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?

If It's a long term thing and you have kids I think It's a winner. Mine are going to move in to it in 8 years or so. Free house for them then.

I work for a letting agency. Things seem to go wrong all the time. I used to think like you, but now I see that the landlords are always having to shell out for stuff.
Also we are very very quiet at the moment. Our small flats are sitting on the shelves for weeks/months on end. It's definitely Brexit. We used to get a lot of eastern Europeans coming over to work. This year we are not seeing many at all.

The house I am renting cost 125k to buy. Mortgage is 650 a month and I have lived here 18 months and only seen the landlord once for one hour. I don't see how It's not a big money maker for most people.

I agree that £100 a month profit on the rent won't be enough to cover your outgoings. It would be much better to either put your £10k into a pension or keep saving to buy a similar property outright (along with a contingency fund for emergency repairs etc) in the future.

Are you currently paying a mortgage on your home? If so, the priority should be to pay that off first.

So, 6 months in and one of the following happens, after you've saved up all of £600 for your contingency fund:

• the boiler packs in
• the roof starts leaking
• your tenants move out at the end of the fixed term (note: they do not need to give you notice to do this) and you need to cover council tax, standing charges for electricity etc, for at least a month while you find new tenants. Which will take a while as frankly a £45k flat is not going to have people queuing up to rent it.

What are you going to do?

I once lived in a BTL property where we had to use the windowless bathroom by candlelight for three months, as the landlord didn't have the money to do the repairs needed to stop water leaking through the electric light fitting. While this was going on we were legally obliged to keep paying that slumlord bastard's mortgage/retirement plan at a rate which prevented us from saving for a deposit to buy a place of our own. If you're comfortable being that person, by all means go ahead.

If you buy a flat which is leasehold you will probably need to pay some fees to the freeholder. Secondly most flats also attract fees for communal areas and gardens. As a LL there are rules about health and safety, checking immigration status, tenancy, deposits. There is responsibility. If you think you can make easy profit why isn't everyone doing it?

I'm getting in excess of 15% per year on my investments so that's £1875 in the first year

Please share where/with whom?!

BTL is definitely not a foolproof way to make money, but it can be a good long term investment. Do your research on the property and the area and overestimate your running costs.

You pay tax on the income.

You will have to pay for repairs.

You have to pay for things like gas safety checks, smoke alarms, etc.

You will need to have buildings insurance, and landlord insurance is also sensible.

You will have some months when the flat is empty so you earn nothing.

If you choose to use an agent you will have to pay management fees.

If your tenants decide to stop paying there's very little you can do for the first 2 months, then you have extra costs in getting them out.

It's not as easy as it first seems!

I've been renting out a house for 15 years and when my current tenants contact is up I'm going to evict and sell.

😂😂😂 £100 a month 'profit' are you joking? Sounds like a dead cert way to lose money with such a tight margin.

We looked at this (south east) house for 200k requires 80k deposit as rental rates here haven't gone up in line with house prices. What with worsening tax relief, stamp duty, insurance, many mortgage lenders not allowing you to have certain kinds of teneants (contrary to belief it's mortgage lenders not landlords not allowing DSS/ no uk residents etc) we worked out if house just held value it would take us 4 years before we started making money! Oh and that's on an interest only mortgage. If it goes negative equity then screwed. Also - the insurance covers if rent goes unpaid or damage caused. So while not cheap it is worth it!

Insurance is worth it not buy to let! And *non U.K. Resident bloomin phone

How much will your landlord's insurance be? It is a requirement. You are responsible for all repairs, no matter how caused. My property has damp, so a specialist is coming out next week. I have no doubt repairs will cost hundreds. My tough luck, it's my property. I recently had to get a carpet fitter put to re-tack down the carpet, I'm due to get the gas certificate renewed. I have a funny feeling the boiler will need re-locating upstairs and replacing, probably about £4500. Superficially, the house looked ok and the survey threw up nothing exciting. There was a hole in the roof and the kitchen and bath needed replacing.

£100 a month profit is a joke. I wouldn't go in for less than £600 because you might well need it.

um but a 30K mortgage isn't just 30K...the way they are calculated over x many years you end up paying back several thousands more than the amount borrowed. if you try to pay them back early you still have to pay off the expected amount.

come the time you need to sell the property is the area popular enough that you can do so?
as people mentioned only 100 a month ahead is really nothing and if the area does not increase in value or declines you will be left with having paid out more than you gained.

Quick back of the envelope says the rent isn’t Hugh enough to get the mortgage, the rent needs to be about 140% of the mortgage at an interest rate of 5.5%. The lending rules changed this year so this is the level of coverage you need

Property has been an apparent one way bet for many, plus superficially it is a simple asset and easy to grasp. For me personally I don't want a society of amateur land barons renting to the plebs, so I'd steer well clear.
On a practical level all the typical headaches have already been mentioned. Worth remembering that houses can be hard to shift if needed, this is termed an illiquid asset. Also, although many other investments will rise and fall, they generally don't require you to throw good money after bad.
But, property is an asset where banks will allow you to leverage / gear yourself - so for a small outlay you will be given a boatload of extra money to gamble. This is brilliant when it works out, ruinous when it doesn't.

And the boiler goes and you need £2500 today.... it you're a shit landlord... apparently.. ..

Ground rent
Service Charge

I have a small ex-LA flat I let out. I used to live there before I met dh and I own it outright. If there is a tenant in the flat with no gaps I get £10k per year in rent, but service charges and major works bills last year came out to about £4-5k. I used to have it managed by an estate agent who took a big chunk of the rent, and even when I managed it myself the estate agent still got a percentage for tenant finding. They also put a lot of pressure on us to hike the rent every year.

Dh and I now do it all ourselves, but even if one year I have no major works bills or have to redecorate, replace appliances/carpet etc and pocket the full £10k in rent it isn't exactly raking it in. The flat is now empty so while I look for a tenant I am paying all bills, council tax etc in addition to the service charges, plus subscriptions to online letting sites etc. I mean, I'm grateful for what I have but it isn't my idea of a 'money spinner'. And if you're paying a mortgage, well, it isn't exactly a get rich quick scheme.

A buy to let can seem scary if you haven't done it before but it really is one of the best long term investments you can have. The property market is stable overall and with the UK being an island, property is always going to be demand. Sorry but people preferring new build homes nowadays is simply not true, the rooms are often tiny and the walls as thin as paper -- there will always be a demand for older homes.

Well having been in BTL for years OP you margins look very thin indeed but that's not to say you cannot make a go of it just try to keep the costs under control there no reason why you cannot manage it your self and use that woman's intuition to weed out dodgy tenants;)

But check your costs and spends carefully first!. and if you haven't got an accountant some advice in that area won't go amiss either!

Friends parents are landlords. They have had to refurbish properties after tenants have been evicted after months of not paying - we r talking sinks pulled off walls, toiled smashed, kitchen units destroyed

We have a BTL but bigger margins. Think 1000 per month rent with a £500 mortgage and maintenance fee.
It's been working for us for about 3 years now, although we haven't made any profit as we plough it all back into the house. New boiler, electric inspection, shower, cooker etc.
However, it is paying off our mortgage and we see it as a long term investment for our kids. And we've been lucky (so far) with tenants

I'm going to against the general consensus here and say if you want to give it a try, why not? You've little risk on a £45k property and your liability to the bank is low.

However...buy to let is definitely not a get rich quick scheme! Capital gains on low priced properties like that will be low compared to better quality housing stock. As PPs have noted upfront you have to factor in conveyancing fees, stamp duty at higher rate, mortgage fees, agent's fees for advertising/drawing up tenancies, contingency, LL insurance ground rent, service charges etc. That's before you even think about having to do a tax return.

Have you talked to local estate agents about which properties are in rental demand in the area? We thought about buying a £45k 1 bed flat as a BTL but the estate agents said people were looking for 2-3 bed homes in that area, not 1 bed. Void periods are very costly- make sure there isn't an oversupply of that type of property in the area.

Freeholds are generally much simpler to deal with than leaseholds- as a general rule most houses are freehold and most flats are leasehold (although there are some exceptions). Leaseholds have ground rent, service charges and you may be liable for lease extensions etc.

We have BTL properties and do make a bit of a return on them (comparable with the stock market but with much more admin/accounts involved) though property investing is a bit of an interest of mine. I think you need to have an interest in property to keep up to date with legislation etc. You will probably have to plan to hold the property for a minimum period of 3-5 years to recoup your initial expenses.

If you want to give it a go then start with a cheap property and see how you get on with it. But do be aware of your responsibilities and go into it with your eyes open.

Consider your very left wing audience here on MN OP. All landlords are apparently exploitative scum just wanting to fleece the hardworking masses

We've found BTL to be a hugely successful use of our money, we break even (at least) every month and will own a house outright by the time we retire.

Even given the left favourable climate for btl landlords these days, it is still an excellent choice IME.