PLEASE READ BEFORE POSTING: Hello Forumites! In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non-MoneySaving matters are not permitted per the Forum rules. While we understand that mentioning house prices may sometimes be relevant to a user's specific MoneySaving situation, we ask that you please avoid veering into broad, general debates about the market, the economy and politics, as these can unfortunately lead to abusive or hateful behaviour. Threads that are found to have derailed into wider discussions may be removed. Users who repeatedly disregard this may have their Forum account banned. Please also avoid posting personally identifiable information, including links to your own online property listing which may reveal your address. Thank you for your understanding.
We're aware that some users are experiencing technical issues which the team are working to resolve. Thank you for your patience.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Advice for First-Time Buyers with a view to letting in a few years...

Options
Hello,

New to the forums but was told this may be a good place for some advice.

My girlfriend and I have been renting a city centre apartment over the last year whilst saving up for a deposit to purchase our first property. Our tenancy is up in August 2018 and by then we will have the £20,000.00 deposit we targeted. Originally, our plan was to purchase a house outside of the city centre, however, we have thoroughly enjoyed the convenience of living here and whilst still in our 20s want to live here for a few more years before starting a family.

We are looking for some advice on the following idea that we have;

-Purchase a city centre apartment in the area we live now (we want to put a 10% deposit down so up to the value of £200,000.00 property).
-Live in the apartment for 3-5 years.
-Purchase a second property, a house on the outskirts of the city, that we would move into.
-Be in a position to rent out our apartment by changing over to a buy-to-let mortgage.

Just looking for some advice on the basic principle of the idea and things to be weary of (i.e. tax implications etc.), almost like a pros/cons list.

Thank you for any information.

Lewis

Comments

  • Slithery
    Slithery Posts: 6,046 Forumite
    Eighth Anniversary 1,000 Posts Name Dropper Photogenic
    Tenancies in Eng/Wales: Guides for landlords and tenants - MoneySavingExpert.com Forums

    Read all of the above and all of the links it contains before even thinking about becoming a LL. If you still think it's a good idea then prepare yourself a detailed financial plan to see if it's economically worthwhile.
  • steampowered
    steampowered Posts: 6,176 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    It doesn't sound like you'll be in a position to buy a second property after such a short period of time.

    BTL mortgages generally require a 25% deposit.

    Plus you'd have to fund the deposit on the new place.

    Plus you'd have to fund the higher rate of stamp duty.

    Plus you'd need savings to cover void periods and repairs.

    For now, I would just focus on buying your first place. Excess savings should go into a stocks and shares ISA.
  • GoingOn30
    GoingOn30 Posts: 231 Forumite
    Sixth Anniversary 100 Posts Name Dropper
    As above, unless your incomes are much higher than average it's very unlikely you'd have enough equity/savings to make your first property BTL and purchase a second property with all the associated costs.
    Sounds like a flat in the city centre will suit you for now, make sure you get a mortgage that you can port if you think you will outgrow it in a few years.
    If you want to purchase soon after August you should start looking at properties in the next few weeks.
  • dimbo61
    dimbo61 Posts: 13,727 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Consider an offset mortgage if you really want to do this !
    All you have to do is pay the mortgage over the next 3/5 years while also building up the deposit for the House you want to buy and all the fees, stamp duty and other costs.
    Now this is not easy as you need to be " moneysavingexpert " on every single penny you spend.
    So Moto G smartphone and not iPhone 8 or X
    Cheap car not BMW 520 even if you could afford it.
    Camping holidays or eurocamp not a two week cruise.
    You get the picture
  • Gwendo40
    Gwendo40 Posts: 349 Forumite
    Amazing how many people STILL don't understand or appreciate how over-leveraged, amateur BTL 'entrepreneurs' are (quite rightly) being targeted with tax changes, deposit/income requirements etc etc
  • Mutton_Geoff
    Mutton_Geoff Posts: 4,019 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    I think it’s a bad idea. Why not follow the traditional route of upsizing as your family grows then downsize as the kids leave home and then when you retire.

    Your plan will have you in a first time buyers flat then a small first time buyers house outside the city later. Why not invest any property growth equity into a nicer house, room for the kids, decent garden etc rather than buying into a business you don’t know anything about?

    If there are level or declining property prices over the next five years what does your plan look like?

    Buy to let or, in your case, let to buy, is not the magic money tree people think it is.
    Signature on holiday for two weeks
  • Cakeguts
    Cakeguts Posts: 7,627 Forumite
    Sixth Anniversary 1,000 Posts Name Dropper
    You can only do this if you can afford to pay two mortgages from your earnings. People who don't know anything about letting property assume that you put the property on the lettings market and nice tenants rent it for years and years without any problems. It just doesn't work like that. Even the most careful landlord cannot avoid someone who lies to get a tenancy, or a tenant who loses their job or someone who just decides to stop paying their rent. If this happens it can take longer than 6 months to get possession of the property through the courts. In that time you will have to pay the mortgage without any rent coming in.

    Letting property is a business. Like any other business you have to spot a gap in the market to be successful. Letting a 2 bed flat in a city where there are already a lot of 2 bed flats owned by professional landlords is not a good idea. It could be vacant for most of the time.
  • Cash-Cows
    Cash-Cows Posts: 413 Forumite
    Ninth Anniversary 100 Posts
    You would be buying a flat for quite a short length of time. Fees, flat or falling markets could scupper your future family home plans. The BTL idea just adds another area of risk in my opinion. Instead of being in a rush to buy a flat have you thought about just saving for a much larger deposit for a family home?
  • need_an_answer
    need_an_answer Posts: 2,812 Forumite
    Ninth Anniversary 1,000 Posts
    edited 13 May 2018 at 12:40PM
    All may seem well in principle but remember that sometimes when starting a family that means a drop in earnings for at least one of you for a time and a shed load of money that's needed to support the young ones through the early years.

    What may seem achievable now on what is a dual income may not seem such a priority to spend your money on when a family time arrives.

    Those early years can really stretch you and rental properties are furthest from your mind.


    However keep it in mind,and revisit it later.

    We always saw the rental market as a good investment and would have loved to have got into it years before we did,our children were teens before we took the plunge and 5 years on its going well with a modest portfolio.However to have started the purchase process in our 20s would not have been the right time for us.
    in S 38 T 2 F 50
    out S 36 T 9 F 24 FF 4

    2017-32 2018 -33 2019 -21 2020 -5 2021 -4 2022
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 350.7K Banking & Borrowing
  • 253K Reduce Debt & Boost Income
  • 453.4K Spending & Discounts
  • 243.7K Work, Benefits & Business
  • 598.4K Mortgages, Homes & Bills
  • 176.8K Life & Family
  • 256.8K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.