First off, let me apologise for what is likely to be a very long and boring post. I am after some sensible advice from owners of rental properties, and people in the know about the property market as a whole. If you came here looking for some good ol' GD high jinx, you may find yourself disappointed. Thank you for your interest, but you may be better off heading back to GD and looking for Theoophany's latest posting of ferret gifs 
. I'll be back out to join you in a sec.
For those still here, this is my situation:
I currently live in Surrey, and work where I end up (IT Project work), but a lot of it is London based. My GF works in Kingston. We both like our jobs and where we live, so can see us staying here for the foreseeable future.
The problem is, we cannot afford to buy a house here. Well, we could, but we can't afford to buy the kind of house we can rent. The house we are in at the moment is valued at about £300,000. If we were to buy something like this a mortgage would cost us about £400 more a month than we currently pay in rent. We have some money saved for a deposit, but as we have found ourselves drawn to more expensive areas, the relative value of our deposit savings has dropped, until we are now well below the threashold (about 15% last time I looked) for decent mortgage rates. Neither of us fancy getting a 95% mortgage with shocking rates just to own a house nowhere near as nice as we currently rent. So we have decided to stay renting and keep saving.
But in conversation with a work colleague who owns a few rental properties he suggested we use the money we have to buy something elsewhere, where prices are much cheaper so our deposit savings go much further, and then rent it out. In reality we would be looking at places back where our family are (Wiltshire). It would not be difficult to find a new build flat for around £100,000 in Wiltshire, which would see our deposit savings worth 3x as much relative to buying a house for us in Surrey.
As we would be buying away from where we live we would need to get the property managed. My family have offered to manage it but I'd rather not put the burden on them. My sister has also offered to live in it, but again I want to keep this separate from any family or friends ties, it just complicates things. So we would be looking for a letting agent to manage the property for us. The last 3 places I have lived have all been fully managed and from the zero contact I have had with any of the Landlords it seems like a relatively hassle free method for owners. Obviously the service comes at a price, which lead me here.
So, I'm after 2 areas of advice from those in the know who may have done something similar before.
From those who own rental properties:
- What do I need to look out for regarding mortgages for rental properties. I briefly looked into this in the past and remember them needing much larger deposits to get decent rates. 20-25% springs to mind. With a ~£100,000 property this would be possible for us. Who are currently offering good rental property mortgages? Anyone to avoid? And are there any other costs outside of the usual solicitors fees, etc that we should take into account?
- What should I expect to pay for a property to be managed by a letting agent? Is it usually a %age, or a flat fee? I assume, being letting agents, they will try and charge me for everything they can, so if anyone has any insight into what to expect, and therefore budget for, that would be great.
- What additional costs should I factor in. There will need to be insurance designed for rental properties, and then an allowance for maintenance costs. The plan with buying a new build is to minimise this initially, but you obviously want to be prepared should a boiler blow up or something.
- Anything else I need to factor in?
And for those with knowledge of the property market:
- Should I bother? Our deposit money is currently sitting earning very little interest and we have lost the desire to use it to buy a house for us to live in. The market appears to be climbing, so I assume its best to get a jolly on and not wait about?
- This is not a get rich quick scheme. I've always planned to get a rental property or 2 as a retirement fund. I'm not looking for quick money. If we invest in property now I'm expecting it to pay out in 35 years when I retire, not next summer. But I'm concious that rises in value on a £100,000 flat are going to be far less in £'s terms than rises in the value of a £300,000 house. But I can't afford the latter, and can afford the former. Assuming that after all the fees are deducted the veture at least breaks even in terms of covering the mortgage then is it worth while?
Wow, I typed a lot! Sorry for the epic long post, but I'm after advice. I have lots of snippets of knowledge, but not enough to confidently sit down and crunch the numbers on this to see if its worthwhile.
Many thanks for you help, OcUK!
. I'll be back out to join you in a sec.For those still here, this is my situation:
I currently live in Surrey, and work where I end up (IT Project work), but a lot of it is London based. My GF works in Kingston. We both like our jobs and where we live, so can see us staying here for the foreseeable future.
The problem is, we cannot afford to buy a house here. Well, we could, but we can't afford to buy the kind of house we can rent. The house we are in at the moment is valued at about £300,000. If we were to buy something like this a mortgage would cost us about £400 more a month than we currently pay in rent. We have some money saved for a deposit, but as we have found ourselves drawn to more expensive areas, the relative value of our deposit savings has dropped, until we are now well below the threashold (about 15% last time I looked) for decent mortgage rates. Neither of us fancy getting a 95% mortgage with shocking rates just to own a house nowhere near as nice as we currently rent. So we have decided to stay renting and keep saving.
But in conversation with a work colleague who owns a few rental properties he suggested we use the money we have to buy something elsewhere, where prices are much cheaper so our deposit savings go much further, and then rent it out. In reality we would be looking at places back where our family are (Wiltshire). It would not be difficult to find a new build flat for around £100,000 in Wiltshire, which would see our deposit savings worth 3x as much relative to buying a house for us in Surrey.
As we would be buying away from where we live we would need to get the property managed. My family have offered to manage it but I'd rather not put the burden on them. My sister has also offered to live in it, but again I want to keep this separate from any family or friends ties, it just complicates things. So we would be looking for a letting agent to manage the property for us. The last 3 places I have lived have all been fully managed and from the zero contact I have had with any of the Landlords it seems like a relatively hassle free method for owners. Obviously the service comes at a price, which lead me here.
So, I'm after 2 areas of advice from those in the know who may have done something similar before.
From those who own rental properties:
- What do I need to look out for regarding mortgages for rental properties. I briefly looked into this in the past and remember them needing much larger deposits to get decent rates. 20-25% springs to mind. With a ~£100,000 property this would be possible for us. Who are currently offering good rental property mortgages? Anyone to avoid? And are there any other costs outside of the usual solicitors fees, etc that we should take into account?
- What should I expect to pay for a property to be managed by a letting agent? Is it usually a %age, or a flat fee? I assume, being letting agents, they will try and charge me for everything they can, so if anyone has any insight into what to expect, and therefore budget for, that would be great.
- What additional costs should I factor in. There will need to be insurance designed for rental properties, and then an allowance for maintenance costs. The plan with buying a new build is to minimise this initially, but you obviously want to be prepared should a boiler blow up or something.
- Anything else I need to factor in?
And for those with knowledge of the property market:
- Should I bother? Our deposit money is currently sitting earning very little interest and we have lost the desire to use it to buy a house for us to live in. The market appears to be climbing, so I assume its best to get a jolly on and not wait about?
- This is not a get rich quick scheme. I've always planned to get a rental property or 2 as a retirement fund. I'm not looking for quick money. If we invest in property now I'm expecting it to pay out in 35 years when I retire, not next summer. But I'm concious that rises in value on a £100,000 flat are going to be far less in £'s terms than rises in the value of a £300,000 house. But I can't afford the latter, and can afford the former. Assuming that after all the fees are deducted the veture at least breaks even in terms of covering the mortgage then is it worth while?
Wow, I typed a lot! Sorry for the epic long post, but I'm after advice. I have lots of snippets of knowledge, but not enough to confidently sit down and crunch the numbers on this to see if its worthwhile.
Many thanks for you help, OcUK!
