buy to let - has anyone done this?

[bossykate]

we are lucky enough to have come in to a medium size lump sum. hooray! though far from lottery winnings, it would be enough for a deposit on a flat and i was thinking of buying somewhere to rent out. the SAHM v. WM thread has got me thinking. doing something like this would be the only way i could even think about giving up work unless we move out of london (which we are also thinking about!).

has anyone done this or ever thought about it?

if so, i would really appreciate advice, experiences etc.

thanks in advance.

[Alibubbles]

We (DH and I) exchanged contracts today on our 2nd buy to let. We now have two very nice one bedroom flats, new build, top floor. The first one we bought just two years ago at £90,000, the rent is £750 a month, the flat is now worth £145,000.
The new one we are about to coplete on is £125,000, the rent on this will be £700 per month We have a mortgage on both, put in the company name, as these are our pension fund. (We have lost so much money this year and last in unit trusts) property is the only thing on the up.

When our daughter goes to Uni in two years time we will buy her a house, to share with others, and my son the year after, likewise.

We have had no problems, the flat is totally managed, and it only costs 10% of the rent. They sort out all problems, like boiler, washing machine etc. I'd recommend it, choose your property carefully ie near the station (we are 20mins to London, Herts) and look at the market for a good while before committing yourself. Good luck!

[bossykate]

thanks v. much alibubbles. could i ask percentage wise how much deposit you were able to put down? sorry, v cheeky question we could manage 15% - 20% tops and based on what i have seen of the rents there would be a question mark over whether we could break even based on management fee, tax, landlords insurance etc, as well as the mortgage. did you speak to estate agents in the area beforehand and how helpful were they? i have spoken to some re buying and although they appear confident of ability to rent out, well they would say that wouldn't they?

thanks very much for taking the time to respond.

[Ailsa]

A friend of mine has just bought a flat on a buy to let basis, she had to put down a 20% deposit, she didn't have the full deposit so got a bank loan for that part, and mortgage for the other 80%.

[Alibubbles]

The first one was 15% ( Mortgage Express) .the second 20%.( Legal & General). The mortgage on the first was about £450 a month, it is now just over £300. so the rent of £750 returns a profit. We didn't necessarily intend them to be profit making as long as they are self funding and the property goes up in value, Here in St Albans, there is no doubt it will. We paid £165,00 for our house 5 years ago, it is now worth £500,000+ A two bedroom terrace stater home costs in the region of £165,000. A two bedroom does n't get a lot more rent than a one bed, not enough to justify the extra cost of purchasing.

We would advise, buy new if you can, you tend to get integrated appliances, (a hob, oven , waste disposal and a washer drier with our new one) don't buy a ground floor if a flat, within walking distance of a mainline station - a mile or so, and let it unfurnished. A good quality carpet, like a neutral berber throughout, and plain curtains. Make sure it has a god size bedroom, room enough for a double bed, check for built in cupboard space.

The estate agents so got to know us and now they ring us as soon as something comes on the market, we know what we are looking for. and we would buy any flat in the complex of the first one we bought, unseen, as there is so much demand. Get yourself onto the management committee as well!

We have an extremely good letting agent (10%) totally managed, they vet tenants, collect the rent and guarantee the rent if the tenant defaults. We have a London doctor in our first, and they have a tenant lined up for the next ready to move in on completion day!

Happy to answer any other questions, as we took a long time to get round to doing it, now we aim to buy one a year.

[bossykate]

alibubbles, thanks so much! this is so helpful!

i am not looking for an income stream from the rent, but it must be self funding.

i think getting a good letting agent must be crucial - could i trespass on your good nature a little further and ask how you found yours?

thanks again.

[helenmc]

thanks for all the info - we're saving a deposit for our first- again as our pension (what with having to buy annuiteis and the maxwell scandal nicking the penison funds). We were thinking of 2 bed terraced house in the city centre - close to amenties and station.

[bossykate]

sorry alibubbles a few more questions have occured to me!

since you can only set off mortgage interest against tax, did this affect your choice of mortgage? i.e. did you get interest only?

what about tax? is at normal 23/40% rates and what else can you offset?

does it really make no difference to the marketability and rent if you let unfurnished?

if you are thinking about this as a pension investment, how did this impact the choice of the mortgage term? for example, for our home i assumed i would want to retire at 55 (some hope!) and chose the mortgage term to finish then. would similar considerations apply to an investment property?

thanks so much for the info you have already provided it is really kind of you to take the time

hope i haven't overstepped the mark with this latest onslaught of questions!

thaks again

[robinw]

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[Alibubbles]

Help Bossykate! I'm not really knowlegeable enough to answer all your questions, you need to talk to a financial advisor or your accountant who would be aware of all your personal circumstances and finances. One useful tip I can give you is that the rent must me 130% of your monthly moertgage payment to qualify. eg, mortage £500 a month, rent must be at least £650 a month.

Talk to the letting agent about furnished or not, it depends on the people in the market for the property. The first flat my sister bought, she furnished, but it didn't really make any difference to the rent. You also have to comply with strict regs about fire retardent fabrics etc, nothing more than two years old etc. That's why we chose the option of unfurnished, but we are open to requests from potential tenants. If they wanted bed for instance, we would consider it. We do put in new curtains and carpets and blinds.

The question about ground floor or not, most people renting are young professionals (in our experience) and are out all day. The security aspect is one they consider greatly. The ground floor in a block is often cheaper as well, you get all the people passing your door, so more noise etc. The letting agent always finds first floor easier to let as well. I would be surprised to find older couples renting at these prices, but that's just this area. I can't speak for other areas.

[bossykate]

alibubbles

thanks very much for your reply!

i am an accountant but my specialism is not personal finance, so i know the sort of questions to ask but not the answers unfortunately!

my next step will be to talk to a local letting agent and look at the inland revenue website. mortgage lenders in this market should probably also be able to advise me.

sorry for the "e-interrogation" , i got carried away by the prospect of talking to someone about this who doesn't have an agenda, e.g. estate agent. the tips you have given are extremely useful and thanks very much for taking the time to respond. i really appreciate it.

good luck with the latest acquisition!

[bossykate]

just in case this info may be useful to someone else... i found the answers to my questions very easily by putting "buy to let" into www.google.co.uk.