...to consider a buy to let

[owlborn]

So, very recently DH and I came into some money. It hasn't made us millionaires, but it has enabled us to become mortgage free an an exceedingly nice house in our mid thirties/early forties and left us some money over.

The amount we have is enough to put down a 50% deposit on a reasonable flat in an OK part of our home town. The property market here is solid but not London. There is a university and a thriving rental market. We think the rent would more than cover the deposit and a bit more from our research.

The idea would be that we would get a buy to let mortgage in my name. The flat would solely be in my name and I would look after it and deal with tenants etc. This would hopefully give me a small amount of income and some security while I am a SAHM (not pregnant yet, but hoping). And in the long run it would provide investment/pension income.

I keep thinking about it but I worry that this isn't an ethical choice. I hear a lot about BTL landlords and landlords in general impacting on the housing market negatively and making it hard for people to find homes. Can one be an ethical landlord? What should I be considering?

(Practical advice also appreciated, even if it's that we don't have enough equity or DH will need to get the mortgage or have his name on it as he has a fairly decent income)

They do? Well TWAT know what she's talking about then.

Can i just point out that quite often it's the mortgage conditions that prevent LL renting to tenants on HB (ours stipulate that we can't).

I'd love to see that challenged in a test case since its a blanket discrimination and a huge contributor to the private lets shortage.

We've been (unplanned) LLs for a year so far - and made a loss! I don't think it's unethical to rent out a property but its not a guaranteed income either!

Itwasmybirthday-Re the income you would get, don't forget that the tax you'll have to pay on the rent money will seriously eat into your profits.

Indeed you do, but you can legitimately offset against your rent any mortgage interest and other expenses incurred in running the property, such as repairs. Thus arriving and a net profit on which you pay tax. But if your a SAHM, you can earn £10600 in profit before you pay any tax. If done right, you should be looking to get about 7.5% yield on your investment, which is a damn sight more than you'd see in a savings account. And that should be achievable on an "ethical" basis, fair rent and looking after the property properly. And of course, if property continues to increase in value, your initial investment is increasing in value.

The downsides are unexpected repairs, bad debts, lousy tenants and any period of unoccupancy. Plus a risk of a drop in property prices.

Please, please will SOMEONE who says BTL is not ethical tell us where those who cannot afford to buy are supposed to live

If the Government banned BTL tomorrow, where would, for example, Students, live henceforth???

BMW6 first of all, nobody is asking for BTL to be banned by the government. More government interference in the market is absolutely the last thing that is needed, but ironically almost assuredly the thing we will get plenty more of, at least until such time as the banks are capital buffered enough to withstand a drop in house prices.

Secondly, there seems to be a common misconception that every BTL LL that leaves the game equals one less house available for people to rent. But the house goes nowhere, it simply becomes available because the LL has "released" it.

Your students would live in the houses that are currently rented by the people who are currently out of the market, either because current house prices represent dreadful value, or because falling house prices - brought about by the removal of government interference and BTL LL - would mean that more people could afford to buy them.

The only thing I would say is look into a 25% deposit and use the other 25% on another house, or other investment.

Sorry, my last paragraph is erroneous. I mean that people are currently out of the market either because they can afford to buy but choose not to because they feel that houses are bad value for money at current prices, or because they cannot afford to buy at current prices.

Either way, remove government interference and allow the market to find its own level, and those people will buy, freeing up houses for rental by the people who can either still not afford to buy, or for whatever reason choose not to.

Also recommend London and Country brokers, BTL's can be taken out with a minimum income requirement (more options and normally better rates) or no minimum income (reduces options slightly higher rates usually).
If wanting to let to multiple students in one property, check out HMO rules and regs in your area, but it is very hard to get mortgage for HMO as a first time landlord.
25% deposit is minimum (hence advise above).
Speak to estate agents to find out which types of property/locations most desirable.
Do research, ask questions and then repeat many more times.

some people would like to buy but cant because prices/deposits/dont allow so they then have to rent,why do they have to rent because so many are BTL and are pushing prices up and then rent follows upwards to

Where do you expect students to live then?

I don't think it's an ethical choice, no. Plus a lot of b-t-l landlords who don't get an agent to manage it for them are really crap LLs who want to make an easy buck but mess about with actual people's lives. I'm not saying you will be but if you are up to your ears in childcare, for example, are you going to be able to sort out everything with regard to your tenants?

Also, it is a very bad idea to rely on property rather than a pension. Relying on property and inheritance are about the worst ideas for your retirement.

I would take yourself off to an independent financial advisor and get some proper expert advice.

My tenants have never really asked for anything, to be honest.

Wondering now if that's unusual!

Many mortgage companies won't lend BTL mortgages if you have tenants with HB. So not just an insurance issue. Also when working out expenses remember the interest rate on BYL mortgage is often a bit higher than normal mortgages.

I'd say it was a bad idea to rely on a pension. I know more than one person that is working well after the age they thought they'd be able to retire after paying into a pension for decades.

So, no realistic ideas on where 17 year olds, students, single bods, etc would live if btl landlords didn't exist!

Job jobbed. Do a load of research and buy/let what works for you, OP.

Happy house hunting

Is that the only way you can argue your point? That we either retain the status quo, or that btl simply ceases to exist?

lol!

We had an excellent professional landlord when we were at uni and we were lovely clean students (6 girls). The landlord insisted on meeting us all before signing the contract and he was very picky about who he let to. The house was well looked after and any issues were resolved very quickly (he had a house building firm so had lots of trades to hand). I think because the house was in a great state of repair, it stayed that way as any damage would be noticed.

I think you can be an ethical landlord by maintaining a nice home to rent out, ensuring all the necessary safety checks are done and by not ripping tenants off (so choosing an estate agent that is also fair!).

I don't think its unethical - people need places to live and rent.

However, as a reluctant landlord, (hard to sell property when moved in with OH), it barely breaks even. I'm a good landlord (I think) in that I haven't fussed about pets, or stuff getting broken that shouldn't have - but just got it mended.

But stuff does get broken and damaged - that's what happens. My tenants don't always pay rent on time - so I have a queasy couple of days till they do. I'm probably a bit soft because I'm a reluctant landlord and don't really view it as a business.

When the current tenants go I'm going to sell and put the money into investments.

I'm really lucky to be in the position I'm in of a house to live in and a house to rent out. But it is hard work at times.

I don't see it as unethical. If the government continues to allow council tenants to buy their property it will eventually deplete the stock to the point where private rental is the only feasible option, no?

I was a landlord in the US and it was a huge hassle. I would be very picky about who you rent your property to. I'd always go for a smaller property, like a one bed flat with no garden. It means less people to deal with, easier to maintain etc.

Out of curiosity, why do the banks put a clause prohibiting renting to those on HB? Are they more likely to cause damage? Not pay?

It always shocks me how much power landlords have to discriminate in the UK. If you have the money and the credit score they can't not rent to you in the US. The landlord would get hit with a discrimination suit before they could blink. Those on HB are actually considered a good bet in the US (or at least the state I was in!) because the landlord can be assured of getting the rent.

Statistically I think yes to both, which isn't to say everyone on HB will cause damage or not pay of course.

MyCat - you don't sound like you have good tenants.

As yet another reluctant landlord, I would echo the reservations previous posts have raised about it being a good source of income, especially when set against the hassle of managing the tenants yourself.

The main financial benefit would be the increase in the value of the property, but that would be subject to capital gains tax when you sell it.

After 20 years we have found a way to make our flat work for us, but I would never recommend btl as an easy way of making money.

Sometimes, you just have to find the right tenants.

I had a friend who's brother, wife and young son needed somewhere to live. They both worked in low paid jobs and didn't have enough for the deposit.

I let them move in with no deposit or similar - just trusted them. They've always paid on time, nothing has been broken and all has been well. The only thing I've replaced is a fridge and some flooring and that's in 3 years.

The other property is managed through a letting agency and never had any issues with that either.

I could be unusual.

blue, I was responding to the previous posters who have been pretty unequivocal in their condemnation of btl landlords. Your previous post may have meant something different, but I wasn't responding to it.

lol, indeed!

This unethical stuff is utter nonsense. Its in the same category of nonsense as some of the other nonsense I've read on here, such as advising people to invest in bitcoins traded on the dark web in areas including drugs, because soft drugs will soon be made legal anyway.

OP - university town, 50% deposit = good investment.

I must be doubly unethical, as I not only have had a btl but currently rent from a btl landlord (I had to move for work). Do some posters on mumsnet not have to consider what to do if their jobs relocate them, or if they get a new job or something? What on earth do you think people who have to move for work do? Rent from social housing associations or check out that their landlords have purchased for cash before renting from them?

Meanwhile, in the real world, life goes on.

I didn't think you were. I was responding to your comment:

So, no realistic ideas on where 17 year olds, students, single bods, etc would live if btl landlords didn't exist!

And yes, lol!

I think we have our wires crossed, blue.

That comment was a follow up to my previous post... aimed at the daft comments that every btl rips a home out of the hands of someone who wants to buy their own home.

I did ask a simple question, and no one directly responded, some simply continued to state, as though it is an universal truth, that btl is unethical....

Others have also asked a similar question... if btl did not exist, if we all acted as ethically as some are demanding, and nobody owned a property they let out, where would 17 year olds leaving home, students, people still creating a life/career, all those not ready to settle down, those who have no saved a deposit, etc etc etc live?

Where?