To think buy to let sounds almost fool proof?

[ProverbialOuthouse]

I accept I might be being naive here but I can't see how buy to let isn't a bit of a money spinner?

I want to buy a second property instead of paying for a pension.

I've found a one bedroomed flat for £45k (I live in a cheap area of the country).

If I put £10k down on it the mortgage would be £35k and would work out at £200 a month. Rental value is £300 a month.

So as far as I can see you're getting the mortgage paid each month plus an extra £100 a month which could be put away for repairs, insurance etc.

In two years you would have nearly £5k paid off the mortgage leaving you with £30k left to pay. So you've basically made £5k in two years. Hold onto it for another two years and you have £10. If you sold it at this point for what you paid for it you get your £10k deposit back plus the £10 that has been paid on the mortgage.

I know it's not massive money but it's still a profit?

What am I missing other than the fact that you could end up with arsehole tenants that don't pay their rent?

Stamp duty = ADS as mentioned above

We looked into buy to let once because we have accommodation provided with my husband's work and wanted to remain on the property ladder. We were told then (a few years ago) that buy to let mortgages are almost all interest only, so you're not really paying off the mortgage anyway. I don't know if that is still the case or whether it is the case in the one you are looking at, but you certainly can't just take out a residential mortgage and let the property out.

This has Bad Idea written all over it. You really think 100 quid will be strictly profit? You've not factored in insurance (on the structure, in case you get tenants who don't pay rent or trash the place), contingency money (to evict tenants who don't pay up, for example), repairs/maintenance fund, funds in case you don't find a tenant/in between tenants, letting agent fees, etc.

There's goes any profit if you're only getting a return of 100 quid a month.

If you put your £10k in a pension it's immediately topped up to £12.5k due to pension tax relief. I'm getting in excess of 15% per year on my investments so that's £1875 in the first year, increasing each year due to compounding. Obviously investments can drop but over the long term they always go up.

My god . I'm a very reluctant landlord absolutely hate it. In the last 5 months I have paid out 2500 for a roof repair, 400 on a new cooker, 2 emergency plumber call outs. I am constantly worrying over what will go wrong next.

OP, just open a SIPP and a stocks and shares ISA. So much less hassle and you're not becoming part of the housing problem to boot.

I have recently, after years of consideration, bought a small flat, partly with some money I had inherited and mostly with a 12 year BTL mortgage. Stamp duty has to be paid on any BTL property, at 3%. A BTL mortgage is already at a higher interest rate plus has higher set up fees. The flooring, maintenance, decorating, initial set up (buying white goods, coat rails, curtains etc) was not cheap, I had to pay for an electrical inspection, survey, landlord insurance, solicitor's fees re purchase, considerable fuel costs for repeated journeys, landlord's certification and a brand new electric shower to be installed. I have to also pay £840 annually for the maintenance charge (heating, cleaning, lighting etc of communal areas and gardening.)

I am very fortunate as a colleague from work has rented it from me. I have bought the flat whilst I could and my children are older teenagers now, so it is short term pain for long term gain. But it is NOT an easy way to make money in the short term. There is too much that can go wrong as other people have said. You have massive obligations to your tenant and life is very unpredictable. If it's part of a long term plan then you may reap the reward in years to come.

😂😂😂😂😂😂😂😂😂😂😂😂😂😂

That is all

OMG don't do it, for all the reasons listed so far. I would not be a landlord if you paid me.

Only the very lucky few who bought properties 30+ years ago are making money from it, and have a lot of equity in the homes.

From everything you have said, you know absolutely nothing about it and are living in a fantasy world when it comes to the dream of buy-to-let.

I know at LEAST 10 people who are reluctant landlords, or who thought buy-to-let would be a great money spinner. Most of them make NOTHING from their 'investment' and are getting deeper and deeper into debt with it.

People used to get 'buy to lets' for the capital appreciatiation (the property was gaining value through house price inflation) , which is generally not now the case, not at the same rate anyway.

As has been mentioned, the fact you're buying a 'cheap' property, in I guess, a less wealthy area, means the tenants you're going to attract aren't going to be able to afford high rents. You need very good references and a good property management company (an additional cost) to do regular checks that the property is being looked after.

Actually that isn't all. Please never be a landlord. There are enough clueless ones already fucking up people's lives.

you need building insurance and tax out of that £100 you also need to pay any repairs in the year since we rented out our old house we've had to get plumbers in to fix showers and replace the washing machine I just desperately want rid of it before the boiler packs in.
It's not a money maker based on the figures you've provided

You will pay tax on addiional income plus capital gains tax when you sell it for starteres.

If something goes wrong you have to sort ASAP. Be that a leaky tap, a problem tenant or a problem letting agent (another cost!)

If you have no tenant you still have to pay mortgage.

Its not easy money as some think and at times can be very stressful for a whole load of reasons not just financial.

Am a LL.

Do some research. You are going to be responsible for putting a roof over someone's head. Are you ready for the actual weight of that responsibility? It may be your property but it will be someone else's home - a distinction that sadly, a lot of LL doesn't seem to be aware of.

In fact, do a lot of research. If the boiler goes pop, you need to replace it. You can't wait and save up for a bit - someone is paying you rent for the property and they need hot water and heating, so you can't leave them hanging on until you feel ready to pay that cost.

There is a helluva lot more to being a LL - a good LL - than just collecting the rent every month. And I would hope you would want to be a good LL and recognise that when someone's home depends on you then you will have moral as well as legal obligations.

On a practical note £100 profit will leave you with very little by the time you have paid:
Your buildings and LL liability insurance every month. Factor in a void month, having to redecorate, an annual boiler service and safety check by a Gas Safe registered plumber, an annual PAT test on portable electrical equipment by a qualified electrician, income tax on the entirety of your rent as you can't deduct mortgage interest. Routine repairs - lights going, burst pipes, taps leaking, oven element packing up - and so on. And that's before you get into the realms of taking on a tenant who falls into arrears and then does a flit owing you months of unpaid rent and as a parting gesture, steals everything that's not nailed down and trashes every room, door, light fixture and window...

Still sound like a "foolproof money spinner"?

You've missed the boat. The "good times" years for BTL have been and gone. If you'd invested 20/30 years ago, you'd be in the money, but now, with tax and stamp duty changes, high house prices, interest rate rises on the horizon, etc., late entrants into the market aren't making anything anymore. A new risk is that sooner or later the UK will have to start building huge numbers of new "affordable" houses, so there'll be more competition and people prefer new, modern housing to older stock - I'm in a university city and we're seeing a glut of ex-student homes coming onto the market as students are now preferring to live in purpose built modern student accommodation rather than live in old terraced housing stock.

Unless you are a seasoned buy to let investor I would opt for pension. Other posters have given you the down sides of buy to let.

With pensions you get tax relief of 20%, more if you are a higher tax rate payer.
If you save through a workplace pension you get employer contributions - more free money!

IMO pensions are less volatile than property market (providing you have a well diversified and managed fund). Pensions can give as well as, if not better returns than average property

Pension can be passed on to dcs
Pension can be taken flexibly from aged 55.
25% can be taken tax free. The rest can be taken in a way to minimise the tax you pay.

Oh and pensions seem to be a lot less hassle than being a landlord!

This is with reference to your other thread.

I have a BTL property which I currently let to my very untidy son and his equally untidy gf. They pay me less than the market rent but that's fine as they are youngish and not very well paid. It's much better than offering to have them here at home because I cannot stand his messy ways.

The property has increased in value to the tune of about 70% over 10 years and we extended the mortgage on our own home to buy it so lower interest rates. So it's worked for us but we live in a nice area in a rental hot spot. Sometimes having a lower end property to rent makes it easier than something high spec.

That said, it's very well maintained and I'm a responsible LL. Do your research well.

at that level of rent you are looking at housing benefit tenants which can be good as they often want long term homes but often mortgage providers won't allow hb tentant as a clause in the mortgage

Also with a low cost property the cost of big repairs like a roof is similar to a more expensive house so the marginal cost is a lot higher and can zap all your profits

Don't be put off by the naysayers on this thread but do do your homework first- lots of good tips here!

As has been said, even in a 'cheap' part of the country, £45K is painfully cheap for a flat, so it is obviously going to be in a shit area. And as someone said, it's not going to attract decent tenants at all.

So if you go for it, God help you.

We are buying second property soon. Our first property is currently empty and we live in a rental. I think It's a great money making idea.

I would also advise anyone going in to BTL to make provision and in time have at least a years rental income in savings. (In London that can be £20k+ ) I worried constantly until we did that, as if you have a problem with a tennant it can take a year to have them legally removed, and if they are not paying rent, that is a lot of money to find to pay a mortgage, or go into arrears yourself and lose the property.

I make hardly anything.

The income (rent) is added to my salary and taxed as such.

Maintenance and repair very £££

Estate agents charge £££

And once Corbyn comes to power, he'll give tenants the right to buy the property at below market rates!

With Brexit, current shit Tory government, to be followed by a hard socialist Labour government, there will be a big economic crisis, and either way landlords ( and everyone bar the super rich) are fucked

Don't do it

But maybe I am unnecessarily gloomy

Surely this depends on your position in first place? We are paying all bills and rent/mortgage on 2 properties ourselves at the moment. Once we move to buy to let we will have a lot more money coming in. Also, we will have the first property for the kids if they want it.

You've missed the boat with btl I'm afraid. 3% stamp duty and less tax relief is making it very difficult.

You need a 25% deposit. You have to pay 3% extra stamp duty. Dodgy tenants, no tax relief on rental payments....

I wouldn't touch it with a bargepole now.