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  • FIRST POST
    • spencer999
    • By spencer999 14th Jun 19, 10:06 AM
    • 74Posts
    • 10Thanks
    spencer999
    buying cheap flats to rent out - cos my friends are doing it too
    • #1
    • 14th Jun 19, 10:06 AM
    buying cheap flats to rent out - cos my friends are doing it too 14th Jun 19 at 10:06 AM
    My credit rating has shot up lately (468 against national average of 414) and I'm thinking of dipping toes slightly further into renting out. We have a mortgage of about £98,000 on our house and we have a flat rented out mainly because we had no choice as it's in negative equity. That's in my missis' name though.

    That flat was bought as a new build about ten years ago and the price immediately plummeted, so they are attractive buys now. The service charge is over £2000 though, and the flat we rent out there doesn't make a profit. BUT as they are so cheap now it does look like an attractive prospect to buy another,
    A lot of my friends are doing it and it feels like I would be joining a trend just before it goes sour in some way - or is there a never ending stream of people desperate to rent? One friend has ten houses, and says that the poor economy and growing population means that there is indeed a guaranteed market. Hmmm

    An agent looks after our flat and we never have to think about it from one month to the next.

    Thanks kids
Page 1
    • spadoosh
    • By spadoosh 14th Jun 19, 10:11 AM
    • 7,465 Posts
    • 10,935 Thanks
    spadoosh
    • #2
    • 14th Jun 19, 10:11 AM
    • #2
    • 14th Jun 19, 10:11 AM
    You dont make any money on a flat you rent out but you want to buy another of the same flats to rent out?

    Before all that it doesnt sound like you have a lot of capital, or there is at least a distinct lack of mentioning any capital.

    With all due respect, it doesnt sound like youd make a particularly good landlord. Maybe think about putting your money in a savings account where it would return more than you will likely get from being a landlord based off previous returns.
    Don't be angry!
    • G_M
    • By G_M 14th Jun 19, 10:16 AM
    • 49,560 Posts
    • 61,516 Thanks
    G_M
    • #3
    • 14th Jun 19, 10:16 AM
    • #3
    • 14th Jun 19, 10:16 AM
    An agent looks after our flat and we never have to think about it from one month to the next.

    Thanks kids
    Originally posted by spencer999
    Some agents are good. Some are not. Likewise tenants. Often even the poor agents appear OK if the tenants are good, stay long term, and all the agent has to for their commission is cream off the rent regularly. You've been lucky.


    Not aways like that though. It's when issues arise you findout what the agent is like.


    * Letting agents: how should a landlord select or sack?


    Remember ultimately allegallibility stops with you, so even with an agent you need to kow what's going on.

    * New landlords (1):advice & information :see links in next post

    * New landlords (2): Essential links for further information



    As for your question? Trends can be risky! If you get in at the start of a trend - great (so long as it does become a trend!). The letting arena has got tougher with lots of changes to tenancy law, and tax, so get up to speed on that.


    And imagine General Election leading to a Labour government: JC is not that sympathetic to LLs and all sorts of leglislation could come in.......
    • tom9980
    • By tom9980 14th Jun 19, 10:20 AM
    • 1,492 Posts
    • 4,173 Thanks
    tom9980
    • #4
    • 14th Jun 19, 10:20 AM
    • #4
    • 14th Jun 19, 10:20 AM
    Everything you have said tells me one thing, you ain't cut out for this kid.
    “In order to change, we must be sick and tired of being sick and tired.”
    • Crashy Time
    • By Crashy Time 14th Jun 19, 4:32 PM
    • 8,390 Posts
    • 2,973 Thanks
    Crashy Time
    • #5
    • 14th Jun 19, 4:32 PM
    • #5
    • 14th Jun 19, 4:32 PM
    My credit rating has shot up lately (468 against national average of 414) and I'm thinking of dipping toes slightly further into renting out. We have a mortgage of about £98,000 on our house and we have a flat rented out mainly because we had no choice as it's in negative equity. That's in my missis' name though.

    That flat was bought as a new build about ten years ago and the price immediately plummeted, so they are attractive buys now. The service charge is over £2000 though, and the flat we rent out there doesn't make a profit. BUT as they are so cheap now it does look like an attractive prospect to buy another,
    A lot of my friends are doing it and it feels like I would be joining a trend just before it goes sour in some way - or is there a never ending stream of people desperate to rent? One friend has ten houses, and says that the poor economy and growing population means that there is indeed a guaranteed market. Hmmm

    An agent looks after our flat and we never have to think about it from one month to the next.

    Thanks kids
    Originally posted by spencer999
    Poor economy + Brexit will mean less people wanting to rent.
    • AnotherJoe
    • By AnotherJoe 14th Jun 19, 4:36 PM
    • 15,913 Posts
    • 19,135 Thanks
    AnotherJoe
    • #6
    • 14th Jun 19, 4:36 PM
    • #6
    • 14th Jun 19, 4:36 PM
    There's a very old joke about a business that makes a loss on each widget but plans to make it up by selling in volume. I never thought I'd see someone in real life actually set out to do it.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • Crashy Time
    • By Crashy Time 14th Jun 19, 4:42 PM
    • 8,390 Posts
    • 2,973 Thanks
    Crashy Time
    • #7
    • 14th Jun 19, 4:42 PM
    • #7
    • 14th Jun 19, 4:42 PM
    The post is obviously a wind up, but does underline the attitude many of the public had towards property until recently.
    • ACG
    • By ACG 14th Jun 19, 4:54 PM
    • 19,514 Posts
    • 11,086 Thanks
    ACG
    • #8
    • 14th Jun 19, 4:54 PM
    • #8
    • 14th Jun 19, 4:54 PM
    He is looking to purchase a property which now costs significantly less than the one he currently owns. Surely you can see the difference?

    Buying something that costs £10 a month and renting it out at £10 does not make sense. Buying something that costs £5 a month and renting it out for £10 can make sense...

    That all being said, I have been a landlord and would never do it again. I would like to think I was a decent landlord and tried my best to vet tenants. People just do not give a crap about your belongings. They know you wont chase them for the money because you may not be able to find them and even if you do, it is not worth it.

    The law is on the side of whoever knows how to play the system the best (which is either dodgy landlords or dodgy tenants).
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • HampshireH
    • By HampshireH 14th Jun 19, 6:42 PM
    • 1,830 Posts
    • 2,378 Thanks
    HampshireH
    • #9
    • 14th Jun 19, 6:42 PM
    • #9
    • 14th Jun 19, 6:42 PM
    Are the flats being let or are there a lot of for rent signs out side?

    Would the 2nd flat turn a profit?

    Could you get another mortgage?

    Also did you resolve the mould issue in the flat your partner owns?
    • 00ec25
    • By 00ec25 14th Jun 19, 7:57 PM
    • 8,590 Posts
    • 8,482 Thanks
    00ec25
    Thanks kids
    Originally posted by spencer999
    do you want sensible adult advice, or playground tattle?
    • spencer999
    • By spencer999 15th Jun 19, 10:29 AM
    • 74 Posts
    • 10 Thanks
    spencer999
    sorry if I misled some folks, allow me to clarify:

    My mortgage is about £98,000, house is worth about £170,000, I've got about £30,000 liquid savings. I'm free of a vindictive divorce which has boosted my credit score.

    The rented out flat doesn't make a profit because the mortgage is too high. However these flats are now selling for less than half of what my OH paid for it. She paid about £110,000 and they are going for 45 to 50 now. So it might make sense in that case, as the rent she is currently getting is 495 minus 10% agent fee. As I said though the service charge is high IMO, c. £2000 pa.

    There are other blocks around that might have lower service charges and demand is high, there is a huge council house waiting list and families are looking for rented all the time.

    ALSO - the humidity problem in the flat was just bad ventilation. Once we kept the air moving everything was "bon".

    The final clincher might indeed be if we live under the Corbyn Terror. Being a landlord might get a lot more difficult. So maybe I'll look for something else....

    All input gratefully received y'all
    • spencer999
    • By spencer999 15th Jun 19, 10:33 AM
    • 74 Posts
    • 10 Thanks
    spencer999
    reply to ACG
    the agent was very thorough and our tenant is a manager for a well known caring sharing supermarket chain, and we've had zero problems. Although it makes no profit, eventually I guess we'll have a flat, paid for, to either sell or keep renting. Not ideal but it's the best we could do given the sudden descent into horrifying NE.
    • Fire Fox
    • By Fire Fox 15th Jun 19, 10:48 AM
    • 25,149 Posts
    • 29,391 Thanks
    Fire Fox
    How on top of the service charge/ repairs/ maintenance issues are you? Do you know exactly what you are paying for? Is there a decent sinking fund?

    A block locally has flammable cladding. Block has had a 24/7 security guard since the cladding was tested (increase from M-F 9-5 concierge). My source says the coffers are now empty. One family own three BTL flats in the block, so their share of removing the cladding will be eyewatering.
    Declutterbug-in-progress.⭐️⭐️⭐️ ⭐️⭐️
    • csgohan4
    • By csgohan4 15th Jun 19, 10:56 AM
    • 6,491 Posts
    • 4,373 Thanks
    csgohan4
    two wrongs don't make a right financially
    "It is prudent when shopping for something important, not to limit yourself to Pound land/Estate Agents"
    • Crashy Time
    • By Crashy Time 19th Jun 19, 12:46 PM
    • 8,390 Posts
    • 2,973 Thanks
    Crashy Time
    the agent was very thorough and our tenant is a manager for a well known caring sharing supermarket chain, and we've had zero problems. Although it makes no profit, eventually I guess we'll have a flat, paid for, to either sell or keep renting. Not ideal but it's the best we could do given the sudden descent into horrifying NE.
    Originally posted by spencer999
    Probably all you could do really.
    • foxy-stoat
    • By foxy-stoat 19th Jun 19, 1:23 PM
    • 5,071 Posts
    • 3,035 Thanks
    foxy-stoat
    My credit rating has shot up lately (468 against national average of 414) and I'm thinking of dipping toes slightly further into renting out.
    Originally posted by spencer999
    So the basis of your discussion to try your hand at being a landlord is a meaningless score of 50 above the nation average and the fact that your mates are doing it?

    Good lucks, you will need all of it.
    • foxy-stoat
    • By foxy-stoat 19th Jun 19, 1:27 PM
    • 5,071 Posts
    • 3,035 Thanks
    foxy-stoat
    Although it makes no profit, eventually I guess we'll have a flat, paid for, to either sell or keep renting.
    Originally posted by spencer999
    If you can keep the consent to let until the end of the mortgage term - 20 years?

    If it is an interest only Buy To Let mortgage then I guess you don't know that you need to actually pay for the original mortgage amount.....also do you pay any income tax on the rental payments? Doesn't matter that your making a loss every month, the income is what is taxed and not all the mortgage payments can be offset against it.
    • Thrugelmir
    • By Thrugelmir 19th Jun 19, 1:40 PM
    • 64,798 Posts
    • 57,204 Thanks
    Thrugelmir
    The rented out flat doesn't make a profit because the mortgage is too high.
    Originally posted by spencer999
    Interest only mortgage? Start paying it down. As time passes the day of reckoning gets closer.
    “If the financial system has a defect, it is that it reflects and magnifies what we human beings are like. Money amplifies our tendency to overreact, to swing from exuberance when things are going well to deep depression when they go wrong. Booms and busts are products, at root, of our emotional volatility.”
    ― Niall Ferguson
    • AlexMac
    • By AlexMac 19th Jun 19, 1:41 PM
    • 2,368 Posts
    • 2,069 Thanks
    AlexMac
    As they (almost) said in the 1977 movie "close encounters of the 3rd kind...

    ... "You are not alone"

    https://www.bbc.co.uk/news/business-48637484
    • armchaireconomist
    • By armchaireconomist 19th Jun 19, 3:03 PM
    • 368 Posts
    • 440 Thanks
    armchaireconomist
    "cos my friends are doing it too" as a reasoning should be all you need to know.
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