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I need an idiots guide to buy to let as an investment

(7 Posts)
krisskross Thu 06-Oct-16 14:08:49

We have considered this (not very seriously though) for some time.

Can anyone give me an idiots guide to how it works and what we need to make a profit, tax we pay etc? What is the best way to borrow the money?

We have a mortgage on our house, but we only have five years left on it and we have very small loan to value (meaning our mortgage is much smaller than the value of our house).

We have approx 25000 savings so have some deposit.

specialsubject Fri 07-Oct-16 12:41:09

it isn't really something for a quick post on MN, but some starters;

- how much is realistic rent for the property?
- how much would the mortgage payments be?
- then also deduct: tax (which will be on turnover, not profit...), insurances (buildings, contents, malicious damage, legals, rent guarantee, home emergency), maintenance, agents fees, fixes (needs to be immaculate at move in), recarpet every five years, repaint every three and so on.

think very hard if it is worth it, especially if you are higher rate tax payers.

EleanorRigby123 Fri 07-Oct-16 12:53:57

Buy to let as an investment is a complicated financial transaction not to be undertaken lightly.
We are accidental landlords while we work abroad and actually make very little on our rental once agents fees (16%) higher rate tax (40% +) insurance and maintenance are taken into account. Despite employing reputable agents , we also had a set of "professional dodgy tenants" who stopped paying and lived there rent free for seven months while we pursued them through the courts. This is surprisingly common.
If you have a lump sum to invest, I would put it into stocks and shares. Your return may be lower - depending on where you are planning to buy- but your stress level will be too.
We would sell up were it not for the fact that we will be returning to UK before the end of our careers. May be sooner rather than later given all the Brexit uncertainty.

Roystonv Fri 07-Oct-16 12:58:43

You would be an idiot if you did not do thorough research, sorry. Whilst mn's and letting agents etc can help you, you have to understand what you are doing and make informed decisions. Gosh I wish we could charge 16%, 10% in our area for full management!

ThunderbirdsHaveMums Fri 07-Oct-16 16:20:34

I would first get educated. First stop I suggest you do an NLA course and make sure you are up to date around your legal responsibilities as a landlord. Then attend some networking events and join some landlord forums to get an idea of the challenges. Make sure you have enough finance to pay for things when they go wrong. Consider what strategy you want to go for. You may need to apply for licensing, which cost needs to be factored in.You'll need to see an accountant because the government has changed tax allowances and many current landlords will soon be in the position of having to pay for the properties they own rather than have them as their pension fund. I suggest you look 5 years ahead in your calculations around tax, and strength test the numbers against higher mortgage rates, don't rely on capital growth but on cashflow.

krisskross Thu 13-Oct-16 14:43:51

thanks everyone- sorry for my delayed response.

Lots for us to think of- i know i am being naive but some people seem to find it so easy!

specialsubject Thu 13-Oct-16 22:46:47

Guardian journos, mostly.

If all goes well and there is nothing wrong at the house, then not much to do. If house needs fixing, easy.

If something goes wrong with the tenant, you are in for a lot of financial pain. If you get anything wrong with your organisation, you can be stuck with a late payer for months or longer.

And if your tenant starts wrecking the place - there is nothing you can do for months while the legals crawl through.

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