Buying a flat to rent it out - WWYD

[Lagirl20]

DH and I have £100,000 set aside for house deposit. Both late 30s, living in London. About to move out of London to a different country with in the next year. Plan is to rent for a year in new country, then buy a property, use £100k as a deposit.

however we’ve been in London years and it’s annoyed me that we didn’t buy a flat here years ago. I am wondering if it would make sense to split the deposit, and spend £50K of it on a flat here, and 50k on property abroad? My thinking is that we won’t be buying abroad for at least 2.5 years more, and we could get started on a mortgage herein London and then rent it out while we move abroad.

what would you do?

I’d see a financial advisor and work out what you can afford to buy in each place with a £50k deposit and what returns you’d get on that in rent. You’ll also need to factor in agency fees for the rental and the tax implications and how having a buy to let mortgage would work if you lived overseas.

Thanks, yes I think we’ll see a financial advisor soon for help. Any way to choose a reputable one, is there a database or something?

50k won't work in London.

If you don't already own, you can't usually get a BTL mortgage.

The LTV on a BTL is usually higher.

All sorts of other problems with this as well.

You could even find yourself liable for tax in two countries, depending on where you move.

If it’s a buy to let, you’ll need a minimum of 25% deposit, not sure £50k will cut it in London. Also, rates are so high at the moment, not sure once you’ve paid tax on the rental income it would be worth it.

50k won't go far and your costs to set it up, agency fees, maintenance and income tax will probably make it unviable. Getting a mortgage as a non resident could also prove problematic.

what about switching to a buy to let mortgage- would I still need to fulfil the 25% deposit need in this case? I guess it won’t work

On the other hand, having the whole 100k for the property deposit abroad will mean we’ll have very cheap monthly repayments. Just can’t help but feel like I’ve missed out on owning London property

I get why you feel like that, but the ever upwards property market with guaranteed returns is a thing of the past, I think. Especially with flats. There is a lot of faff with renting a property out. I would focus on the property abroad and enjoy life with low repayments.

As a landlord I would say don’t do it.
You will likely be in a very vulnerable position where the rent won’t be significantly above the mortgage, and any voids or non paying tenants could cause major issues. If you will be in another country you will need full letting agent services, which can be expensive in terms of regular fees and repair costs.