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Still thinking of dipping our toes in the landlord market. What do we need to think about, what margins are we looking at, probably purchase price of around 120k with 30k deposit? Pitfalls and pluses.
Better deals on lower LTV figures - think 60% if you can.
Income tax payable on net profits - finance charges no longer exempt.
Agents can be life savers or utter arseholes.
Think about it as an investment; don't have any sentimental attachment to the property.
Think about your exit strategy - capital gains tax etc.
Consider Air BnB instead (that should add a few rabid dogs to the discussion) 🙂
Agents are there to take money from everyone, from persuading tenants to move or scamming you some other way. Direct or minimum of finders fee if you can manage it and maintain it yourself.
A good tenant is worth more than a gold plated carbon fibre enduro weapon!, if you have a good one who wants to stay make sure you keep them.
Whats your local market actually like? Whats the demographic?
Personally no pets no kids if I was chosing
I can borrow 90k on interest only for about 130/month, on a property like that I should be able to return 500/550 month. Thinking of buying it in mrsws name as she is a part time low earner so could she offset it against her basic tax rate?
Hard to see a profit with those numbers TBH
https://docs.google.com/spreadsheets/d/18d6uKRYc6sUpo7YcPH0n1G2MrqlU5_abdyJsHOR4iAo/edit?usp=sharing
Edit, this assumes a cash + capital mortgage at a marketish rate (5%).
^tl:dr 😀
Consider Air BnB instead
Think about what timescale you are planning for - there is presumably a finite number of potential air b&b customers. At the moment the idea of air b&b is new and the customer base is growing all the time but it can’t forever. What happens when the market local to you gets saturated and you’re competing with people who have lower overheads (ie no mortgage) than you
We’ve had ours for about fourish years now. I wanted a place in reasonable nick to start off with and possibly useable should we eventually downsize, near us. So spent a lot of time looking for a place that fitted our spec. So research the area and the market extensively, something I found out recently is round here you get a lot of hits if you allow pets. We had it well decorated at the outset and that’s helped with getting and keeping tenants. We went semi furnished, beds, wardrobes, sofa etc - hit ikea hard. Boiler examination every year so make sure that’s ok. We never used an agent and found tenants via openrent which is better for them as well with no fees for them. Not had any horrors yet bar two minor leaks and the tenants we’ve had have been fine with no long periods of being empty maybe one month at most, first tenants did three years present is 18 months) Ours is not a massive earner but ticks over being a long term pension device and unmortgaged
I’d this isn’t cool then feel free to report, I’ve had this as buy to let, been letting it to students for the last 4 years for 650-700pcm Selling as mrsTHtobe and I want to buy together. PM me for more details if it’s of interest.
https://www.martinco.com/property/for-sale/345962
I'm after something local I'm afraid Tom, must be some well off students in Huddersfield if it's only a one bed 😳
It's students, you will get 4 in there!!
It’s not local to me, for 8%, a letting agent deals with everything. I don’t trust them as far as I could throw them, and deal with them appropriately. It’s worked pretty well so far
(Huddersfield has a LOT of, apparently minted, international students...)
I have one rental, but have had two (from an inheritance, now sold)
Some thoughts:
Your gross yield 5.5% on 550pcm / 120k is at the low end for B2L.Mine yields 6.2%, which I'm ok with, but still isn't spectacular for B2L. before all costs, which of course will lower your even further, and then theres tax to pay (and the tax burden is only increasing for LL).
I'd do some hard sums based on the 2020 tax regime and then ask yourself what your net yield would be & "is this worth it". Also factor in rising interest rises.
-Whats your end game / what are you hoping for?
Capital appreciation? (which B2L is great for if the market moves that way because of gearing / leverage)
Or retirement income? If so, whats the re-payment vehicle? Cos you'll pay tax on rental income if you're paying down the mortgage (so you're paying tax on money thats never been in your pocket).
Its work / time commitment - I've spent 4/5 hrs at mine this morning sorting some guttering issues. Sure not a major, but its 4/5 hours i wasn't doing work on my own house, time with family etc.
You'll always have little issues to sort, sure you can pay someone, but thats eating into your yields. Factor in the value of YOUR time.
Risk - property may seem more stable than equities (and it maybe in terms of capital value) but the risk comes in other forms - dodgy tenants (which can cost thousands), expensive repairs etc.
Illiquidity - are you happy having thousands tied up that you can't touch quickly (a share portfolio can be sold off ad hoc of course) - My B2L is owned outright (which is great) but I have a 6 figure sum i can't release any funds without re-mortgaging (which the current tax regime makes unfavourable) - the flip side of this is that I don't go out and piss it up the wall on cars etc.
Some stuff to think about. Email in profile (i think) if you have any more questions.
If you are interest only then an increase in rates will hit you. I wouldn’t do it unless the rent allows for a repayment mortgage in case the housing market dips and you need to exit. Also consider costs of insurances, safety inspection and maintenance.
it will get run down and good tenants are worth their weight.
i would say that I lose money Or make near enough zero renting my flat out now as i am out of the Uk.. I build equity but it’s not going to give me cash in my pocket
edit - everything thekingisdead said. Despite what anyone might say it is not cash for nothing and many people lose money on it. We can’t all be van hoogstraten
IF I invest 30 k I return circa 400 quid a month in rent, I appreciate maintenance is a factor, due to what I do for a living I can get stuff done cheap though and a lot I would do myself. I'm intent on banking the proceeds each month as a future savings pot, as I said earlier im not sure what tax we would have to pay as Mrs ws is currently 6k ish under the low earner tax threshold.
What other way could I invest 30k and return 4k a year?
If you can make those numbers stick then it should work, but I'd be looking at some sensitivity analysis on the occupancy / interest rate etc.
do your sums on 9 months occupancy a year not 12. You will get fallow periods and you will get problem tenants.
Just looked again at 5 year interest only fixed, cost is 165/month. This is fag packet calcs i know but I reckon I can still return 4k a year. That's 20k on a 30k 5 year investment without the property ecruing or losing any equity in that period. Again it depends on the tax status and whether it call be apportioned to Mrs ws.
The boiler in my flat went at Christmas because of the odd shape, age and new regs it cost £5k to rebuild the kitchen cabinets re-route ducting plus installation costs.
do not underestimate costs and make sure your emergency pot is prepared. If you can get 20k over 5years that is pretty good though.
That’s 20k on a 30k 5 year investment without the property ecruing or losing any equity in that period. Again it depends on the tax status and whether it call be apportioned to Mrs ws.
Sounds promising. Make sure you add insurance (£15 per month?) and buying and selling costs into the mix.
Stamp duty looks to be £3,600 according to https://www.moneyadviceservice.org.uk/en/tools/house-buying/stamp-duty-calculator
If you can apportion the income tax to Mrs WS then you should clear £15,000 easily, even with 75% occupancy on a £500 per month rental.
Term 5
Cash 30,000
Finance per month 165
Rental Income Per month 375
Stamp Duty 3600
Insurance per year 200
Solicitor's fees 2000
Income 22500
Costs 6600
Net 15900
I work in quite a few let properies some landlords lok after the properties some dont, some tenants dont care some do.
Havent worked out yet how to get nice clean tenants with no hangups or stupid partners, but from experience there are people who are quite skilled at missing rent claims, and then the boiler goes bang and rent is refused till its fixed, or they report you to the council for not doing repairs, to mior stuff, damp and condensation is also a favourite for refusing to pay rent on time.
Then youve got to look at electrical and gas inspections yearly, repairs and insurance, and void property, when a tenant moves out and a new one doesnt jump in straight away, a few months rent missing is a few months payments you have to make.
Avoid Housing benefit claimants they get cash paid direct, and theyre supposed to hand it over to you, check all references, and addresses on google earth to see if previous home exists along with their referees. ensure you have a deposit and place in the government rental deposit scheme.
Take loads of pictures with a newspaper to date stamp pictures.
expect a full redecoration after most lets, along with new carpets or a heavy clean.
Dont wander in all times of the day or night, you need to make an appointment its their home,change the locks after every tennant.
Chase all debts imediately, fix all repairs within a week.
Avoid Housing benefit claimants they get cash paid direct, and theyre supposed to hand it over to you, check all references, and addresses on google earth to see if previous home exists along with their referees. ensure you have a deposit and place in the government rental deposit scheme.
Be careful with that one - one school of thought is that it could be discriminatory
Probably lots of ways around that, eg credit check, low income, low hours, etc, now if the cash was paid direct to landlords like it used to be before landlords created invisible tenants and claimed for them for months or years
Bit of scare mongering going on in this thread! Admittedly if things go wrong it can be costly, time consuming, frustrating and a right royal pita but most lets complete without major upheaval and most tenants are at least half decent.
My advice would be pick your property and area carefully. Think about what kind of tenants you want and what kind of property would appeal to them.
Don't discount kids and pets, especially pets. People with pets really struggle to find rented accommodation and are more likely to stay long term. They are also more likely to be decent tenants as they will struggle to find another place. You can generally ask for larger deposits, insist on the flat being professionally cleaned when they leave, and so on.
Get decent insurance, rent protection, help with legal fees if you have to evict, that sort of thing.
Also, gas checks are yearly but not terribly expensive. The general guidance with electrical testing is to get it done every five years.
Decide on whether you want to let furnished or unfurnished but even if the latter,dress the property in order to let it. If you do opt for furnished, don't leave any non built in electrical items there as they will require PAT tests.
HMOs are much more bother so stay away from those unless you really want to get into being a landlord.
Don't worry about he finance and tax changes.
Put it in a ltd company and the changes don't apply.
Works well if you're new to BTL.
My advice? It’s all great when it’s great.
However, when your tenant sub lets and then buggers off, leaving you with a now trashed flat and owes thousands in rent with a court date weeks away that may or may not see you given possession and at least a 2 week wait after that to evict and start the cleanup process-can you afford to pay the mortgage for maybe 6 months with no rental income? Pay for the renovations and then relet with associated fees etc?
Luckily, we can but it’s been a stressful few months with more to come. Harder for my wife to deal with as she was more emotionally attached to the place (we lived there for 3 years).
I agree that agents are useless and I’m not quite sure what I’ve been paying 8% for; shoddy record keeping, ‘drive by’ inspections etc... She’ll be getting the bump along with the squatters...
Put it in a ltd company and the changes don’t apply.
I thought they they changed the rules on this so you had to have a certain number of properties to be considered a company. Also if you do it this way you can’t claim the personal tax allowance but can discount the full mortgage payment I thought. Plus i guess you have different taxes when you buy and sell...
i know something was done/suggested just can’t remember what now....
I own a flat supposedly worth £125k, we paid £110k for it.
i do not use an agent.
Rent £550pcm. Yes, when I've a reliable long term tenant it washes it's face and generates a couple of quid.
All my profit however has been wiped out by: leaky roof =-£4K share of new roof, dodgy tenant that took months to evict (no rental income) and court case -£3.5k, void periods £1.5k, two full redecorates and one new full carpets -£3k, boiler died -£2.2k. All that has been in 8 years, so that adds up to -£100 a month from any profit...on top of usual insurance and safety checks, landlord registration etc.
The first question to ask before you make any investment is: why are you investing?
Once you understand that then you can make more informed decisions about what you invest in.
Some people would be:
A. happy with a profit of £500 per month with an investment of 30k (20%ROI), maybe to cover a fancy car lease.
B. Others may want more than that, maybe to cover their mortgae or have really had to save hard to get 30k in the first placec so wouldn't be happy<span style="font-size: 0.8rem;">. </span>
<span style="font-size: 0.8rem;">C. while some wouldn't belive you could do that well when the banks are only paying out 3-4% so would be happy with 10%.</span></span>
All depends on why you are investing.
Think about what timescale you are planning for – there is presumably a finite number of potential air b&b customers. At the moment the idea of air b&b is new and the customer base is growing all the time but it can’t forever. What happens when the market local to you gets saturated and you’re competing with people who have lower overheads (ie no mortgage) than you
For most major cities, this is the point that the backlash kicks in and regulations come into place, reducing supply and competition, for those that stick with it. Happened in London, NY, Barcelona, Berlin etc.
For those just jumping in and thinking its an unregulated goldmine, it is for a bit, but they are the ones that will probably get caught out by regulation coming in. Get it properly registered/planning application if needed, right mortgage, insurance, fire safety etc. then it should be more viable longer term.
Find me a bank or deal paying 5 percent a year and I'd go there. I have money available from working very hard and not spunking money on fancy holidays or cars. I could have more by releasing equity in my house. I want to make more money that is the be all and end all of the op and buy to let seems to be a possible vehicle for that to happen. As I said before maintenance is not a big worry to me. As for dodgy tennants I'm sure there's ways around that.
I would say try it and also start a new thread like the Pyrenees one😀. Photos, wonder stories and horrors if there are any.
this way you can get tips along the way and everyone else can learn too.
there are no real ways around dodgy tenants other than find your own - don't trust agents. any illegal action can get you in a lot of trouble
In your position, I'd be buying a house in need of some renovation and then selling it. Put the house in MrsWS' name and get the work done ASAP to a very strict budget. Back on the market quick as. If you did a couple of these a year I guess it would be more profitable than becoming a LL. Your cash isn't tied up as a LL and you don't have to deal with potential troublesome tenants.
Or invest wisely in a stocks & shares ISA or pension.
Find me a bank or deal paying 5 percent a year and I’d go there
If that is really all you want then stick it in stocks and shares. A decent fund will easiiy beat that on average. Put it in an isa wrapper for zero tax, too.
That said there is still plenty of milage in property. If you have the skills and contacts then buy a fixer upper and rent that out.
Personally I have a mix of both. Very happy with both too. I don't think one is especially better than the other.
Will the mortgage be in your wife’s name?
Can’t buy and fix up a property for £30k or on a BtL mortgage, for those suggesting that. If you’ve got a fixed 5 yr rate and find something that will rise in value enough to cover conveyancing/mortgage fees etc, then go for it. If wanting some income and a decent medium term investment talk to someone about a medium risk stocks and shares - ISA as far as possible (annual cap on saving) divs and capital gains then tax free, though you have c£22k cap gains exemption between you anyway. I assume that after your 5 yr mortgage tie in, that you’d be free to sell and go again if there was equity to use?
dodgy tenant that took months to evict (no rental income) and court case -£3.5k, void periods £1.5k, two full redecorates
Wife had that on a BTL, last downturn caused the tenant to have her hours cut and she got into arrears etc. Had to evict her onto the street (literally). Was a very upsetting process for all and cost the wife about £5k all in with lost rent, solicitors, barristers, court fees etc. Probably wiped out the profit from the previous five years. We sold it in the end, as just too much hassle to manage.
I have commercial and residential property that I have let for over 30 years and i'm finding that it has got harder to make anything out of residential. In the past 4/5 years tenants appear to be of a mind to stay 6 months then move on.Not a problem with the property as one tenant was in for 17 years. As others have said, this constant interruption costs you money.
I have also found that rental amounts on residential have been driven down.Lots of small older run down terraces on the market at fairly low buying prices. I am fortunate that the commercials are on long leases with upward only rent reviews.
If I was buying now it would be an "untidy" property meaning I could do most of the work myself.My brother recently did this and let an older terrace straight away. If you can stomach the fees then I would go with an agent. You can just let them do the initial let then deal with the tenant yourself. This means the tenant has your contact details. From past experience I now let the agent deal with the tenant.My properties are around 80 miles away from where I live and it is a bit irritating when a tenant phones and says a lightbulb needs replacing or at midnight he can't sleep because a neighbours dog is barking.
I don't have DSS and pets would depend on the person applying.
I don’t have DSS and pets would depend on the person applying.
Our remaining let house has a tenant with a dog at the moment, the place needed new carpets but when a potential new tenant with a dog came along we just said you can have the dog but we won't change the carpets (we just repainted it all).
Isn't new lending stress tested at 5% and 150% rent cover over income. I thought it was maybe it's a guideline.
I have been a private landlord for over 10 years now, never had a void and just do what the agent tells me re pricing and offering. Current rents over purchase prices are c 7% which for the risk involved i am q happy with. It's a pre invested pension so I ll hang on regardless.
New money in the se is lucky to get 3.5% gross, you can beat this via property investment trusts and not get the leaky roof, partying tenants, stained mattresses....
So if you re in i d stay in,but for new money i cannot make it work.
The OH has a flat.
If you're interested in buying to let then unless you can get a bargain doing up or building the property in the first place then its not worth the hassle.
To paraphrase what people say about divorce. Find some people you couldn't give a shit about and have never met before and offer to decorate their house every couple of years, fix every little problem they have and cover their mortgage when they CBA. Because between the mortgage, tax, fixing shit and agents you won't make any money.
I'm currently living in a building site of a house because I've not go the energy or funds to finish it having just spent 3 weeks redecorating the flat after the tenant left it utterly f***** with kids scribble all over the walls, they broke the front door and the whole place stank of piss. The useless agents are telling them that its 'wear and tear' so they're asking for the bloody deposit back! If I'd not taken time off to do it the quotes from decorators were £3.5k, £1.6k for the door and £900 for the carpets (the latter two were going to have to pay anyway so the deposits still nowhere near enough).
2nd what TJ says re: finding your own tenants.
if you trust your instincts / nose for BS I’d do your own tenant finding. Agents would let to anyone just to get their fee, IMO
im on my 4th set of tenants in 7 years, and have had no major issues / rent arrears. Treat them with respect, carry out repairs quickly and they should be inclined to stay. Also had it empty for probably 4 wks total in that 7 years, which is pretty darn good (and you need it empty occasionally to keep on top of decorating / repairs)
if all you’re after is a return on your 30k, personally I’d be using my ISA for equity investment. Tax free income and infinitely less hassle.
IMO, B2L glory days were built on the back of (seemingly) never ending capital appreciation. No one has a crystal ball, but personally I’m not expecting UK house prices to rise massively over the next 5 years or so.
Just my 2 pennies
if you trust your instincts / nose for BS I’d do your own tenant finding. Agents would let to anyone just to get their fee, IMO
+1
I have 'got it right' for 15 years now - apart from one fool, who I should have listened to my inner nagging doubt about....
I’d say if a house is in good condition to start with you get better tenants as in people who will look after the property. Treat them as people who need a home not cash cows. Pets are ok with an appropriate deposit to cover cost of carpets. Fix all issues ASAP. If you’re from the tools you will save a lot of money. If you get a house with a lawn expect it to be wrecked after first tenant, gravel it for the second. DSS are ok everyone hits the skids sometimes but don’t get too PC a doushbag is a doushbag. It’s a long term investment if your rent clears the mortgage flog the house when it’s paid off and you’ve have enough of work. Lump sum to last so many years. I rent out houses and work for countless landlords and have worked all over the place renting. If you show no interest in the property but just want an easy income your in for a hard time.
Put your hard earned in an S and S ISA instead.
Shares have beaten property over just about every 5/10/20 year period over the last 100 years.
Entry and exit costs are minimal and gains are tax free.
Far less hassle too!
BTL is a mugs game.