Scooby Soon!

I have enough money to buy a nice 3 bed semi that can easily be rented out, As far as I can see i have a few optionsshould

Take a mortgage on the property and offset the interest against the rental income.

Buy the property outright and have no mortgage.

split the money across 2 houses and take two small mortgages out on each one and offset the interest against two rental incomes.....

NACRO

Option 3: keep the capital and wait until the outright purchase price drops further.

That's if you're a gambling man and prepared to call the market.

That said if you can buy the entire property for cash and you can take a long term view ie over a decade. Then it will likely perform better than a pension given the same capital input, over the same perioud of time. Despite the tax benefits.

Question is are you buying cheaply enough?

As an aside to this I dipped my toe in the UK property market again with an auction purchase of a suitable for students terraced house at a 40% discount over it's supposed 2007 peak. Taking the long view this property will return at 80% occupancy rate almost 1.5 times the best return on cash I can get at the moment.

c_maguire

I bought one flat outright and the second with a mortgage. The second I have since sold, but in either case I would put forward a 3rd option.
Buy the largest, most desirable property you can that is in need of renovation, modernisation or the like and buy it as your main home. Live in it and improve it as time and funds allow. When it's done all profits are yours, hooray.
I found the rental scene a pain in the ****. You're reliant on tenants, a fair proportion of them are total tossers, and then you'll have the Inland Revenue looking to screw you all the time. All too risky and too much grief unless you're rich enough to spread the risk over a number of properties.
Kevin

rb5_336

With the news today speculating that stamp duty might be suspended or reduced, you'd be mad to buy a property now.

Also, i would assume you'd set up a limited company to hold the rental in, therefore take advantage of re-cooping a lot of tax based on expenses/mortgage costs.

If I had enough money to buy 1 property outright, i'd probably buy say 3 with 66% mortgages within a company. I currently have 4 in my sideline business.

Sean

drb5

iTrader: (4)

Buy to Let Mortgages: HouseMouse UK

jjones

i think i can hear pete95 having some form of seizure!

al4x1

I'm with this man, buy to lets are too risky and far too slow to see a worthwhile return, couple that with agro from tenants and agent fees if you let them manage them then to me its not worth it.

House renovations on the other hand can be great, I've done 3 so far and am on the 4th, bought for 250K got 100K to spend on renovating and extending with a conservative £650K selling price. I was lucky with this one and have had it 2 years and have had to go through Listed buildings and planning nightmares and untold agro as well as moving into a house with no water heating or supply or indeed any heating full stop but if I stay I'll have a large house in cracking location and have an outlay of 50% what it would have cost on the open market, or if I sell and move on then I'll have a large chunk of cash towards the next purchase. At the moment renovation properties are coming onto the open market in a way I've never seen before due to the estate agents not getting the backhanders from builders etc for them as they are hard to shift if you need a fast turn round.

PeteBrant

Wait another 6months at least for the prices to conitue dropping.

Mortgage the property; Don't pay for it cash. Too much exposure in the current climate.

Use the cash in a different investment that could potentially make you more money than any unkown propert price rise.


Plus it means you don't have the money tied up in property if the sit hits the fan

rb5_336

I'm in it for the long term, as a 2nd pension.

Fantom

I don't see the point in using a mortgage at all. By buying outright you'd trade all your cash for a monthly income.
If you mortgage then you are just paying a stack of interest that you don't need to pay. Fair enough the tenants would effectively be paying it but then what's the point in that unless you are expecting prices to rise rapidly.

PeteBrant

You buy the house, for say £200,000. In 12 months it is worth 10% less, so £180,000.

So you lose £20,000.

In other words you would need to pay £20,000 a year in interest to be worse off, which isn't going to happen.

All in the current climate obviously.

rb5_336

That's only if you sell it. In 20 years time, 20k would not be a big percentage of the profit made.

But I do agree you'd be mad to buy for an investment currently, unless you got a very good deal.

Spoon

SS, whatever you do, I wouldn't be doing it right now.

If you want the work of 'managing' tenants then split your money and treat it like a job. I had 24 tenants in the late 90's early 2000's and treated it as such, although it wasn't my first income. Fortunately I never had any payment problems with my chosen tenants.

If you simply want a return on your capital and a retirement asset then buy outright but this won't be the best way to work your money.

As always, it depends on your attitude to risk and the time you can, or want, to dedicate to managing it.

Scooby Soon!

Well thanks for the advice so far, because of the work I do my time is quite flexiable so I could manage things. I am just looking for something to invest money in for the long term so house prices going down (or up) wont make that much differance to me, I wouldnt actually need the income from the rent so I could put it aside for further investment depending on how well things pan out.

I have only started to look at houses now because so many people near where I live (south east) are in major trouble with houses they paid £250k with a 95%/100% mortgage and are now worth £180- £200k they cant afford the mortgage because there fixed rate has finished and they also cant afford to pay for there range rover sport lease so that has got to go back as well.

bargains to be had everywhere!

i wont be rushing in to anything but things are certainly interesting.......

Pattesting-manchester

Heres my perspective, see if you agree ?
If you wait for several years earn and save cash to buy anything like stock shares or properties, you will normally pay tax on your income therefore get less value from the money.
If you borrow as much as you can you will not pay tax on that money and also be able to invest earlier.
Invest for cashflow not capital gains.

fivetide

iTrader: (1)

One thing that can be easier - look to see if your local council has a private let scheme.

Essentially, you rent the place to the council, thety then provide a tenent, are liable for any repairs and you get a regular income from it because it is rented to the council not to an individual tenent.

You need to buy carefully, in an area where they will wnat to put people and of course they pay a little bit less but it's a surer way of letting if there is on.

Just sold my let flat, I was lucky enough to buy it off plan so cleared a bit on it. I'm not in your position but have been humming and arring about putting the £20k down and doing the above on a very cheap flat.

5t.

Will

paulr

This thread is 4 years old. i have 80k sat in a savings account, looking for something to do with it.

EddScott

Premium bonds?
Full Stocks and Shares ISA allowance for 2012/13 paid monthly?
Pension Contribution?
Investment Bond?
A cheap BTL property?
Halequin Property?
Drugs and hookers?

Pattesting-manchester

I would have thought the problem with buying flats is the service charge would cause you to have less profit than a house ?
Also depends what area you are looking at but wouldnt a 2 bed house appeal to more tenants ?

Dingdongler

Thanks for letting us know what your bank balance is.

...seamus...

buy gold and rent a safety deposit box

Puff The Magic Wagon!

iTrader: (2)

There's some good BTL opportunities in London atm. G/f just completing cash on a good/tidy 2 bed flat in a good area with a 10% return which is OK but the price being paid is 20% below market as the owner needed it shifted due to needing some money.

80k gets you 2 20% deposits on btl with up to £200k asking each. Do it right (property & location, location, location) and get someone else to pay for the mortgage for you. When its paid off, then thats your early retirement & pension sorted.

London property, good ones that is, are still a solid investment as the rental demand is strong and looking likely to go up whilst credit is still hard to get hold of.

Dingdongler

Would you mind if I enquired as to the details? ie which part of London and purchase price?

Cheers

Puff The Magic Wagon!

iTrader: (2)

SE London, Lewisham but selected "nicer" parts of it. Access into town via mainland is 15-20 mins or DLR for the Wharf. Lot of regeneration going on in places and its still one of the parts of London that is not overpriced for what you get. Upto £200k but quite possible to find £150k with £1k month rental (8%).

Its definitely about selecting properties with amenity access. We prefer non-council and non-victorian but not modern/brand new.

Dingdongler

Thanks, I know that part of London well and funnily enough own a property not far from there

I'd like to go through the figures with you as I struggle to find that sort of return unless it's in a really rubbish area.

So did your gf buy a £200k flat at 20% under market (so £180k) and it now gets 10% yield ie £18,000/year or £1500 per month?

I struggle with those figures as I can't see where in London a circa £200k flat will give you £1500/month.

ditchmyster

iTrader: (7)

+1. you'll get the best return doing this, and if you have an existing property then rent that out, if you don't mind the hassle.