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  • FIRST POST
    • bytheseas
    • By bytheseas 14th Sep 18, 10:50 AM
    • 51Posts
    • 48Thanks
    bytheseas
    Buy to let?
    • #1
    • 14th Sep 18, 10:50 AM
    Buy to let? 14th Sep 18 at 10:50 AM
    Well. I'm due some inheritance in the next week or two and I've been thinking hard about what I want to do with it.

    1: Pay off the majority of my mortgage.
    2: Bank it and just use it for an easier life/more holidays and fun for a few years.
    3: Buy to let.

    I do love the idea of being mortgage free myself so number one is super appealing. However, I know for a fact if I pay my mortgage off I will end up just being a little lazier with work and earning less so I wont really notice the difference.
    2 in my option would be amazing to do for those years but I have no doubt I would regret it.

    That leaves option 3. Buy a buy to let house outright. I could get a property with around 8% yield fairly easily in my city. I know I will still work as hard if I do this option but then I will have the asset of a another home and the addition of extra income to start paying down my own mortgage or maybe even go towards a second but to let.

    However I know nothing about rentals. Will i not be making as much as I think? Anything else I should know before doing this option?

    Thoughts and options really appreciated.
    Mortgage: £60,744.22 Student Loans:£16,726.59
    Joining Debt (08/04/2018) : £90,283.01 Current Debt: £77,470.81


    Goal: Debt free by 2033
Page 1
    • AlexMac
    • By AlexMac 14th Sep 18, 11:13 AM
    • 2,184 Posts
    • 1,917 Thanks
    AlexMac
    • #2
    • 14th Sep 18, 11:13 AM
    • #2
    • 14th Sep 18, 11:13 AM
    Lots of others will point you to the stickies on this forum about the skills, attitude and obligations required of being a Landlord, and the need to be able to effect repairs rapidly and cope with voids and a a bad tenant if you're unlucky..

    BUT, I've never regretted slipping into being a small BTL landlord after purchasing a flat for a family member 20+ years ago then letting it out after they moved on. The Self- Assessment tax is a doddle and you just have to be ready to replace boilers and white goods the moment they bust. Choose your tenants wisely with all appropriate checks (yourself or via an agent) and treat them right and in my experience, they'll reciprocate; never a bad debt in my case.

    BUT, and it's a big but, it really depends on yield, house price capital growth and the market locally. I've now had five BTL flats or second homes over the years and still rent 2 out, but the real gain from thos came in the amazing Capital uplift in values over the late 20th Century, then again, after the crash of 2007/8 in the past six years (in my area at least). That means I've probably made more in Capital Gains than rent, which is daft (and why younger people like my grand daughter on average wages will never afford a place of her own without help- quite awful for her generation X!)

    That (inflation) just ain't going to happen in the next few years ... in my view at least. In fact we almost got burned when we bought a place in 2007 at the peak of the market... and just got out evens four years later; if we hadn't bought a wreck, tightly managed the refurb cost (£25k for a full internal gut-out with new everything including 2 new bathrooms) we'd have lost money as prices in that area dropped 25% in 2008.

    So look at the trends locally- take others' advice on being a LL, consider property as a very "illiquid" investment, and work out if its for you.
    • tom9980
    • By tom9980 14th Sep 18, 11:33 AM
    • 1,314 Posts
    • 3,894 Thanks
    tom9980
    • #3
    • 14th Sep 18, 11:33 AM
    • #3
    • 14th Sep 18, 11:33 AM
    Well. I'm due some inheritance in the next week or two and I've been thinking hard about what I want to do with it.

    1: Pay off the majority of my mortgage.
    2: Bank it and just use it for an easier life/more holidays and fun for a few years.
    3: Buy to let.

    I do love the idea of being mortgage free myself so number one is super appealing. However, I know for a fact if I pay my mortgage off I will end up just being a little lazier with work and earning less so I wont really notice the difference.
    2 in my option would be amazing to do for those years but I have no doubt I would regret it.

    That leaves option 3. Buy a buy to let house outright. I could get a property with around 8% yield fairly easily in my city. I know I will still work as hard if I do this option but then I will have the asset of a another home and the addition of extra income to start paying down my own mortgage or maybe even go towards a second but to let.

    However I know nothing about rentals. Will i not be making as much as I think? Anything else I should know before doing this option?

    Thoughts and options really appreciated.
    Originally posted by bytheseas
    There are lots of other options than those 3. What about your pension situation do you even have one?

    There are extra taxes involved including extra stamp duty and s24 not to mention lots of talk of extra regulation being touted by politicians both red and blue. Landlords are easy targets despite the low yields most rental property deliver. Then you have the house price growth of the last 8 years or so, we are now seeing the first wobbles and signs we might be near or at the top of the cycle.

    I personally would be ensuring my pension was well financed and investing the rest in stocks and shares isa's, long before the hassle of being a landlord in the current climate.
    “In order to change, we must be sick and tired of being sick and tired.”
    • Cakeguts
    • By Cakeguts 14th Sep 18, 11:41 AM
    • 5,214 Posts
    • 7,895 Thanks
    Cakeguts
    • #4
    • 14th Sep 18, 11:41 AM
    • #4
    • 14th Sep 18, 11:41 AM
    You have to do a lot or business research on what lets where you live. I will give you an example of my research for an area of the country that we let houses in. For the area that we let in 2 bed terraced houses are cheap. But my research told me that there were lots and lots of these available to rent at any one time on the market which also told me that there were fewer tenants looking for this type of property than the number of properties available. What was in very short supply was 3 bed semis with drives. These were much more expensive to buy. However although the yields looked lower than a 2 bed terraced with the 3 bed semis you could get much longer tenancies. So several years of continual occupation by the same good tenant who pays the rent and looks after the property. What you don't want is lots of voids when the property is vacant because that is when you seriously lose money. The longer the tenancy the better. Our business model works. We have very few voids and if we have one we don't have one for long.



    The problem is that you can easily get confused by a property being let for what intially looks like 8% yield but you don't know how long that tenancy is for. It could be 6 months followed by a void of 3 months. This is why something where the tenancy goes on for years is better but may look like a lower yield to begin with.
    • bytheseas
    • By bytheseas 14th Sep 18, 12:25 PM
    • 51 Posts
    • 48 Thanks
    bytheseas
    • #5
    • 14th Sep 18, 12:25 PM
    • #5
    • 14th Sep 18, 12:25 PM
    To be honest, I think it's a market I know fairly well just from living here and renting for most of my adult life/seeing friends using the rental market too.

    I know my area well, places to avoid, places families would like to live and what areas generally rent for. But I have also been checking out how many of each property type are available in my surrounding estates and what these generally rent for.

    This may sound like a stupid thing to say. But I'm not really that bothered about house capital growth. I have no plans to sell and would ideally keep it to hand to my daughter along with my own property.... when the time comes...

    I guess I see it as a security blanket. Having that extra 450 - 550 per month coming in to boost wages. Even if I do go a few months without tenants. It wouldn't be the end of the world, with the mortgage already paid.

    When it comes to tax returns and such. I've been self employed for the last 5 years so not an issue in regards to that. It would be very little change.

    I should also say my options are indeed not the only options. They are simply the ones that excite me haha. The idea of stocks and shares or just having it in the bank bore me.

    I love DIY. Gutted my own house when I bought it and turned my hand to 90% of the modernisation myself. SO I would genuinely look forward to doing that with another place too.

    In regards to pensions and such. I admit I have little in place but I'm 31 and do see this as a pension in some regards. Regular months income as long as its tenanted and if worst comes to worst it could be sold to release funds if required.

    But yeah current financial situation is certainly prioritised over retirement.

    So be honest. Writing this. I'm 99% sure it's what I want to do. Pretty sure I was just looking for someone to scare me out of it with some unknown or horror stories. Which hasn't happened.... yet.
    Mortgage: £60,744.22 Student Loans:£16,726.59
    Joining Debt (08/04/2018) : £90,283.01 Current Debt: £77,470.81


    Goal: Debt free by 2033
    • somethingcorporate
    • By somethingcorporate 14th Sep 18, 3:04 PM
    • 8,969 Posts
    • 8,694 Thanks
    somethingcorporate
    • #6
    • 14th Sep 18, 3:04 PM
    • #6
    • 14th Sep 18, 3:04 PM
    "Professional" tenants can easily mean you are lacking rent for 12-18 months, could trash the place costing £10ks in refurbs. No tax advantages (and getting worse), higher stamp duty on second property, time and effort to manage tenant, repairs and letting agents, tax to pay on income, CGT when time comes to sell, very illiquid if you need to sell quickly, ground rent & maintenance charges if it's a leasehold. If you ever need benefits it will be counted as an asset. The list of issues goes on and on and being a professional LL is a lot of time, effort and responsibility.



    You really should look into pensions first which has lots of tax advantages over housing.


    The golden era of B2L is long gone and the near-term horizon looks bleak.
    Thinking critically since 1996....
    • Slithery
    • By Slithery 14th Sep 18, 3:19 PM
    • 967 Posts
    • 1,544 Thanks
    Slithery
    • #7
    • 14th Sep 18, 3:19 PM
    • #7
    • 14th Sep 18, 3:19 PM
    You need to read all of G_M's excellent guides, and all of the links that they contain before even thinking about becoming a landlord...

    Tenancies in Eng/Wales: Guides for landlords and tenants
    Last edited by Slithery; 14-09-2018 at 3:22 PM.
    • Cakeguts
    • By Cakeguts 14th Sep 18, 3:52 PM
    • 5,214 Posts
    • 7,895 Thanks
    Cakeguts
    • #8
    • 14th Sep 18, 3:52 PM
    • #8
    • 14th Sep 18, 3:52 PM
    I don't know where you are thinking of buying but that £450 - £550 per month would be right in the middle of the 2 bed terraces or just 2 bed houses in general. It is the level of rent that comes from a house that is at the bottom of the range of rented property available. If you want a quiet life without lots of hassle you have got to have properties that offer something more than usual. If you do this you get the choice of the best tenants.



    The problem is not the actual letting at a certain rent the problem is screening out the tenants who are going to cause you a lot of voids and hassle like wrecking the property or not paying the rent. The examples of your friends renting and you renting are good but you are not everyone and not everyone behaves the same way. The cheaper the property and the rent the more likely you are to have a problem.
    Last edited by Cakeguts; 14-09-2018 at 6:12 PM.
    • tom9980
    • By tom9980 14th Sep 18, 4:46 PM
    • 1,314 Posts
    • 3,894 Thanks
    tom9980
    • #9
    • 14th Sep 18, 4:46 PM
    • #9
    • 14th Sep 18, 4:46 PM
    In regards to pensions and such. I admit I have little in place but I'm 31 and do see this as a pension in some regards. Regular months income as long as its tenanted and if worst comes to worst it could be sold to release funds if required.

    But yeah current financial situation is certainly prioritised over retirement.

    So be honest. Writing this. I'm 99% sure it's what I want to do. Pretty sure I was just looking for someone to scare me out of it with some unknown or horror stories. Which hasn't happened.... yet.
    Originally posted by bytheseas
    Pensions have important tax breaks even a non tax payer can get a 20% boost to pension contributions. It is utter madness to completely ignore contributing to a pension as you are doing especially when you take into account reinvesting dividends and compound interest over long periods of time especially when you are only 31.

    If you want a scare story I am still owed £1k by a former tenant who i have a CCJ against and I am unlikely to see that cash anytime soon.
    “In order to change, we must be sick and tired of being sick and tired.”
    • bytheseas
    • By bytheseas 28th Sep 18, 11:25 AM
    • 51 Posts
    • 48 Thanks
    bytheseas
    Well guys. I've gone ahead with it. Made an offer on a property pre auction for the starting price and got accepted.
    1 bed cottage, about a quarter of a mile from my house. Fair bit of research done. Nothing similar to it currently to let within 3 miles. I hoping that means it will be in demand. Based on similar properties further way in the same city I should expect 375 - 425.

    Property cost Exactly 40k + £2,006 solicitor fees/stamp. Probably needs 2 - 3k spending on it so round up to 45k total. So looking at 8%+ yield if occupied full time.

    It's the sort of property that's ideal for an older person or maybe a disability. Very close to shops, all on one level. Small and easy to maintain but in a nice street too.

    Cheaper than I was expecting to get a property for so I've also paid my max 10% over my own mortgage too so the rest doesn't just get wasted.
    Mortgage: £60,744.22 Student Loans:£16,726.59
    Joining Debt (08/04/2018) : £90,283.01 Current Debt: £77,470.81


    Goal: Debt free by 2033
    • tom9980
    • By tom9980 28th Sep 18, 12:12 PM
    • 1,314 Posts
    • 3,894 Thanks
    tom9980
    Well guys. I've gone ahead with it. Made an offer on a property pre auction for the starting price and got accepted.
    1 bed cottage, about a quarter of a mile from my house. Fair bit of research done. Nothing similar to it currently to let within 3 miles. I hoping that means it will be in demand. Based on similar properties further way in the same city I should expect 375 - 425.

    Property cost Exactly 40k + £2,006 solicitor fees/stamp. Probably needs 2 - 3k spending on it so round up to 45k total. So looking at 8%+ yield if occupied full time.

    It's the sort of property that's ideal for an older person or maybe a disability. Very close to shops, all on one level. Small and easy to maintain but in a nice street too.

    Cheaper than I was expecting to get a property for so I've also paid my max 10% over my own mortgage too so the rest doesn't just get wasted.
    Originally posted by bytheseas
    Not much research done really? you should know what the demand is and with certainty the rent.

    I am also concerned you bought an auction property (means problems usually) for cheap before auction. I hope you had a good survey or walked around with someone with knowledge to spot the issues.
    “In order to change, we must be sick and tired of being sick and tired.”
    • Cakeguts
    • By Cakeguts 28th Sep 18, 12:13 PM
    • 5,214 Posts
    • 7,895 Thanks
    Cakeguts
    Well guys. I've gone ahead with it. Made an offer on a property pre auction for the starting price and got accepted.
    1 bed cottage, about a quarter of a mile from my house. Fair bit of research done. Nothing similar to it currently to let within 3 miles. I hoping that means it will be in demand. Based on similar properties further way in the same city I should expect 375 - 425.

    Property cost Exactly 40k + £2,006 solicitor fees/stamp. Probably needs 2 - 3k spending on it so round up to 45k total. So looking at 8%+ yield if occupied full time.

    It's the sort of property that's ideal for an older person or maybe a disability. Very close to shops, all on one level. Small and easy to maintain but in a nice street too.

    Cheaper than I was expecting to get a property for so I've also paid my max 10% over my own mortgage too so the rest doesn't just get wasted.
    Originally posted by bytheseas

    You have got to get an EPC and it has got to be in at least band E or you will not be allowed to let it.
    • bytheseas
    • By bytheseas 28th Sep 18, 2:21 PM
    • 51 Posts
    • 48 Thanks
    bytheseas
    Not much research done really? you should know what the demand is and with certainty the rent.

    I am also concerned you bought an auction property (means problems usually) for cheap before auction. I hope you had a good survey or walked around with someone with knowledge to spot the issues.
    Originally posted by tom9980
    Well my research was what's available to rent now and what's not. There's 100+ 2 beds to let. A dozen or so 3 beds and 0 1 beds. Not really sure how I would find demand? Phone estate agents I'm guessing now? As for rent, I did mention that in the post.

    It already has a brand new roof so no issues there. There's a small patch of damp on the front wall but there's a sealed up air brick just and a drainpipe running down the same wall so I have no doubt that will be fixed with one of those two.
    No cracks or movement to be seen but it's literally a tiny terrace cottage. Very little that could do wrong.
    Last edited by bytheseas; 28-09-2018 at 2:24 PM.
    Mortgage: £60,744.22 Student Loans:£16,726.59
    Joining Debt (08/04/2018) : £90,283.01 Current Debt: £77,470.81


    Goal: Debt free by 2033
    • bytheseas
    • By bytheseas 28th Sep 18, 2:22 PM
    • 51 Posts
    • 48 Thanks
    bytheseas
    You have got to get an EPC and it has got to be in at least band E or you will not be allowed to let it.
    Originally posted by Cakeguts
    Thank for the info. It's got a high D.
    Mortgage: £60,744.22 Student Loans:£16,726.59
    Joining Debt (08/04/2018) : £90,283.01 Current Debt: £77,470.81


    Goal: Debt free by 2033
    • G_M
    • By G_M 28th Sep 18, 2:30 PM
    • 45,842 Posts
    • 55,296 Thanks
    G_M
    I would have suggested you consider other options beyond your 3 eg

    * Pension (for the tax advantages)
    * S & Ss (for liquidity)
    * specialist investments (eg wine,antiques for the hobby interest)


    But you've made your choice. I hope it works out.


    ** Tenancies in Eng/Wales: Guides for landlords and tenants This thread is intended to provide information to both landlords and tenants relating to Assured Shorthold Tenancies (ASTs) in England and Wales.

    Topics covered:

    * Repairing Obligations: the law, common misconceptions, reporting/enforcing, retaliatory eviction & the new tenant protection (2015)

    * Deposits:
    payment, protection and return

    * Ending/renewing an AST: what happens when a fixed term ends? How can a LL or tenant end a tenancy? What is a periodic tenancy?

    * Rent increases: when & how can rent be increased?

    * Repossession: what if a LL's mortgage lender repossesses the property?

    * New landlords: advice, information & links

    * Letting agents: how should a landlord select or sack?
    • hazyjo
    • By hazyjo 28th Sep 18, 11:50 PM
    • 11,059 Posts
    • 14,583 Thanks
    hazyjo
    Seeing your market as older or disabled tenants sounds very limiting to me. Plus, the fact there were no one beds would actually ring more alarm bells suggesting they're not in demand at all.

    Did you have a survey? Are you sure it's freehold? Standard construction? Nothing alarming being built nearby?

    Not got a large garden has it?

    Good luck, let us know how it goes!
    2018 wins: Single Malt Whisky; theatre tickets; festival tickets; year of gin(!); shoes; Thai cooking stuff; Jo Brand talk; Slime Factory
    • csgohan4
    • By csgohan4 29th Sep 18, 8:45 AM
    • 5,149 Posts
    • 3,276 Thanks
    csgohan4
    OP you need to treat a BTL as with any business, overheads and income and tax


    here's when it goes wrong, can you handle it?
    https://forums.moneysavingexpert.com/showthread.php?t=5896992
    "It is prudent when shopping for something important, not to limit yourself to Pound land/Estate Agents"
    • buglawton
    • By buglawton 29th Sep 18, 9:00 AM
    • 7,816 Posts
    • 4,472 Thanks
    buglawton
    I'd say that BTL suits several different profiles of investor.

    1. Government ministers who can buy a batch of over 6 BTLs from a Conservative party sponsor, buying over 6 avoids paying the extra 3% Stamp Duty.

    2. Medium to high net worth individuals living in countries with poor rule of law. They urgently need to park wealth in liberal countries with strong rule of law and good wealth protection rights.

    3. People who want to pass properties onto their children. ROI won't be the only motive and can subsidise the situation.

    4. People who enjoy the challenge of managing the DIY and tradesmen involved in running BTLs, and even the process of finding and managing their tenants. Who at the same time don't trust the share market as an investment, because it's a lot of overpaid CEOs managing the investment.

    Decide if you fit nicely into one of these slots.
    • tom9980
    • By tom9980 29th Sep 18, 10:20 AM
    • 1,314 Posts
    • 3,894 Thanks
    tom9980
    I would lay money the op didn't do a side by side comparison in a spreadsheet of the various options available. I fear that their idea of research was looking at rightmove for comparison and running a few fag packet numbers over a weekend cuppa and cake.

    It might work out they may be lucky but I wouldn't call it a smart way to start a business or investment.
    “In order to change, we must be sick and tired of being sick and tired.”
    • Teamocil
    • By Teamocil 29th Sep 18, 10:21 AM
    • 116 Posts
    • 70 Thanks
    Teamocil
    I'd bet that with their new found cash they outbid people who actually wanted a secure place to live.
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