thinking about becoming a landlord...(16 Posts)
I'm currently, tentatively, starting the process of buying a buy-to-let. Will be my first attempt at anything like this. So my question is, has anyone any insightful advice as to what I should be asking of agents/vendors/solicitors? Other than the usual "what kind of rental rate could this property achieve?" and "service charges?" I'm at a bit of a loss as to anything else I should be enquiringly about. Any tips greatly appreciated
Tax liability, insurance, agent fees and what is included, inspections, inventory, maintenance, permissions and conditions from mortgage company and any covenant/lease.
Will you have a mortgage on the property, or will you buy outright? If the former, you need to be very aware of how our friend Mr Osborne is moving the goalposts at the start of the next financial year - all the income from the property will be taxed as profit, and it may have a significant impact on your ability to make any money from it.
Take a look at Landlord zone. I really would think twice if I were you. Is the place you want to buy currently rented out?
It's not the cash cow that many believe it is. Particularly with the new tax changes, I would think very carefully about it & seek advice on other options from an IFA. It may well be that other investments are less hassle with equal profit. In fact, many private LL make very little profit (if any) after tax.
The cost is considerable, between stamp duty on purchase, agency costs (wouldn't attempt self-managing as a 1st time LL), LL insurance, maintenance, repairs, annual safety gas/electoral checks, legionella assessment (all a legal requirement for which you are personally responsible), registration (if you are in Scotland), paying common building charges, not to mention void periods.
I would seriously consider other options financially.
Just adding in my 2 pennies... we know it's not an easy way of seeing the money roll in, but Sauvignon what other options are there financially these days? Savings give you zilch interest, shares are risky and if all goes well with them only give returns over a period of years. And not everyone has the entrepreneurial nous to start a business.
I would agree that property can be hard work, and stressful but you should see a return for your investment if your property goes up, and at least tenants should be paying the mortgage plus other costs outlined above.
My advice is to be prepared for the landlord haters!!!
Apart from that - where are you looking to buy? Do your own research on the rental market in that area - go and look at properties like the one you want that are to rent. Look at the rents and how quickly the properties move..
How will you cope with voids between tenants? What about unexpected bills? Can you go there to arrange emergency plumbers etc when something goes wrong or do you need an agent?
We are currently buying our 2nd (first was an accident) but we already have tenants we know and trust lined up who wAnt to stay long term...not sure I'd do it otherwise. And it's only financially viable as I have no other income so it stays in the lower tax band...
It is not risk free (what is?), however I don't think there has ever been a ten year period when property hasn't appreciated in value.
I wouldn't recommend it in unless you are buying in an area where house prices are very low. The tax changes are going to be really problematic for many LLS.
You say you need entrepreneurial spirit to start a business, but this is exactly what BTL is - a business, a profession ie not for amateurs. The tenants you will house deserve, and are legally entitled to better. Get it wrong, you'll lose your business, your home, you could potentially kill someone.
You will work hard, it will be very stressful at times, you will have to pay out maybe thousands of your own money at times and at year end you will have most likely make no money in rent after tax.
Mortgages will only rise, taxes will only get higher. And then with capital gains, there is no guarantee you'd make money in the short or medium term. A previous poster said what 10 year period havent houses gone up in? Id say the last 10 years they havent outside London.
Sorry to be so negative, but this is not the cash cow everyone thinks it is.
wow since 1985, shares have out-performed property by three times. Also, spreading risk in a share portfolio is easy and cheap, property works if you have a good tenant, low voids and buy in the right area, get any of these wrong and you will lose money.
There's a thread in AIBU just now on private renting - makes an interesting read - many LL's saying they barely break even, others running at a loss during & have had to sell at a loss, especially during property crashes/recessions. Have a read at it, OP.
before you even start, do lots of sums. Mortgage costs, real rentals in your area, insurance costs (buildings, contents, malicious damage, legal expenses, rent guarantee, home emergency) agent fees, tax.
think about renovations and ongoing maintenance.
I would think VERY hard about doing this now if you need a mortgage. Many are driven into it by poor savings returns, but you can get 3% on £100k if you are a couple.
Many BtL landlords do not do their sums correctly. They only look at the increase in property price and think they've made a killing. However it is essential you take into consideration the cost of inflation (and yes, it is a significant cost) and the cost of ongoing repairs and maintenance.
indeed. It's no good if the place is going to rise in value but your gain disappears in legal costs and repairs. Worst case, but can happen.
lots of recent law changes so you need to be right up to speed. Agents are unregulated and so you need to realise that the buck stops with you.
carol - a good point well made. I do think that someone with no experience who is thinking about it should probably do something else with their money. It's not easy money by any stretch.
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