buy to let
#1
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buy to let
the flat below us is up for sale and we have an opportunity to buy it to let it out, it is let out at present and has a sitting tenent, who will stay should we go ahead...
have been to see the mortgage people etc and its a goer in principle...
we know the buy to let mortgage is reletivly simple to do, providing we can release some equity in our own property to raise the 15% deposit required.
it is rented as furnished at the moment, but to honest it is awfull furnishings!! so prolly looking at unfurnished after this tenent moves on. the flat needs updating, recarpeting, the kitchen and bathroom both need cosmetic renovation too, so there is alot of work to be put into it IF we get it.
we are really dithering tho because
a) never done this before
b) MASSIVE commitment financially
ayone here rent out property? can you give us some hindsight into whats its like to do, what it involves and the pitfalls etc etc???
have been to see the mortgage people etc and its a goer in principle...
we know the buy to let mortgage is reletivly simple to do, providing we can release some equity in our own property to raise the 15% deposit required.
it is rented as furnished at the moment, but to honest it is awfull furnishings!! so prolly looking at unfurnished after this tenent moves on. the flat needs updating, recarpeting, the kitchen and bathroom both need cosmetic renovation too, so there is alot of work to be put into it IF we get it.
we are really dithering tho because
a) never done this before
b) MASSIVE commitment financially
ayone here rent out property? can you give us some hindsight into whats its like to do, what it involves and the pitfalls etc etc???
#2
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Make suer that the rental covers the mortgage if let out for only 10 moths per yer, if it doesn't can you *comfortably* fund the differance
Also look to see what similar properties rent out for and how many empty rentals there are in the area
DO NOT do this if you are relying in capital growth
www.FOOL.co.uk is your friend
Also look to see what similar properties rent out for and how many empty rentals there are in the area
DO NOT do this if you are relying in capital growth
www.FOOL.co.uk is your friend
#3
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firstly you need to find out the exact basis on which the tenant occupies the property. if they are in fact a "sitting tenant" then you could find yourself paying over the odds for something which is worth very little until they move. you also need to find out what they're paying in rent, plus whether this is protected/regulated etc
can be a real headache getting into this sort of thing, but on the other hand you could either be lucky or find that you have a talent for this. remember not to look at the whole thing emotionally - this is a business transaction which has the sole purpose of generating future wealth for you
can be a real headache getting into this sort of thing, but on the other hand you could either be lucky or find that you have a talent for this. remember not to look at the whole thing emotionally - this is a business transaction which has the sole purpose of generating future wealth for you
#4
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the tenent there presently rents through an agent and pays £365 a month, if we were to get it the rent would be increased to match that of other 2double bedded properties in the area to about £400
i dont think we would have any trouble letting it as there are a couple flats close by that seem to easily and quickly get let when they come up.
what exactly is capital growth?
i dont think we would have any trouble letting it as there are a couple flats close by that seem to easily and quickly get let when they come up.
what exactly is capital growth?
#5
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...so they occupy the property under an assured shorthold tenancy? (AST) if so ,then they're not a sitting tenant and it's likely to be nothing to worry about.
capital growth is growth in value as opposed to increasing rental income - ie the money you will have invested will be your capital and capital growth is the capital you'll take out of the property when you sell (and pay off your mortgage)
capital growth is growth in value as opposed to increasing rental income - ie the money you will have invested will be your capital and capital growth is the capital you'll take out of the property when you sell (and pay off your mortgage)
#7
He has to move out the day you purchase and move back in with a new tenancy agreement the same or next day to avoid any problems. You also need a signed letter to state that he has moved out and the new tenancy should be to your specifications and rent amount.
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#8
Beware that after 1/4/06 changes to personal pension SIPP rules mean that a lot more people are going to jump on the buy to let bandwagon. This could have postive or negative effects. In the short term it could drive up the cost of decent buy to let properties as demand for suitable property jumps alternatively in the medium to longer term it could mean a shortage of decent tenants as the market gets flooded with buy to lets. The new SIPP rules could be a very tax efficient way of your own funding the purchase if you have some cash savings.
Personally if you've already got most of your own money invested in property then I would beware having all your eggs in one basket.
Also dont believe anyone who tells you they know what the markets going to do in the longer term. I have worked in the property industry for 10 years and listen/read/talk day after day to self professed experts getting it wrong.
Personally if you've already got most of your own money invested in property then I would beware having all your eggs in one basket.
Also dont believe anyone who tells you they know what the markets going to do in the longer term. I have worked in the property industry for 10 years and listen/read/talk day after day to self professed experts getting it wrong.
#9
Wouldn't you want to look at return on capital?
the amusing thing about BTL is that people seem to think it is a capital free investment. I.e. just burrow all the money required and then see what happens. So in order to buy this place you are going to:
re-mortgage your own place for 15% of the value of the property and
take out a BTL mortgage for the remaining 85%
The total cost of these two loans will be what?
the rental income will be what?
the cost of insuring the building will be what?
factor in vacant periods, wear and tear, periodic refurbishment etc.
if you want to be really pessemistic factor in base rate hitting 6% at some point in the next few years.
Funny how people never burrow money to buy shares, isn't it?
the amusing thing about BTL is that people seem to think it is a capital free investment. I.e. just burrow all the money required and then see what happens. So in order to buy this place you are going to:
re-mortgage your own place for 15% of the value of the property and
take out a BTL mortgage for the remaining 85%
The total cost of these two loans will be what?
the rental income will be what?
the cost of insuring the building will be what?
factor in vacant periods, wear and tear, periodic refurbishment etc.
if you want to be really pessemistic factor in base rate hitting 6% at some point in the next few years.
Funny how people never burrow money to buy shares, isn't it?
#10
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pretty much... like i said we own the flat above, and as this is a converted house by buying the flat below now we would have the whole property which at some point a fair few years down the line could be converted back to a 4 or 5 bed house and would of cost us £130k.
the mortgage we are looking at is on a fixed rate of 5.5% for 3years, paying back will be £90 a month less than the rental income on the property.
(slightly higher interest rate as partner has been self employed for just over 13months)
we are considering renting it out ourselves, tho will be looking into the possibility of using an agent, thee is one here that gaurentees to pay the rent even if empty, but have to look into that in a lot of depth!!!
the mortgage we are looking at is on a fixed rate of 5.5% for 3years, paying back will be £90 a month less than the rental income on the property.
(slightly higher interest rate as partner has been self employed for just over 13months)
we are considering renting it out ourselves, tho will be looking into the possibility of using an agent, thee is one here that gaurentees to pay the rent even if empty, but have to look into that in a lot of depth!!!
#11
Originally Posted by KiwiGTI
It's slightly worrying that you have to ask that question given the situation you are asking about
dont even think about it till you are properly informed and have done some research.
You dont say which area you are in but in some places (london area mostly) buy to let is so popular it has had an adverse effect on rental values ie downwards.
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TBH I wouldnt in your position - 'proper' landlords buy as much of the property as possible with cash, when its as cheap as possible.
You're buying a property when its probably as expensive as its ever going to be, and is more than likely going to drop in value over the next couple of years, plus you havent actually got the money to buy it, you're going to borrow against your own mortgage and increase the payments on that.
Could you afford to cover the mortgage on it if it sat empty for 6 months ? not unknown to happen, especially when you get a lot of properties to rent in the same area - rentals are strong at the moment becuuse first time buyers cant afford to buy - if the market drops over the next 12 months and fsb's can buy, nobody will want to rent your flat unless you let it out really cheap, which wont cover the mortgage. ( An agent that offers a guaranteed income will charge you around 1/5th of the rent each month in fees ).
Property CAN be a good investment, but only if you buy it cheap, sit on it, and sell it when the market is strong, you're looking at doing it the other way around, which isnt a very good idea.
A good friend of mine is a property developer ( a 'real' one, not one of these DIY ones you see on TV ) - he buys cheap places, renovates them, lets them out and when they reach their peak price, sells them. He stopped buying earlier this year and sold 5 of his houses !
There are a lot of people now who see these TV programs and think 'I could do that' but the only people who really make money from letting are the ones who already have plenty of money behind them.
You're buying a property when its probably as expensive as its ever going to be, and is more than likely going to drop in value over the next couple of years, plus you havent actually got the money to buy it, you're going to borrow against your own mortgage and increase the payments on that.
Could you afford to cover the mortgage on it if it sat empty for 6 months ? not unknown to happen, especially when you get a lot of properties to rent in the same area - rentals are strong at the moment becuuse first time buyers cant afford to buy - if the market drops over the next 12 months and fsb's can buy, nobody will want to rent your flat unless you let it out really cheap, which wont cover the mortgage. ( An agent that offers a guaranteed income will charge you around 1/5th of the rent each month in fees ).
Property CAN be a good investment, but only if you buy it cheap, sit on it, and sell it when the market is strong, you're looking at doing it the other way around, which isnt a very good idea.
A good friend of mine is a property developer ( a 'real' one, not one of these DIY ones you see on TV ) - he buys cheap places, renovates them, lets them out and when they reach their peak price, sells them. He stopped buying earlier this year and sold 5 of his houses !
There are a lot of people now who see these TV programs and think 'I could do that' but the only people who really make money from letting are the ones who already have plenty of money behind them.
#13
Originally Posted by scoobyangel
pretty much... like i said we own the flat above, and as this is a converted house by buying the flat below now we would have the whole property which at some point a fair few years down the line could be converted back to a 4 or 5 bed house and would of cost us £130k.
I'm not going to get into the BTL discussion even although I could contribute...but there is an interesting twist in this one...
ie, this may be the one of few chances you have to own the WHOLE property. If you are thinking you may need the extra space in the future (need more space for children/more children/whatever), then it is worth considering on this basis. Saves you moving if you need extra space...you just terminate the tenancy and start converting. Would be cheaper than moving IF you like the location and the house.
Are most of the houses in your street converted into flats or left as houses? What is the value of the whole property when it sells as one house?
#14
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next door is the only other flat conversion and rents out at 422 a month, next door to that again is a whole 4 bed house and valued at £210k earlier in the year
#15
Originally Posted by MikeCardiff
A good friend of mine is a property developer ( a 'real' one, not one of these DIY ones you see on TV ) - he buys cheap places, renovates them, lets them out and when they reach their peak price, sells them. He stopped buying earlier this year and sold 5 of his houses !
#16
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We bought a 2 bed house in Leics this year, which we rent out. It rented within 3 weeks, we dont see much profit from it each month, but never intended to - its a long term investment.
Would agree with most of the replies in this thread. Ensure that if you do it, you can afford to cover the cost of any mortgage if its empty for 1-3 months of the yr. Also, look at the benefits of a managed system (run by many of the lettings agencys) can be costly, but also much easier to deal with and faster to find tennants.
Hope this helps
Neil
Would agree with most of the replies in this thread. Ensure that if you do it, you can afford to cover the cost of any mortgage if its empty for 1-3 months of the yr. Also, look at the benefits of a managed system (run by many of the lettings agencys) can be costly, but also much easier to deal with and faster to find tennants.
Hope this helps
Neil
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NotoriousREV, he sold in Jan and Feb when houses in this area were right at their peak and had stayed level for about 2 months without dropping.
Main reason he stopped buying ( apart from the downturn in the market ) was he said most renovation houses he was interested in were being bid up to stupid prices by the DIY property developers, so werent even worth looking at.
As he is a millionaire, I think he pretty much knows what he's doing ( git ! )
Main reason he stopped buying ( apart from the downturn in the market ) was he said most renovation houses he was interested in were being bid up to stupid prices by the DIY property developers, so werent even worth looking at.
As he is a millionaire, I think he pretty much knows what he's doing ( git ! )
#18
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Remember there are new regualtions being introduced which will require landlords to provide a host of things for their tennants such as adaquete fire escape routes and that sort of thing in their properties, at the expense of the landlord - and could leave you open to legal action from the tennant if you dont provide them and they are injured as a result etc.
Also you need to be realistic with whats happening to property prices at the moment. Ignore all vested interest (estate agent, mortgage lender) house price surveys, and look at the Land Registry survey. This will show you house prices are falling, and its likely they'll continue to do so for some time. You could realistically buy this place, let it out for 5years, then stand at a loss.
TV programmes over the last few years have made BTL seem like a goldmine that you cant go wrong with, but IMO there are now far better ways of investing money right now.
Also you need to be realistic with whats happening to property prices at the moment. Ignore all vested interest (estate agent, mortgage lender) house price surveys, and look at the Land Registry survey. This will show you house prices are falling, and its likely they'll continue to do so for some time. You could realistically buy this place, let it out for 5years, then stand at a loss.
TV programmes over the last few years have made BTL seem like a goldmine that you cant go wrong with, but IMO there are now far better ways of investing money right now.
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on a 5 yr investment plan, then yes, I would agree with Petem95, however if you're looking for longer term (15yrs plus), then there is little better place to invest your money.
My parents started in the property game around 25yrs ago, and now have over 30 properties, all rented, both commercial and residential. They always see it as a long term investment. Short term is too much of a gamble.
My parents started in the property game around 25yrs ago, and now have over 30 properties, all rented, both commercial and residential. They always see it as a long term investment. Short term is too much of a gamble.
#20
long term is the way too look at it as most people have said. Someone else is basically paying your mortgage while they are renting, at least 10 to 15 years investment. A 5 bed house would be nice in the future
#21
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Originally Posted by NeilT
on a 5 yr investment plan, then yes, I would agree with Petem95, however if you're looking for longer term (15yrs plus), then there is little better place to invest your money.
My parents started in the property game around 25yrs ago, and now have over 30 properties, all rented, both commercial and residential. They always see it as a long term investment. Short term is too much of a gamble.
My parents started in the property game around 25yrs ago, and now have over 30 properties, all rented, both commercial and residential. They always see it as a long term investment. Short term is too much of a gamble.
So what you're saying is that at the moment, property is a crap investment and what scoobyangel should do is to invest the money somewhere else at the moment, and then move to property as the price returns to sensible levels?
#22
if your borrwing 100% of the money required and it still gets you a profit of £90. Based on your figures the property is about 50k and represents 50% of a building worth 200k so should by rights be worth about 100k (although needs work).
Even if you have both flats doesn't mean you 'own' the freehold? You will just own 2 leases and if the owner of the freehold doesn't sell you the freehold, then you couldn't convert it back to a single dwelling.
Just my thoughts, not a property guru.
Even if you have both flats doesn't mean you 'own' the freehold? You will just own 2 leases and if the owner of the freehold doesn't sell you the freehold, then you couldn't convert it back to a single dwelling.
Just my thoughts, not a property guru.
#23
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Originally Posted by wilf
Beware that after 1/4/06 changes to personal pension SIPP rules mean that a lot more people are going to jump on the buy to let bandwagon. This could have postive or negative effects. In the short term it could drive up the cost of decent buy to let properties as demand for suitable property jumps alternatively in the medium to longer term it could mean a shortage of decent tenants as the market gets flooded with buy to lets. The new SIPP rules could be a very tax efficient way of your own funding the purchase if you have some cash savings.
http://news.bbc.co.uk/1/hi/programme...ey/4727637.stm
http://news.bbc.co.uk/1/hi/programme...ox/4211292.stm
http://news.bbc.co.uk/1/hi/programme...ey/4728889.stm
They also found that there was a serious lack of good advice available, even from IFA's. Caveat emptor.
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