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AIBU?

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Original poster

to think my friend is crazy with this buy to let plan

35 replies

stolenview · 04/06/2015 21:29

She's planning on buying a 3 bed flat in tooting. Renting out to four different people. On an interest only mortgage it will be about 1400 a month and will bills she thinks she will make 1000 profit each month as each room will go for 600 apprently. She's not taken into account void periods, matinance , interest rate rises etc.

I've just nodded and said nothing, but it sounds like a huge gamble with her inheritance money.

Anyone know tooting, will a room go for 600 in a place without a lounge or garden?

OP posts:
Theycallmemellowjello · 04/06/2015 22:00

well, if she's factoring in 1,000 profit each month then she has room to absorb problems such as the one you mention. I don't know tooting but sadly 600 pcm for a room is not unheard of in zone 3.

scarletforya · 04/06/2015 22:07

I've no clue where that is but even I can smell the failure off that plan.

ilovesooty · 04/06/2015 22:08

Does it have a good view?

TurnOverTheTv · 04/06/2015 22:09

My husband pays £450 for a room at the end of the Northern Line, so probably!

londonrach · 04/06/2015 22:13

4 people i take it lounge is being used as a room.

MrsBigginsPieShop · 04/06/2015 22:13

£450 PCM for a room just outside tooting was a steal about six years ago, so £550 to £600 PCM is about right. That's without garden or lounge, did have small en suite though.

londonrach · 04/06/2015 22:14

Spare room example. (Saying nothing about my buy to let feelings). www.spareroom.co.uk/flatshare/london/tooting/4101175

drspouse · 04/06/2015 22:19

If she's getting the mortgage on the basis of the rent, unless the flat is already let like that, she'll need an EA to quote that rent.

MsPerfect · 04/06/2015 22:23

As long as she does all the right legal bits to protect her and the tenants she should be fine.

She can put the rent up each year in line with inflation if she really wants, and in the meantime the property will be increasing in value anyway.

The reason that people are buying buy to lets with their pensions/inheritances is because it's currently one of the most lucrative forms of investments.

ratspeaker · 04/06/2015 22:28

Won't she need an HMO licence?

lordStrange · 04/06/2015 22:29

I think she has a good idea tbh. Even if she broke even for the first couple of years the property is likely to grow ludicrously in value over 20 odd years.

That said, the whole cost of property and rent is utterly bonkers, and a truly shit trap for renters these days.

MrsBigginsPieShop · 04/06/2015 22:33

Depends on the local authority but if over 3 separate renters, she will HMO.

MrsBigginsPieShop · 04/06/2015 22:34

*need

Vycount · 04/06/2015 22:36

This is a House of Multiple Occupancy. She needs to look into that before proceeding further. I didn't think you could get interest-only BTL mortgages any more. If she does not have the right mortgage she will invalidate the landlord's insurance that she will (hopefully) take out.

She needs to research this carefully before proceeding.

Oh, and expect to be completely redecorating, re-carpeting etc an HMO at least every 2 years!

BabyMurloc · 04/06/2015 22:36

I doubt even in London JUST a room goes for £600. That link above would suggest not as that's a good chunk less and offers 3 people sharing a kitchen/bathroom/lounge area with own bedrooms.

Can you imagine 4 strangers sharing a bathroom/kitchen? shudder sounds like my worst nightmare...

Babynamelist · 04/06/2015 22:37

Renting out rooms individually (if she's done the legals and maths properly) will increase her profits for sure. And in an area in high demand too. Doesn't sound crazy to me at all.

MrsBigginsPieShop · 04/06/2015 22:47

Murloc - if only! Zone 1 rooms/tiny studios on roommate websites often upwards of £600. It's the business to be in I think!

PaperdollCartoon · 04/06/2015 22:53

£600 for just a room with no living room in London sounds about right to me, if that includes bills that's a steal but probably not. About 6/7 years ago I rented a room in a flat with 3 stranger and a friend and that was £400 including bills in a shit bit of East London. Will she be including bills cos 4 strangers sorting it out between them is a recipe for disaster?

PinkPearlClutcher · 04/06/2015 22:57

I'm in Surrey and rooms rent for about £650 per month here...is be surprised if it was any less in London!

Though not sure she's looked into the legalities of her mortgage etc

PaperdollCartoon · 04/06/2015 22:59

Oh and Murloc, yes 4 stranger sharing a bathroom and kitchen is a bloody nightmare, but sometimes needs must. Never again though!

CloserToFiftyThanTwenty · 04/06/2015 23:00

Yes, I reckon she will be able to get that in Tooting if the house is decent in other ways (lots of young medics at St George's, for eg)

ActiviaYoghurt · 04/06/2015 23:05

£600 is fairly typical for a room in a house share in london tbh. I don't see the problem with your friends plan? If she has the right insurance etc good luck to her

Original poster
stolenview · 05/06/2015 06:46

Well the problem I see is she could have a works bill for tens of thousands and not be able to pay it, if interest rates go back to normal she's had it. She's planning on spending this profit each month to rent somewhere for herself.

Can't believe q room there would go for that much!

I used to live in Bloomsbury for 850 a month, with a lounge and saved a fortune by walking most places. This was only 5 years ago!

OP posts:
RebootYourEngine · 05/06/2015 07:12

Why doesnt she live in the place & rent out the other 2 rooms. Surely that would be better financially than having to pay two lots of rent/mortgage & two lots of bills.

purpler · 05/06/2015 07:33

Won't she have to pay tax on the income?