Privately renting/buying a buy to let?

[greenknitting]

My partner and I (with our dc) are privately renting in a city we couldn't afford to buy in. We will shortly inherit some money which won't be anywhere near enough to buy a property in our city, but we desperately don't want to leave. So we're thinking of using the money to buy a place in a small town that we like on the coast about an hour away, and letting it out. And maybe one day even live in, but definitely not for some years.

I'm bloody naive about such matters- can anyone flag up any pitfalls with a plan like this? E.g. If you're suddenly out of work, does having income from a buy to let disqualify you from any benefits etc? Or any downsides at all that we may not have thought of?

[MrsOverTheRoad]

You need to factor in the times when it's not let...how would you pay the mortgage without any rental income for instance.

Then, if things went wrong such as the boiler broke down...could you afford to replace it?

Some tenants are destructive...and the costs of repairs can break amateur landlords.

I believe that if you needed to claim benefits to live in the case of being unemployed, any property you own is taken into consideration.

They won't pay benefits whilst you sit on an asset.

[MrsOverTheRoad]

Are there no part buy schemes in your current city?

[greenknitting]

Thanks MrsOver the road, there are part-buy schemes but limited and still very expensive (we're in London), but there's a possibility that we could buy a small place outright out on the Kent coast somewhere when the inheritance comes through. But even putting it towards somewhere in London I still don't think we could buy! Dilemma.

[QuiteUnfitBit]

What are your goals? Is it to invest the money so that when you eventually move out of London, you can buy a house? Do you have a timescale for this? Or are you looking to use the rent as an income?

As MrsOver says, BTLs involve some work. Even with a letting agent, the legal responsibility falls to the owner. Then there's the cost of repairs, particularly if you can't deal with them yourself, but rely on tradespeople.

Then there's the economy. Now is maybe not the time to go into BTLs, although as you don't own a home, you won't be liable for the additional stamp duty.

If you invest the money in a BTL, when you eventually come to sell, you will have to pay capital gains tax.

What about buying a holiday home, so you can go down at weekends, and rent it out at other times? (This is probably a terrible idea, but I just thought I'd add it here )

[MrsOverTheRoad]

I'd be tempted to buy a static caravan! I love them though...bit of 1970s living! :D

Is moving out of London totally not happening?

I would move I have to say. Owning your own home is very important if you can.

Otherwise, maybe you could look into buying some land? Get some advice on that perhaps. Land can make a great investment.

[ladybirdsarelovely33]

The most important thing when buying is location if you want to see capital appreciation. May be buy a small flat in your city if you can afford it and let that out. You can keep an eye on it and eventually sell it to buy a place you can live in a bit further out. Bear in mind capital gains tax if you haven't lived in the flat though.

[ladybirdsarelovely33]

Invest in property though for sure.

[Sunnyshores]

From a ll - Even assuming everything goes well, the time and sometimes upfront costs involved in owning a BTL are huge. You are at the end of the day are responsible for everything.

And then....however carful you are, there will be times when it doesnt go well. Huge repairs bills, bad tenant causes damage, bad tenant doesnt pay rent, eviction costs, bad Agent who messes things up.

And then... theres the current market. House prices arent stable, mortgage rates will go up, LLs are being targetted by Govt with more and more legislation (some quite rightly, but none the less), more taxes.

If you are prepared to work hard on learning about BTLs then it could work for you. But if you have no time and plan on leaving it all to an agent, then I wouldnt take the risk.

[Ttbb]

You'd be better off investing the money. There will be no upkeep to pay and you will end up with more money in the end if you do it properly. Property is an asset, not an investment.

[greenknitting]

Thanks all, I was out all day unexpectedly sorry for disappearing!
Quiteunfit - when you say about buying a holiday home that we could stay and also let out (as holiday home) - are there different rules attached to that compared to buy-to-let? I assumed if you let it out as a holiday home it was essential buy-to-let?
in terms of goals - good question - basically we're not young and I worry about my child's (now a teenager) future as he has a disability, not severe but I'm not sure how independent he will be. I feel property is important for future security so that he/we have something to either live in or sell and buy somewhere else. The staying in London for now at least is pretty important to us all for reasons too complicated and exposing to go into, but it has in part to do with much needed support networks.

[QuiteUnfitBit]

Sorry, I don't know anything about holiday lets. I'm not sure they make money, though. I was just thinking that you might get some pleasure out of your inheritance.

Re so that he/we have something to either live in or sell and buy somewhere else If you do end up selling and buying somewhere else, then bear in mind that buying and selling is quite expensive, plus the capital gains tax. It would be much more cost effective to buy somewhere you end up living in.

[greenknitting]

Thanks quiteunfit, yes it's a very good point about enjoying it!

[repetitionrepetition]

i might be wrong but i recall that to get a BTL mortgage as a FTB is nigh on impossible

[Sunnyshores]

Holiday Lets do have completely different mortgage, legal, tax, letting rules. There is a limit on how much you can use them (or at least a minimum that they have to be available for letting)

Generally, they are more hands. You need to completely furnish them and this tends to need to be fairly high end and kept immaculate. Thus profits tend to be less, but tax breaks are better. As I say thats all generally, depends on your individual status and the property.

[ChuckysLoveChild]

Think you have to be a property owner to get a btl mortgage

[greenknitting]

That's interesting sunnyshores, it sounds very much a case of swings and roundabouts. Hmmm all v interesting food for thought. Thanks!

[specialsubject]

Single property landlording is not for anyone without good cash reserves and very solid insurance.

If the property will be in Scotland I'd say ' forget it' due to the new laws. Welsh landlords and some English ones need to register and go on a training course.

[TeeBee]

Would you be buying the property out-right, or have a mortgage? I ask because you will pay more for a BTL mortgage. But whatever property you own will be taken into account with regards to your benefits.

[greenknitting]

Teenee, I'm not sure. Ideally but I guess that depends where we buy. So difficult to know what to do...

[specialsubject]

Btl with a mortgage has been questionable for a while - do the sums and see if it is really worth it. And factor in the risk.