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Is it worth buying a flat to rent out?

Discussion in 'General Discussion' started by Andr3w, Mar 14, 2012.

  1. Andr3w

    Capodecina

    Joined: Oct 6, 2004

    Posts: 18,814

    Location: England

    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 :o.

    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: Mar 14, 2012
  2. Ahleckz

    Capodecina

    Joined: Nov 7, 2009

    Posts: 16,770

    Location: Glasgow

    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.
     
  3. Andr3w

    Capodecina

    Joined: Oct 6, 2004

    Posts: 18,814

    Location: England

    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.
     
    Last edited: Mar 14, 2012
  4. Vuvuzela

    Wise Guy

    Joined: Sep 16, 2010

    Posts: 2,454

    Location: Petworth

    As Ahleckz has already mentioned. I would defiantly rent it out. I went to a auction yesterday, had my eye on two properties (I didn’t 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.
     
  5. Andr3w

    Capodecina

    Joined: Oct 6, 2004

    Posts: 18,814

    Location: England

    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.
     
  6. timebomb26

    Wise Guy

    Joined: Feb 26, 2012

    Posts: 1,416

    Location: Sapporo


    Really? Man I have to move to Leeds.
     
  7. Vuvuzela

    Wise Guy

    Joined: Sep 16, 2010

    Posts: 2,454

    Location: Petworth

    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.
     
  8. Maccapacca

    Don

    Joined: Apr 13, 2010

    Posts: 15,160

    Location: Sunny Sussex

    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.
     
  9. AFK_Matrix

    Wise Guy

    Joined: Dec 17, 2004

    Posts: 2,486

    Location: Crawley, WEST SUSSEX

    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/showpost.php?p=41160642&postcount=12
     
  10. Matthew.M

    Mobster

    Joined: Oct 18, 2002

    Posts: 3,014

    Location: Birmingham

    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.
     
  11. Psycho Sonny

    Capodecina

    Joined: Jun 21, 2006

    Posts: 22,579

    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.
     
  12. Showboat

    Wise Guy

    Joined: Sep 11, 2009

    Posts: 1,880

    Location: UK

    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.
     
  13. mattyg

    Soldato

    Joined: Jun 17, 2007

    Posts: 5,526

    What:eek:

    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
     
  14. Andr3w

    Capodecina

    Joined: Oct 6, 2004

    Posts: 18,814

    Location: England

    Luckily one advantage of being in the forces is its much easier to get BTL mortgages for some reason.
    I could afford the mortgage repayments just fine. However I am aware of the issues that arrive with bad tenants.
    Yes I can afford them comfortably.
     
  15. Ahleckz

    Capodecina

    Joined: Nov 7, 2009

    Posts: 16,770

    Location: Glasgow

    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?
     
  16. mattyg

    Soldato

    Joined: Jun 17, 2007

    Posts: 5,526

    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
     
  17. Dava

    Gangster

    Joined: Sep 7, 2011

    Posts: 381

    Location: Leeds

    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)
     
  18. Vuvuzela

    Wise Guy

    Joined: Sep 16, 2010

    Posts: 2,454

    Location: Petworth

    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 can’t see you going wrong with renting.
     
  19. Psycho Sonny

    Capodecina

    Joined: Jun 21, 2006

    Posts: 22,579

    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.
     
  20. soundb0y

    Mobster

    Joined: Mar 19, 2009

    Posts: 2,611

    Location: Hereford

    Does this actually work/is it legal?
     


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