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

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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?

Ethics and costs aside, with four people renting, there's likely to be a lot of turnover and probable voids, so I'd guess the plan is a lot closer to break even than the £1k profit she's hoping for.

£600 pcm for a room in Tooting? Sounds expensive. I'm in North Central London and you could find a studio for that and probably a one bed for another £150 on top. That would be for Holloway / Finsbury Park (ie a not so nice part of N central)

Does she know with a BTL mortgage she will have to pay a very large deposit? Does she know she'll have to pay income tax on the rent? Landlord insurance? Building insurance?

Well she has a 25% deposit. IMO I don't think that's large. No idea if she will actually get the mortgage (she's been turned down for credit cards and can't get the pre pay metres removed from her place). But last year she was able to buy a buy to let, but this is let to someone on housing benefit - she has no problem idea if her mortgage allows this.

She says she can put the income through a company and only pay 20% tax and buildings insurance is included with the leasehold.

Landlord's insurance e.g. for damage, liability won't be included, nor for contents (she'll probably include a fridge, washer etc even if unfurnished).
25% deposit is really low for a BTL.

Price didn't seem redic, and I'm sure it will be a good investment in the long run but:
HMO license
Insurance
Tax
Agency fees to deal with initial contract
Savings to cover void periods, new boiler, re carpet, other unexpected maintain r expenses, new dishwasher etc

In my view, she would have a much better type of tenant if she rented the flat out as one property with 3 bedrooms and had a kitchen and lounge. Three people with a social space are much more likely to stay longer and treat the flat less like a doss house.

Those room only set ups are generally quite transient and its a pain in the neck finding decent new tenants and there is a financial cost to every change of tenant.

From your updates she sounds like she is going to be one of those shit landlords that everyone on here complains about :-( people who don't want to do it properly give every other landlord a bad name.

BTL with an interest-only mortgage. There is no profit in that deal until she's repaid the mortgage. Does she realise that she's going to have to re-pay the full mortgage amount at the end of the term?

I'll say again - this will need to be registered as a House of Multiple Occupancy. If she doesn't do that right she's breaking the law and in for a world of pain.

Sounds as if she's pretty clueless to me.

Yes she says house prices in london double every 10 years so repaying interest only will be easy apparently.

Apparently no agency fees as she will be posting for free on gumtree. Sounds like a load of pain and will constantly be looking for new people to move Into it as people don't stay in random homes long or treat them well.