Renting out a home?

[KevjustKev]

Right chaps and chappet's, I now have enough money to move the money from a portfolio in to buying a house to rent out.

Now I would like to pick your brains to hear you views.

I can buy out right or with a small loan, £5,000-£7,500, not a mortgage a 2 up-2 down house. I'll give you a bit of background. At the moment I get just under £100 month from said dosh put away, yes that is nice. Yet I think getting £250-300 in my grubby little mits is a better idea. I know that using an agency is the way to go, and most I have looked at charge 8-12% of the rent and should take  I'll try to buy something basic that would need very little in the way of doing stuff, new kitchen, bathroom, lick of paint and carpet. That sort of thing. 

I have a few places where I know I can afford, namely 'up North' can't get anything worth it my way for under £350,000, so £40-50,000 is more in my range.

Your comments, yes, no, I would, wouldn't, pros and cons, anything at all, would be most welcome.

Of course anyone looking for a nice Fender Custom Shop Telecaster, would help nicely!  

[ST1986]

Do some research into additional stamp duty & new taxes being phased in over the next three years

If your in the 40% tax bracket, you rental income will be taxed at 40%

I would stick it with a decent letting agent, mine are charged at 8% just find it easier with the paperwork & deposits etc

Good luck finding one

[vand]

i think you're about 10 years too late to be getting into the BTL game.

[SergioSena]

Honestly I would wait until SHTF thats coming soon and then would buy something much cheaper.

The rental market is going to have a boom when people cant get a mortgage due to high interest rates.

BTW, I'm selling my property in East Neuk, Lundin Links, Scotland  if you fancy a bit of fresh air

 

[SilverTanner]

As someone 'up north', and the only place my funds would have made this possible, I also looked at this as I felt the stock market was extremely fully valued and decided the risk of all the funds in a single property was too great and I wouldn't have time to manage the property myself - I invested using Property Partner instead and spread the funds across multiple properties across the whole country which are currently returning over 4% per year. This is purely for consistent monthly income and as soon as I have completed some of the key coin sets I am working on more funds will go into Property Partner (several years away).

If this is of interest I am happy to use the 'referral' link and share the 'bonus'

[kimchi]

37 minutes ago, SergioSena said:

Honestly I would wait until SHTF thats coming soon and then would buy something much cheaper.

The rental market is going to have a boom when people cant get a mortgage due to high interest rates.

BTW, I'm selling my property in East Neuk, Lundin Links, Scotland  if you fancy a bit of fresh air

 

If you expect SHTF are you buying more property with the proceeds of the sale? I would think other than PMs property is the safest haven possible for such a scenario?

[Augustus1]

with interest so low interest rates and able to be fixed for five years+,  would a BTL mortgage be better?, and hold onto your cash just put a big deposit down say  30% , spend free/ well low cost money rather than yours, BUT this

Do some research into additional stamp duty & new taxes being phased in over the next three years

 

and this

think you're about 10 years too late to be getting into the BTL game.

 

are things worth thinking about

dean.m

[SergioSena]

52 minutes ago, kimchi said:

If you expect SHTF are you buying more property with the proceeds of the sale? I would think other than PMs property is the safest haven possible for such a scenario?

Yes I will once I exchange PM for whatever, most certainly real estate. But will do it exclusively with no mortgages. I do not want to be in contract with any banks or institutions when things go pear shape, as I dont believe interest rates will stay this low for much longer when LIBOR ends.

This is my very humble opinion. Maybe I'm wrong...

[kimchi]

49 minutes ago, SergioSena said:

Yes I will once I exchange PM for whatever, most certainly real estate. But will do it exclusively with no mortgages. I do not want to be in contract with any banks or institutions when things go pear shape, as I dont believe interest rates will stay this low for much longer when LIBOR ends.

This is my very humble opinion. Maybe I'm wrong...

Many thanks for your reply and I was thinking very much along the same lines (no mortgage etc).

[KDave]

5 hours ago, ST1986 said:

If your in the 40% tax bracket, you rental income will be taxed at 40%

Some would say that 60% of something is better than 100% of nothing. If you are a basic rate tax payer then its 80% of something. If people are using a lot of leverage then it is going to hurt a lot by 2020. If you are new to the game you can factor those changes in.

My thoughts on property (don't take my word for it, I have no skin in this game);

Look at the return vs risk to capital in other investments before doing anything silly like putting all of your money into one yield investment (a properdee) and then finding you can't get the yield because you can't get a tenant in, or the boiler breaks and eats 3 years worth of yield, or the tenant stops paying for months and turns into a squatter, eating 5 years worth of yield while you end up going to court - turning your investment into a liability while you pay the council tax (if no mortgage) and the mortgage (if mortgaged). I bet that is not in most peoples 'business'* plan. Safest investment there is! 

One house is a risk. Lots of houses are not so much of a risk. If one tenant stops paying rent and you have one house, you are screwed (as above). If 1 tenant stops paying rent and you have 5 houses with tenants who do pay, the profit from the ones paying might cover the loss of the one not. I have seen a 'business'* plan where this was the case, but with 7 properties that only needed 4 tenants to pay all of the costs, the other 3 were profit. They were all max leveraged with 25% deposits so lots of pain coming in 2020, but something is better than nothing right? 

Consider using fixed cost leverage but work it out based on 2020 tax arrangement. Factor in the cost of leverage (the interest) into your 'business'* plan. You need 25% deposit - put the minimum amount in and fix leverage cost. In your case this allows you diversify with the rest and not rely soley on the one numpty on housing benefit paying his rent on time. If SHTF and you can't remortgage when your fixed term ends because prices have fallen 50% and interest rates are 15%, you can pay the bank its due with your opportunity money learn from it. 

If you put all of your money into one house, you pay a massive 'opportunity cost' - pay for it and use the banks 'opportunity' instead.

If you put all of your money into one house you are taking a massive punt on one tenant, and another massive punt on house prices. Risk all round for the 'safest investment there is'.

All imo and a bit tounge in cheek sorry.

 

 

 

*(business is the wrong word, a better phrase is 'rent-seeking' plan, or 'emulation of a parasite' plan but lets call it a business for simplicity sake)  

[sixgun]

From my experience of renting it is a long haul. Profits have primarily been on the property appreciation with the rent covering insurances, letting fees if any, capital costs, vacant periods etc etc. There are quite a few etceteras by the time you are done.

i see the GBP took a hit verses the USD. Lowest point this year. There will be pressure on the BoE to lift rates. The housing market is toppy. Prices are set at the margins. That is there is 5 houses selling this month out of 1000 but the value of the 995 not on sale is set by the 5 that are. A property tumble is quite possible and we could see double digit percentage falls. i have lived through a few. When something has looked like a one-way bet it is often likely the tide will start flowing in the other direction.

If i were to be asked if i would be wading into the property market right now i would say i am waiting. 

[zeusss4]

Be wary of the likely tennants in a 40-50k property. It can be very difficult, tiresome and costly. 

 

[KevjustKev]

20 minutes ago, zeusss4 said:

Be wary of the likely tennants in a 40-50k property. It can be very difficult, tiresome and costly. 

 

No worries, if I do do it, it will be through an agency.