Getting into buy to let property business

cm1179 said:
it's not a case of it being an argument, it's the way it is and there is no way around it. when i was at school, i sure as heck didn't see me still living at home until i was 29. i didn't want to rent though as (imo) it wasn't the best use of my money as i wanted a mortgage.

as i've said a few posts before, yes, house prices have risen but interest rates are different. the rates through the 80's and 90's were ridiculous at times.
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But with rents costing the same as a mortgage there's no saving to be made any more by renting.

One of the biggest issues at the moment is that there is such a massive demand for housing, supply can't sensibly match it. I want a cheap house like thousands of others but there aren't enough, and BTL investors seem to get first pickings with them because it is their business and of course they know what they are up to, where the best buys are to be had.

"It's just the way it is, theres no way around it" - of course there is, same is true of most things. It's finding the way to achieve it, raising support and making people listen that are the hard parts.
 
Interesting thread. Something myself and my parents are starting to get into this year. One of the positives of living in Stoke is the house prices. Its fantastic.

My first house, a 10 year old, 3 bed semi with off road parking for 2 vehicles cost £100,000 a couple of years ago.

I can go and buy a 2 bed terraced house in birches head (average area around here, one of the nicer terraced housing areas anyway), it has a well respected primary school, walking distance to city centre... For £60,000.

That semi will yield a return of £375 (absolute worst case)up to £430PM.

The beauty is, 25% deposit is only £15k to get started.

That property would cost me £275pm on a mortgage. Putting a minimum of £100 per month in my pocket. That's an 10% return on investment per year. PLUS the fact that your 15k will actually be worth the total value of the property in 25 years.

That works out that your £15k investment has increased 550% in 25 years if house prices stay the same.

If you want month.y income you can go the interest only route where You'd earn £200 a month.

Obviously the above is all best case, it's unlikely that every month for 25 years you will have tenants, and that you won't need to pay for repairs

Jez, I saw that you said 'we' expect to have a few more by the end of the year. Are you running this as a company? Using buy to let mortgages?

My parents took a terraced house in part exchange for their own, 'valued' at £70k but i think they paid a little more than they should have but it only took me 2 weeks to decorate throughout and by the 3rd weekend we had tennants moving it £430Pm.

Looking into buying at least 2 more this year as a joint effort. But I'd just like to pickle you brain if you don't mind :o

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estebanrey said:
How long does it take to pay a mortgage off normally? Until you've done that you're at a loss surely aren't you?

If I buy a house for £170k and spend 30k doing it up to rent out, I'd have to rent it out at £800pcm for 20 years before I've raked back the initial 200k paid for it.
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:eek: wow.
 
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bloodiedathame said:
But with rents costing the same as a mortgage there's no saving to be made any more by renting.

One of the biggest issues at the moment is that there is such a massive demand for housing, supply can't sensibly match it. I want a cheap house like thousands of others but there aren't enough, and BTL investors seem to get first pickings with them because it is their business and of course they know what they are up to, where the best buys are to be had.

"It's just the way it is, theres no way around it" - of course there is, same is true of most things. It's finding the way to achieve it, raising support and making people listen that are the hard parts.
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well, there is a saving to be made buy buying over renting and it's quite simple. i pay a mortgage for 25 yrs, a renter pays rent for 25 yrs. after 25 yrs, i own my house, after 25 yrs, the renter still needs to pay rent. let's hope they're still working to afford the rent.

i don't want to come across as claiming some higher status because i have mortgage, i know it's hard and understand i am in a privelaged position. my sister has rented for 8 yrs and loves it, it suits her, it wouldn't suit me.

i'm on the ladder now and i don't intend to get off it. as a single person, my 2 bed end terrace suits me very well at a mortgage repayment i can comfortably afford. should the day come i need to get a bigger place, i will cross that bridge when i come to it.

the biggest disadvantage i have, is i am now in a chain. the biggest advantage you have as a first time buyer is having no upward chain and being able to use this as a bargaining chip with your offers. i got my house for £20k less than i first saw it advertised in less than a 6 month period. never forget the negotiating powers you have as a first time buyer.
 
Very good mr tommo. You are definitely on the right track there, and there is no denying that property prices at that level make the idea a lot more accessible :)

What is it that you would like to know?
 
mr tommo said:
:eek: wow.
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And person to do that, are my maths wrong or something?

It maybe OK in Stoke where you can buy a 2 bed semi for 60k but where I live (Oxfordshire) that wouldn't even buy you a one room flat.

At the same time, I somehow doubt the difference in wages is over double here than it is in Stoke (yet the house prices seem to be from your example).

Here's the stats for my current postcode for example,

Summary of Properties for Sale in OX4
Total properties for sale in OX4: 488
Properties for sale in OX4 listed in the last 14 days: 43
Average* price of properties for sale in OX4: £289,352
Median* price: £250,000
Average Time on Market (ToM) in OX4*: 153 days
Median Time on Market (ToM)*: 91 days
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mr tommo said:
That's an 10% return on investment per year. PLUS the fact that your 15k will actually be worth the total value of the property in 25 years.
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This is why I hate property programmes so much. "Ooh look they've bought for 60k, put a lick of paint on it and now it's worth 95k after two weeks. Isn't that marvellous?" Funny how they never show the disappointed first time buyers going home to ring the bank asking if they can borrow 80k instead of 60k because all the houses are going to BTL. Another 20k they have to pay off over 25 years. I still notice no pro-BTL owning up to this behaviour being blatant greed on their behalf.

As you mention, your house won't be occupied all the time, so you're looking at 10% as best case, but figure it being lower. Funnily enough, if you put the mortgage repayments in the bank as savings, you'd still end up with a chunk of cash. For example, NS&I have occasional inflation-linked accounts that pay tax free. ISAs are tax free, meaning the headlines of 4% for a 2 year fixed savings is actually much more given the tax situation. There's always a regular saver available that pays 6%+ for the amounts of your mortgage payment. All you're gambling on is the house being worth more than you've paid for it long term.

Hopefully the prices will tumble, bankrupting all the aggressive buy to letters out there. There, I've said it - at least I'm being honest.
 
cm1179 said:
after 20 yrs and a mortgage of £170k, not only would you have paid your mortgage off with rent recieved, you'd also own the house which has probably atleast doubled in value.
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Well the total in my fantasy figures were 200k as you can't write off the amount needed to furnish the place.

But my only point was about which point you'd start making money (i.e. after break even) which wouldn't start until you've paid all your initial costs off.

The house maybe worth more but in real terms would it be? Sure my parents house went up in real terms but housing can't keep rising at this silly rate and as has been said prices are starting to drop so you can't confidently predict in 15-20 years time the house will be worth a lot more than when you bought it in real terms.
 
Ok here goes :)

1) do you just use high street estate agents/right move when searching for repossessions?
2) BTL mortgages? If so anyone in particular you can recommend?
3) If so, interest only or repayment?
4) you mention you'd let them know you'd buy without surveys? Any particular reason for this?
5) do you use any property management companies? We entered into this rather quickly with it being a part exchange and to save the hassle my parents had the estate agent selling our house to take care of everything and he now takes his monthly cut.
6) if you don't use the above, is it hard work to set up? Obviously the estate agent scared my parents into thinking it was all quite difficult to set up, with credit checks on prospectives tennants etc and legal contracts. I don't particularly want to go down this route so would be interested in hearing you experience in this.
7) do you run it as a company?


Sorry for all the questions but I don't know a single person who does this so I'm taking advantage while I can! Just ignore any questions that you don't want to answer or email if you'd rather to ********(at)gmail.com
 
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estebanrey said:
Well you could just introduce maximum prices, they seem to be able to do similar things in other markets.

Obviously part of revaluing every house in the country would also include re-writing mortgage deals as well.
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lol ok and while we're at it with this whole arbitrary wealth distribution nonsense should the state just seize the assets of multinational corporations etc...

who gets to keep what? how do you decide how to allocate houses? you realise communism has completely failed
 
estebanrey said:
Well the total in my fantasy figures were 200k as you can't write off the amount needed to furnish the place.

But my only point was about which point you'd start making money (i.e. after break even) which wouldn't start until you've paid all your initial costs off.

The house maybe worth more but in real terms would it be? Sure my parents house went up in real terms but housing can't keep rising at this silly rate and as has been said prices are starting to drop so you can't confidently predict in 15-20 years time the house will be worth a lot more than when you bought it in real terms.
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but the rent has paid the mortgage off anyway. you'd be extremely unfortuanate for a house not to be worth substantially more in 20 yrs time than it is now, though this could happen, dilapidation, subsidence, japanese knotweed etc but in reality, you wouldn't let either of these happen.

you don't immediatley make money when you buy a house. you buy a house primarily to live in or take tenants and pay the mortgage or have the mortgage paid through rent. it is a risk and the house may slip into negative equity over the mortgage period but there is a high chance of it being worth more than when you bought it. the mortgage is a constant, you'd pay it anyway, same as rent.

just because a house doubled in value, doesn't mean that's what it would actually sell for but as said, it's likely you'd still make a tidy profit, even after the initial work and maintenance.
 
Jez said:
I will drop you an email.
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Thanks :)

estebanrey said:
Well the total in my fantasy figures were 200k as you can't write off the amount needed to furnish the place.

But my only point was about which point you'd start making money (i.e. after break even) which wouldn't start until you've paid all your initial costs off.

The house maybe worth more but in real terms would it be? Sure my parents house went up in real terms but housing can't keep rising at this silly rate and as has been said prices are starting to drop so you can't confidently predict in 15-20 years time the house will be worth a lot more than when you bought it in real terms.
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What you need to remember though that this isn't a 25 years or nothing thing.

At £800pcm your earning £10k per year. If you want you all your money back say, after 10 years. You've made £96,000 in rent. You sell the house for £200,000. That's all your capital back plus £96,000.
 
estebanrey said:
No problem with people making good for themselves, until it comes at the expense of other people/rest of society.
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anyone making more money than average is doing so at the expense of others - its not necessarily a bad thing. Unless you fancy living in some communist utopia where everything is distributed arbitrarily you'll find that lots of things are finite in quantity and prices reflect, in some part, demand. We've got finite amounts of everything in this world and competition for commodities etc.. is only going to increase over then next few decades.


How can you arbitrarily reduce house prices and mortgages by 50% - pay for it all with magic beans? - just force all the international banks currently operating in the UK's market to take a big hit... essentially a seizure of assets by the state - that won't work out well, would be illegal to start with but supposing some future left wing govt did try it we'd fall out with all our international trade partners, trash the UKs credit rating and economy and make us poorer than the average eastern european state - suddenly your 50% reduction in house prices is meaningless when everyone is earning even less than 50% of what they were before and still can't afford houses.. not to mention not having a banking system left.
 
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mulpsmebeauty said:
This is why I hate property programmes so much. "Ooh look they've bought for 60k, put a lick of paint on it and now it's worth 95k after two weeks. Isn't that marvellous?" Funny how they never show the disappointed first time buyers going home to ring the bank asking if they can borrow 80k instead of 60k because all the houses are going to BTL. Another 20k they have to pay off over 25 years. I still notice no pro-BTL owning up to this behaviour being blatant greed on their behalf.
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whats wrong with that? if there is demand for rental properties in that area then why does the first time buyer have any more right to the property than the guy who's happy to take the risk with his own capital and provide rental accommodation to those who need it

if the buy to let owner is paying too high a price for the property or over leveraging himself then he'll likely get burned

conversely if it was undervalued and in and area with increasing demand for housing then why should the vendor end up selling it below its true value just because the purchasers are first time buyers...
 
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mr tommo said:
Thanks :)



What you need to remember though that this isn't a 25 years or nothing thing.

At £800pcm your earning £10k per year. If you want you all your money back say, after 10 years. You've made £96,000 in rent. You sell the house for £200,000. That's all your capital back plus £96,000.
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Less costs to be fair, which are significant if financing that original 200k :)
 
I don’t think this is going to be as lucrative as you might think. The whole idea of getting rich off buy to let involves high borrowings to accumulate wealth, and right now borrowing is a real pain. As a long term investment it makes sense, you would be looking at about a 6% return, but bear in mind this involves a reasonable amount of work and you can’t just sit around watching your money grow. Imo there are far better investments around.
 
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