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Old 14th Mar 2012, 14:30   #1
Andr3w
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Is it worth buying a flat to rent out?

The situation as it stands for me is that I've saved up a bit of money and not really sure what to do with it apart from leave it in a savings account/ISA. A lot of people keep saying to invest it into property.

I've been looking at doing this for a while but it wasn't until recently I've properly looked into it.

I've found a lovely looking 1 bedroom flat/messanine in an old mill that has just been converted, it's not big by any means but well laid out and very well finished. It's overlooking a river, is a 5 minute walk from a little town centre and about 100m from a railway station that is a direct line for stations in west Yorkshire. About 15/20min max to the centre of Leeds.

I'm going to see a mortgage advisor on Friday, however from doing the odd online calculation it looks like I'd have about a 20% deposit on the flat and then the mortgage would be around £220-£270 a month.

Another plus side for me is if I decide to come out of the Air Force in 4 years then I will have somewhere to live! Unlike now where I either have a barrack block or my parents house .

What would you do in my position? Do you feel with the current market that properties are a sound investment for the future?

I'm going to try view it again and discuss it more with the agency.

Last edited by Andr3w; 14th Mar 2012 at 14:38.
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Old 14th Mar 2012, 14:34   #2
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The market is likely to go up a bit in years to come, but I don't think prices will go up by much in most areas.
The best idea would be to buy somewhere that wasn't in good nick, and do it up. You may make a few % on an already nice property, with the developer of that property making a decent profit. But if you did the work yourself you'd likely make a healthier profit.

There's no point in buying a property to rent out if the rent covers the mortgage and doesn't give you a return. By the time fees, repairs, and other expenses are factored in then you'll make a loss. I can't see a 1 bed flat, in Leeds costing much more than 300pm to rent.

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Old 14th Mar 2012, 14:42   #3
Andr3w
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It's quite a sought after little town due to the railway station and it's proximity to the motorways. Location location location! Other 1 beds in the same complex are up for around £425-£475? This would be at the higher end of that.

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Old 14th Mar 2012, 15:14   #4
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As Ahleckz has already mentioned. I would defiantly rent it out. I went to a auction yesterday, had my eye on two properties (I didnít win ) and there were some great bargains about, all over the country.
Buy something cheap, spend some money on it, get it up to a good standard and then rent it. Remember you want to try do as much as you can. I know that is not always possible but at the end of the day the more people you get to work on it the more it will eat into your profit. I just finished a place I bought last November got it at a great price(not auction) and ready to sell in a month or so.

Can link you some sites if you want mate?

Auctions do have some rules in place i.e. deposits, completions dates etc so you have to be careful.
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Old 14th Mar 2012, 15:18   #5
Andr3w
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All links would be appreciated. If you were to rent what type of yield do you aim for? A rough yield for the one I'm looking at is around 7-8%. Most websites say aim for at least 5%. 7-8% seems quite good to me.

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Old 14th Mar 2012, 15:29   #6
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I can't see a 1 bed flat, in Leeds costing much more than 300pm to rent.

Really? Man I have to move to Leeds.
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Old 14th Mar 2012, 15:31   #7
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All links would be appreciated. If you were to rent what type of yield do you aim for? A rough yield for the one I'm looking at is around 7-8%. Most websites say aim for at least 5%. 7-8% seems quite good to me.
the two big ones.....

http://auctions.savills.co.uk/
http://www.barnardmarcusauctions.co.uk/
I know they big down in London, there might be a big player up North??

Again this is based on london figures...
Between 6% and 12%, rental market is good at the moment.
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Old 14th Mar 2012, 15:38   #8
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All great do it, I have one I'm renting out, however BTL mortgages are very hard to get, I've just been turned down for two even with a 50% deposit.

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Old 14th Mar 2012, 15:42   #9
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I wouldn't want to be a landlord personally as there is a lot of responsibility involved and I also think your being a little optimistic with the mortgage as I assume you have looked at residential mortgages where as you would need a Buy to Let mortgage where the interest rates are usually higher but then the advisor your seeing will inform you about that.

You also have to consider all the contingency money you should have (around 6 months worth of rent minimum) for things like boilers breaking down etc. Then you have to worry about getting the right tenants and all the searches involved and that's still no guarantee.

That's a fraction of what you have to do, for more info read this post:

http://forums.moneysavingexpert.com/...2&postcount=12

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Old 14th Mar 2012, 15:54   #10
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Could you afford the hassle if it went wrong? One of my friends lets out a small flat - a new family moved in with positive references checked by the estate agent. One day they just stopped paying rent.

Tennants have so many rights it's taking months to evict them, meanwhile the landlord can't get access to the property and they could be wrecking the fixtures and fittings. Rent seems to be the first bill people stop paying and there's so little you can do about it.

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Old 14th Mar 2012, 15:55   #11
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I wouldn't want to be a landlord personally as there is a lot of responsibility involved and I also think your being a little optimistic with the mortgage as I assume you have looked at residential mortgages where as you would need a Buy to Let mortgage where the interest rates are usually higher but then the advisor your seeing will inform you about that.

You also have to consider all the contingency money you should have (around 6 months worth of rent minimum) for things like boilers breaking down etc. Then you have to worry about getting the right tenants and all the searches involved and that's still no guarantee.

That's a fraction of what you have to do, for more info read this post:

http://forums.moneysavingexpert.com/...2&postcount=12
not only that, but is he able to comfortably cover the mortgage for when he has no tenants at all?

sometimes it can take months to find tenants or new ones when old ones move out.

also buy to let mortgages are extortionate compared to private mortgages.

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Old 14th Mar 2012, 16:02   #12
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Calculate the mortgage based at a min of 6%.
You will have other things like insurance / letting fees.
You will also need to declare it to the tax man

You will also need to be able to cover the mortgage in case you can't let it and also be able to do repairs. So some money in the bank is essential.

If you can get £400 rent and it costs £270 in mortgage it's probably just about worth it.
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Old 14th Mar 2012, 16:09   #13
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The market is likely to go up a bit in years to come, but I don't think prices will go up by much in most areas.
The best idea would be to buy somewhere that wasn't in good nick, and do it up. You may make a few % on an already nice property, with the developer of that property making a decent profit. But if you did the work yourself you'd likely make a healthier profit.

There's no point in buying a property to rent out if the rent covers the mortgage and doesn't give you a return. By the time fees, repairs, and other expenses are factored in then you'll make a loss. I can't see a 1 bed flat, in Leeds costing much more than 300pm to rent.
What

Sorry but If I buy a property for £100k and someone else pays my mortgage for 25 yrs. Then I sell the property that someone else has payed for how can that be bad.

It's like being given £100k for nothing even if the property doesn't increase in value

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Old 14th Mar 2012, 16:11   #14
Andr3w
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All great do it, I have one I'm renting out, however BTL mortgages are very hard to get, I've just been turned down for two even with a 50% deposit.
Luckily one advantage of being in the forces is its much easier to get BTL mortgages for some reason.
Quote:
Originally Posted by Matthew.M View Post
Could you afford the hassle if it went wrong? One of my friends lets out a small flat - a new family moved in with positive references checked by the estate agent. One day they just stopped paying rent.

Tennants have so many rights it's taking months to evict them, meanwhile the landlord can't get access to the property and they could be wrecking the fixtures and fittings. Rent seems to be the first bill people stop paying and there's so little you can do about it.
I could afford the mortgage repayments just fine. However I am aware of the issues that arrive with bad tenants.
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not only that, but is he able to comfortably cover the mortgage for when he has no tenants at all?

sometimes it can take months to find tenants or new ones when old ones move out.

also buy to let mortgages are extortionate compared to private mortgages.
Yes I can afford them comfortably.

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Old 14th Mar 2012, 16:12   #15
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What

Sorry but If I buy a property for £100k and someone else pays my mortgage for 25 yrs. Then I sell the property that someone else has payed for how can that be bad.

It's like being given £100k for nothing even if the property doesn't increase in value
How are you going to pay for repairs/cover the mortage when people aren't there/insurance/fees/etc if you aren't making a profit from the rent?

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Old 14th Mar 2012, 16:17   #16
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I've done it to replace my pension.

Over the last 4 yrs it cost me on avg £1000 per year in lost rent repairs and Ins.

Thats less than £100 per month.

If I was to set up a pention now with virgin at £100 per month that would give me an annual income of £4100 or in todays money £2100.

I'd rather "waste" my money in property

Bear in mind that If he lived in the flat he would have similiar Ins and wear and tear to pay for

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Old 14th Mar 2012, 16:22   #17
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most 1 beds in leeds are around 400pm to 500pm for a regular 1 bed flat, some are furnished some arent. (this is 10mins out of center too)

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Old 14th Mar 2012, 16:56   #18
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Yes agree about all the issues people have mentioned..not paying rent, boiler breaking down, squatters etc.

I still think if you can find yourself a bargain, spend some time doing it up then put it on the market. I canít see you going wrong with renting.
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Old 14th Mar 2012, 17:29   #19
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How are you going to pay for repairs/cover the mortage when people aren't there/insurance/fees/etc if you aren't making a profit from the rent?
lots of people don't aim to make a profit from the rent, so long as the rent covers all the bills, that is perfectly fine. although it is obviously better to aim to make a profit so it's a win win situation, but that usually requires a much larger deposit.

also it doesn't matter if he loses a little bit of money here and there, it's a long term investment, he will reap it all back a hundred times over in the long run.

to the OP, may be better to make it an interest only mortgage, that way you make a profit every month, which you can put into a separate bank account.

i'll give you an example on one of our properties:

loan outstanding £40K (flat was bought 2 decades ago was roughly £50K at the time, it's now worth £150K+, in glasgow city centre), interest only mortgage is only £89 per month, the rent is £500 a month.

it doesn't matter if the mortgage never get's paid off, we make a profit every month and the flat has tripled in value since we have had it.

the trick is if your a first time buyer, do not tell the bank you are letting it out, get it on a private mortgage, interest only.

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Old 14th Mar 2012, 18:42   #20
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the trick is if your a first time buyer, do not tell the bank you are letting it out, get it on a private mortgage, interest only.
Does this actually work/is it legal?

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Old 14th Mar 2012, 18:49   #21
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Does this actually work/is it legal?
Legal NO , done often yes

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Old 14th Mar 2012, 18:55   #22
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lots of people don't aim to make a profit from the rent, so long as the rent covers all the bills, that is perfectly fine. although it is obviously better to aim to make a profit so it's a win win situation, but that usually requires a much larger deposit.

also it doesn't matter if he loses a little bit of money here and there, it's a long term investment, he will reap it all back a hundred times over in the long run.

to the OP, may be better to make it an interest only mortgage, that way you make a profit every month, which you can put into a separate bank account.

i'll give you an example on one of our properties:

loan outstanding £40K (flat was bought 2 decades ago was roughly £50K at the time, it's now worth £150K+, in glasgow city centre), interest only mortgage is only £89 per month, the rent is £500 a month.

it doesn't matter if the mortgage never get's paid off, we make a profit every month and the flat has tripled in value since we have had it.

the trick is if your a first time buyer, do not tell the bank you are letting it out, get it on a private mortgage, interest only.
I was perhaps a tad hasty in my response. You need to make sure that you have the liquidity to cover any costs that come up if you are renting for less or the same as the rent you are getting. You can't just assume you'll get £400pm therefore you can afford a £400pm mortgage.
It'll matter quickly if he can't afford to take that hit!

As for your final point, that's fraud.

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Old 14th Mar 2012, 18:58   #23
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Illegal to get a private mortgage knowing your going to rent it out. But its not illegal If bought it to live in but your circumstances changed and you "forgot" to tell your mortgage provider that your then renting it out.

One is Fraudulant
One is breach of contract

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Old 14th Mar 2012, 20:01   #24
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And if the lender finds out you didn't tell them they can pull the mortgage and ask you to pay all the mortgage back. Oh and plus if you don't tell your lender it invalidates any insurance you have so if your house burns down your stuffed

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Old 14th Mar 2012, 20:41   #25
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Illegal to get a private mortgage knowing your going to rent it out. But its not illegal If bought it to live in but your circumstances changed and you "forgot" to tell your mortgage provider that your then renting it out.

One is Fraudulant
One is breach of contract
??? No it's not. There many different types of mortgage.... Ones for renting are usually harder to get.
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Old 14th Mar 2012, 20:46   #26
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First rule of fight club, if you think it's "lovely" you will make bugger all. Buy something that looks like crap in a good area.
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Old 14th Mar 2012, 22:04   #27
mattyg
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And if the lender finds out you didn't tell them they can pull the mortgage and ask you to pay all the mortgage back. Oh and plus if you don't tell your lender it invalidates any insurance you have so if your house burns down your stuffed

I doubt any lender would ask for the money back. They MAY..IF they find out insist you go onto a BTL

You need to provide evidence of that as I've just checked my insurance policy and it makes NO mention of that.

I guess it'll be one of those no MOT No insurance old wives tales.

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Old 14th Mar 2012, 22:35   #28
Xordium
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HSBC let me rent out my old house for 12 months on the normal mortgage I had with them before they required it moved to a BTL. I only lived there for about 6 months as my main home before doing this.
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Old 14th Mar 2012, 22:54   #29
Sonea Fifer
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Hi there

I don't really have much constructively to add to your thread Andr3w - I'm not a financial expert and I've only owned three properties in my life time. However, I do have two brother in laws both also RAF, one is due to come out in Aug and doesn't have a job to go to (or a home yet) and doesn't know what he wants to do. . . . .

The other one loves his job but is potentially a candidate for redundancy later this year.

My point is I'm sure given their current circumstances if they could go back to the point you're at right now they probably wouldn't hesitate to invest in property with any money saved. Like you've said yourself it's an investment and given the current state of property prices you "should" gain a considerable profit on this investment.

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Old 14th Mar 2012, 23:36   #30
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Sounds great, jump on it now imho.

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