buying to let

Discussion in 'Finance, Property, Law' started by airbornereme, Feb 29, 2008.

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  1. evening all, im toying with the idea of buying to rent, just a flat or small house as its my first time :wink: is there anyone who can advise me on the pros and cons, from what iv hurd it sounds like a winner, the rent pays the mortgage and a bit more, they pay the bills, sounds too good to be true. cheers in advance
     
  2. If the rent paid the mortgage everyone would be at it! I have 3 houses let out, one makes money (albeit only £150) the other two lose money BUT i'm in it for the long term. In time, the mortgages will be paid and i'll have a nice income stream! They have all increased in value since i've had them, which is nice too!
    My advice (for what it's worth) is do your homework - buy in the best area you can afford, get a decent letting agent (absolutely key that one) and most importantly buy somewhere you would be happy to live in. If you buy a craphole you won't get tenants. Buy nice and you'll get good tenants who will pay good money.
    Good luck!
     
  3. In theory you are right mate, however there are some things to bear in mind.

    1. Your existing Mortgage will affect how much you can borrow in relation to your buy to let mortgage.

    2. Are you ready to be a landlord - unless you are renting to family or trusted friends you will find tenants can be a real pain in the ARRSE.

    3. Buy to Let looks good in a stable and rising property market - however if the market falls you take the hit in terms of negative equity.

    4. What happens if you cannot rent it out?

    5. Capital gains tax.

    N.B in a rising market Buy to Let looks easy - think very carefully as at the moment things are more risky.

    Hope that helps

    Cheers

    Farmboy
     
  4. Im with Taz. I have a small flat that i rent out and I lose about £30 on payments per month on the whole arrangement before I change a lightbulb. I cant speak for everyone, but for me, it feels more like a weight around my neck than an easy money maker.
     
  5. Cons: the rental market is different to the buying market. A lot of people have found that when their mortgage repayments increased the rental market did not see a growth (in some cases it fell - it's supply and demand) to cover the difference. Also, income from buy-to-let properties (the rent) is taxable as an awful lot of people found out about six months ago when HMRC cracked down and "I didn't realise I had to pay tax on it" didn't cut it.
     
  6. Why would you want to do that when all the indications are that the US, the UK and the Euro economies are heading for the buffers?

    Don't buy any flats in city centres at the moment unless it is at auction and you are certain that you can let the flat. There is blood on the floor at the moment.

    Do the sums carefully and include all the costs (stamp duty, tax, accountants etc) and then look at the effect of a falling asset value when it is mortgaged. Gearing works just as well on the way down as it does on the way up, but the impact is quicker!

    If you are thinking of buying, go to the auctions and look at the clientele. It is nearly all local. The guys with the money are not even bothering to turn up - because property isn't cheap enough yet.

    Litotes
     
  7. roger that, thanks everyone for your advice, its a minefield hey.
    Im researching as much as I can on the net before i get back to UK on my POTL, the 7 Grand FRI theyre offering REME VMs plus my op allowance plus money saved while being away should tally up to easily 16K so iv got a nice deposit. or i could just blow it all on a porsche, decisions decisions!
     
  8. One quick question:

    If you leave your Main Residence and occupy SFA "in the interests of the service", can you take your SFA charges into account for tax purposes if the sum: rental income from MR - (mortgage interest + agency fee + SFA charge) = worse off than if you continued to occupy your main residence?

    This will potentially happen to me - overall, having paid off most of my mortgage, I make a healthy paper profit from renting out my main and only residence whilst in SFA. In reality, this is immediately subsumed by paying a hefty MQ charge, leaving an overall loss.
     
  9. Live your life whilst you can enjoy it, nowt worse than seeing a stunning sports car to see some old dodger in it because you have to be 55 to afford the insurance!!
     
  10. Hi,

    Decide on a couple of geograohical areas that you would like to buy and then search the local media, rightmove and local agents to see what is available. If there are loads of 2 bed flats available then there probably isn't a market for that typ of property.

    If you are buying-to-let, you have to remeber that the property isn't for you to live in, so don't base decisions on personal tatses. Avoid company's that offer guanranteed rents, its normally just your own money that they give you back.

    One of the best markets is in flat share, especially in areas of London that are still affordable. 3/4 bed ex local authority masionettes in place like Clapham or Battersea. Rail links into Waterloo and rents of £1400 + per month.

    Think out of the box, comercial property, land, leisure property and brown field sites are all worth a look. The buy-to-let market in certain areas is so swamped that many properties can lay empty for months.

    But above all else, make sure that in the long term (10-15 years) that not only can you can afford it, but that you are prepared to possibly be subsidising mortgages out of your own pocket for periods of time.


    Don't know how old you are, but if you're in you twenties and approach this corectly, long term you could make some serious returns by the time you leave the army.

    Good Luck Buddy
     
  11. The buy to let bubble has burst mate, I can't fault the idea of buying property, but taking on debt to buy property and paying it off with the rent is very risky in this climate.

    Rent prices are starting to fall below mortgage payments in some places and people have found themselves out of pocket. This is because the buy to let idea has been done to death and many people have trouble getting tennants.
     
  12. No. That is the choice you have made. There is no provision in the tax rules for that.

    Normally, paying down your mortgage is a really effective investment (do ask if you don't understand why) but I can see that, in your situation, it might not be the best thing to do. You should work out the options open to you which might include increasing your mortgage again!

    Litotes
     
  13. You're right, Airborne, mate. That's a nice little sum to have (about a year's net salary for a JNCO?) - but don't blow it on fripperies. Stash it away because it gives you a cushion in case you decide to change your plans in the future.

    Have you paid off all your loans/credit cards etc? Do that now (unless you will be stitched for early repayment charges). Then stash the rest away at the best rate you can get (Northern Rock is offering 6.45% gross pa with a 100% guarantee).

    Those with cash at the end of the coming storm will be in the best position to take advantage of the bargains!

    Alternatively, just give me the lot and I'll look after it all. Honest. :D

    Litotes
     
  14. The arrse has fallen out of the buy to let flat market, you need to wait and see if its just a blip or on a downward spiral. The one area that will be worth investing in is Bristol though as all those folk heading upto abbeywood are looking for places to stay, a lot of service personnel with 600 quid to spend a month looking for a decent flat.
     
  15. I heard that story too.... fifteen years ago..... as Abbey Wood was being built. Just down the road from Abbey Wood is one of the largest post-war housing estates called Sadly Broke, sorry, Bradley Stoke. Reportedly, in the mid to late 90s, it became a byword for negative equity and repossessions. All those MOD staff waving beer tokens were unable to prevent that!

    IIRC, the major employers in that area are Rolls Royce, Airbus, Royal Mail, Cadbury and the Ministry. The first two are being crucified by a falling dollar, RM has its own problems, Cadbury has started shifting its business away from the UK, and DE&S has to cut its staff by 10% year on year for the next 3 years. Hardly an ideal cocktail for rising prices?

    I will note that the traffic problems in the area obviously indicate a thriving population; if I have to visit AW, I start very early!

    Litotes