Buy to let - Is there still money to be made?

[Ant84]

I'm in a predicament at the moment and I have roughly £25,000 in savings. I'm potentially looking at getting into the BTL market but I'm concerned about whether, with the new tax implications and nightmare tenants still in abundance, the pitfalls outweigh the benefits these days?

There are numerous properties listed in the area at the moment (NW England) for around the £50,000 mark. There's one in particular that I have my eye on and I'd be going in low hoping to purchase for closer to £40,000, spending maybe £5,000-£8,000 improving the property if required and rentals would be somewhere in the region of £450-£475pcm.

There's also a house of identical size in the next street that's been done to a good standard and it's for sale for £90,000, which opens up the possibility of gutting the house, redoing it and walking away with a profit of around £25,000 for two or three months work (even after capital gains tax and paying the early redemption charge).

What's the best strategy to maximise potential earnings? Buy and rent out long term whilst spending as little as possible initially, or getting in and out fast to make sizeable, quick returns?

 

[Bad_Boi]

Me personally I'd invest the £25,000 in cryptocurrency & double your monies in a couple of month..

 

[Kreeeee]

Me personally I'd invest the £25,000 in cryptocurrency & double your monies in a couple of month..

That's a massive risk compared to what the op is proposing.

 

[FurryLemon]

With one BTL...no.

You have someone pay your mortgage, but there is no real monetary profit in it (short term). If you do make any profit, that needs to be set aside for repairs, nonpayments, loss of income etc etc

 

[DarrenM343]

IMO BTL is hardly worth doing now unless buying cash. With potential interest rate rises on the way, reduction in BTL mortgage relief, it makes BTL even less appealing IMO.
BTL mortages aren't cheap especially once the fixed rate ends, void periods, idiot tenants, fixing stuff. Even things like carpets you need to plan on replacing after 5 years. If you have good carpets by year 4 and a tenant moves in wrecks them, forget about using their deposit for that as it won't stand up in court (carpets old).
Buying, doing up and flipping is more appealing these days. Not to be negative but then you're still at the mercy of property fluctuations that short term ownership brings, so if you cant find a bigger mug to buy it from you (and there's no guarantee brits will continue their love affair with paying too much for property) then you may be stuck with it for a while.
I had two BTL's. Sold one Nov last year easily even with a tenant in situ. This year my second place is now empty and it wont sell. The market has been an odd one this year, despite what you may read in the press about hitting an all time high. It's very slow at the moment. THis is an example of the change in the market in < 1 year. You could have course buy your BTL now, I persoanally think it's more of a buyers market at the moment so if you can find someone who doesn't want to wait a while you might be able to get a good discount.

IMO you're lucky to clear 5% profit annually (on rent) at current prices, and that's assuming you're mortgage free on the BTL. Long term should have course get growth but already high prices, who really knows. Each time I talk to my agents they're always talking about investors buying rather than people buying to live in which is worrying.
And if interst rates go to 5%, a hassle free 5% interst on savings sounds more appealing to me than the risk of BTL. IMO for now BTL has had it's day, need good growth in wages and static house prices to improve matters.

 

[dalepearson]

This is something I have looked into recently, I think unless you already have property the boat has been missed on this one if your looking to make short term profit.
If you are in it for the long term 20+ years based on a sale at the end of mortgage it might still be worth considering. However you need to be ready for the difficulty of tenants, and lack of them too.

 

[tom_nieto]

We haven't jumped into another BTL, it's a huge hassle and with the new tax laws the benefit of just rental income is negligible. The gains are from capital growth in the property, but this isn't exactly an instant process. Flipping a single house is a better way to get a quick return, but you aren't guaranteed to make cash and need to be pretty savvy. If you have a whole lot of BTL flats then you might be doing better. Have you considered buying two cheaper flats?

Make sure you do your sums twice before doing anything!

 

[edscdk]

the government have changed BTL so its a rich mans game, they are phasing out tax relief on interest... so unless you can buy outright it does not look very attractive... and don't forget the extra stamp duty

 

[x-st]

and don't forget the extra stamp duty

And agent fees, and insurance and maintainance (inside and out) and periods where there are no tenants. Unless you're buying outright in a location near to you with good demand it's definitely a risk.

 

[Russinating]

As everyone has alluded to, it depends what you want from it. Short-term the consensus is pretty much a no, but personally I'm looking at entering the BTL market with my business partner for a partial pension pot so as long as the rent covers the mortgage (which it has to by 125% to even be considered by most lenders) then we're simply interested in both the ongoing rent post-mortgage (25 years) or the capital gain having had a repayment mortgage. The rates are even higher for Limited Company mortgages but it allows us to transfer any profits/capital gains via dividends to our partners, or in the future our children, avoiding paying higher rate tax ourselves.

We're also lucky in that the market in Bristol is still buoyant and definitely not skewed for buyer's. We offered on a property that was on the market for £160,000 with a tenant in-situ, our final offer was £170,000 and it went to a cash buyer. Every month or so it seems apartments are going up by 5%. I know an apartment sold for £153,000 a few weeks ago as I was in direct contact with the seller and an identical property in the same building is already on for £160,000.

 

[Martynt74]

One thing that's had me thinking. Wonder if someone could answer.

If I own a house and then buy a BTL incurring the increased stamp duty.

What happens when I then want to move main residence? Is it classed at the basic stamp duty rate or again at the higher rate because I own something else.

 

[martin363]

Basic if it is your primary residence.

People 'flip' residences to avoid stamp duty, but they are tightening up on that

 

[Rifte]

I have a small portfolio in the UK, all with varying degrees of equity, but all on a capital repayment BTL mortgage.

Do I make any 'cash' from it? In short ....no. As others have eluded to once I have taken into account tax (which is only going to get worse), repairs, agency costs, the mortgages and various other legal obligations etc from a cash perspective it actually costs me over the year to keep them all going.

So why keep them on if they dont pay for themselves?

I have been a landlord for about 8 years now and taking into account what it has cost me so far, conservative property valuations, CGT and other associated and estimated fees with a sale, if I decide to sell it all now I would probably be in profit to the tune of about 500k.

Obviously this is all theoretical and I am subject to market fluctuations, but when I became a landlord it was for the longhaul. Before I retire they will all be paid off and I would obtain a very nice monthly income from them to prop up my pension.

Is it a headache and a worry? Yes, and it doesnt help living 5000 miles away and leaving my largest assets under the control of an agency.

Would I ever consider selling up? Only if I had to or the basic mathematics dont add up to make it economically viable.

This illusion that some people have of landlords living on a boat somewhere in the Mediterranean is only the truth for a small amount of landlords IMO, and those have a huge portfolio of properties with little to no mortgage.

 

[Skillmister]

One thing that's had me thinking. Wonder if someone could answer.

If I own a house and then buy a BTL incurring the increased stamp duty.

What happens when I then want to move main residence? Is it classed at the basic stamp duty rate or again at the higher rate because I own something else.

You can have as many BTLs as you want and still move main residences without incurring the higher rate, so long as you sell the old main and buy a new one.

 

[M3G4UK]

No. Don't BTL. Too many cowboy landlords trying to make a quick buck return on their "investments".

Property should not be a money spinner.

 

[psd99]

long term yes, short term no.

best investment outside of kids, but damn expensive. Tories are doing everything they can to prevent working class people from being BTL landlords but absolutely welcome foreign investments with open arms!
Rich man's game now no doubt.

 

[Rifte]

No. Don't BTL. Too many cowboy landlords trying to make a quick buck return on their "investments".

Property should not be a money spinner.

Dont hate the player, hate the game.