to live in an unpleasant house.
    I think as long as you buy in the right area, look after your tenants well you shouldn't encounter too many problems. You obviously realise that you won't be making a fortune, so as long as you do your homework you should be fine.
    • Gwendo40
    • By Gwendo40 10th Apr 18, 5:42 PM
    • 159 Posts
    • 177 Thanks
    Gwendo40
    Quite remarkable how blissfully unaware some people still are in relation to the (entirely justified) targeting of the amateur, over leveraged, BTL wannabe property entrepreneurs, who's only research into the subject seems to involve little more than sitting through an entire episode of Homes Under the Hammer.
    • Smodlet
    • By Smodlet 10th Apr 18, 6:39 PM
    • 3,991 Posts
    • 7,229 Thanks
    Smodlet
    Quite remarkable how blissfully unaware some people still are in relation to the (entirely justified) targeting of the amateur, over leveraged, BTL wannabe property entrepreneurs, who's only research into the subject seems to involve little more than sitting through an entire episode of Homes Under the Hammer.
    Originally posted by Gwendo40
    Why waste an hour on that when you can just come on here and ask a bunch of randoms on the interweb?
    What is this life if, sweet wordsmith, we have no time to take the pith?
    Every stew starts with the first onion.
    I took it upon myself to investigate a trifle; it had custard, jelly, soggy sponge things...
    • Cakeguts
    • By Cakeguts 10th Apr 18, 7:59 PM
    • 4,903 Posts
    • 7,280 Thanks
    Cakeguts
    You appear to have a reasonable attitude to the BTL market. The minute you raise this,a lot of people will try to put you off. Yes you may get some grim tenants, you may have void periods, but then again you may not.
    My son who lives in Hong Kong has a BTL near Manchester He had no choice as he wanted to get on the housing ladder over here and residential mortgages are a no no for ex pats. He employs a managing agent who is excellent. Small company so you deal with one person all the time, not a big organisation that propels you from pillar to post. They do all the viewings and vet the tenants. He has had it for 18months and so far ,apart from a few minor problems things are ticking along. He certainly doesn't bank a fortune, but his mortgage is paid by the tenant which is what he wants. He is lucky that in HK his company pay his rent so should he have void periods paying the mortgage is not too much of a problem. He is a good landlord and looks after his tenants well. He would certainly not expect them to live in an unpleasant house.
    I think as long as you buy in the right area, look after your tenants well you shouldn't encounter too many problems. You obviously realise that you won't be making a fortune, so as long as you do your homework you should be fine.
    Originally posted by Hillwalker11
    18 months is nothing. We let our first house in early 1990. Even with the best letting agents which we have got and the best property in a good area you can't guard against tenants who lose their jobs or tenants who basically are economical with the truth.

    Stuff goes wrong and when it goes wrong it can go really wrong. You have to be aware of what can go wrong and you have to factor this into your business decision.
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