To buy a small property to rent out - would you? Have you? How have you found it?

[opalplumstead]

I am currently about to apply for a buy to let interest only mortgage to buy a small house to let out.

I have had the mortgage illustration and it will cost me about £280 a month, (I already have a repayment mortgage for the house that I live in that is £600 a month).

I have had a rent estimate done and the estate agent thinks that the approximate rent would be £600-700 pcm.

I am new to all this - I only bought my own house 6 years ago! Is it worth doing? Or is it more hassle than it is worth? And any other advice or words of wisdom would be amazing.

TIA

I mean *distribution or policues. Not “personalities”.

These threads always bring out the old Trots
Many people actively want to rent/need to rent while they save up to buy.
The poster who froths about the OP 'extorting' money from tenants and 'then no doubt complaining when she can’t be bothered to landlord correctly', I'd love a go at your mind-reading skills/crystal ball; must be good if you know what kind of landlord she is and will be.

I'm vaguely thinking about buying to rent too. Partly for a bit of financial security (price drops etc notwithstanding) and partly I'm thinking it'd be good to have somewhere nearer to my ageing parent for if/when I want to be closer to them.

Lay on, Macduff, with the comments about me being 'unethical' and 'gross' etc etc.

I meant to say as well, I am putting down a £30k deposit its not all mortgage

what's the LTV? in the current climate I would want a high deposit. I also think CGT is likely to increase at some point.

@Salmakia

Yes YABU, buy to let landlords profit out of the misery of overpriced housing and low wages. It's a grim aspiration.

Where do you suggest all the people live who can't get social housing and can't get a mortgage, if not in private rentals that are owned by landlords? Disclaimer: I don't have a buy to let.

I’d pay off my mortgage before I’d invest in another property.

I wouldn’t do it on an interest only mortgage. The costs and taxes will eat most of your profits leaving you very little to pay off the capital. The interest rates are likely to rise. Plus if your tenant defaults you could potentially have no rental income for six months or more, plus legal costs to evict them plus any repairs and redecorating.

Ignoring all the usual bitching and whining about how buy to let landlords are the devil incarnate...

To me, it's really risky. If you get a great tenant, then it could be completely hassle free. If you get a shitty tenant who trashes your house and refuses to pay their rent, a total nightmare. And however good you think your due diligence is, it's going to be really hard to work out which type a tenant is before they move in. Evicting a rubbish tenant is expensive, especially as they are advised to stay put until you take them to court.

Personally, I wouldn't be up for the risk and hassle.

If you can ignore the landlord haters, then yes. But get good financial advice, detach yourself from any emotional attachment to the property and prepare yourself for bad tenants from time to time. It’s not the easy option many people think.

Property is more of a long term investment as generally prices go up over a long period of time and it has historically been a safe way to invest compared to keeping the money in the bank or taking the risk with stocks and shares for example. I would want to put in a high deposit than £30k though in these uncertain times.

That said, you can't really rely on the rental income month to month in case your tenants pay late or not at all, or if repairs are needed. In my experience, a tenanted property always requires much more work than your own home. Partly because tenants will insist on getting everything fixed ASAP - I know I'd be happy to live with minor issues but will always get repairs done for my tenants. So unless you have the time and skill yourself, then you'll end up paying for someone else to go in and fix things, and there are of course costs like gas safety and electrical safety certificates, cleaning in between tenants, fees to the letting agency if you use one etc. Unless the property is in a very popular area, you'll probably have void periods between tenants and will have to pay the council tax yourself as well as not having any rental income coming in.

Despite what MN says, the law is very much in the tenants' favour and it can take a very long time to evict a non paying tenant.

I'm planning to sell my flat next year and don't plan to ever become a landlord after that.

Is it worth renting it out as a holiday let instead - less likely to have problem tenants.

On an interest only mortgage you’d be crazy tbh. Your basically just renting it yourself at that point unless you know you can earn enough personally to pay off capital on the property.

Empty periods, landlords insurance, the utilities while it’s empty, decorating to start with, electrics test, gas safety, epc etc increasing interest.

It’s not an investment at that point really.

Just sold ours - wouldn't recommend to anyone. Too much hassle, stressful, not worth it, 90% of our tenants were a nightmare who left (eventually) with a pile of debt letters behind them. Just our experience, we gave it a good go but so happy to see the back of it.

Ignore the landlord bashing posts 🙄 There is nothing unethical about essentially providing a service. There is a huge shortage of rentals atm so you'll find tenants easily.

Yes it's worth doing. Yes it can be stressful at times. Some people get lucky with tenants, others seem to get dreadful ones.

We bought a small BTL that needed some updating a couple of years ago. Aside from the additional income it brings via rental, the value of the house has increased by about £50-60k in that time. Your £30k won't gain much sitting in the bank so I'd go for it if you are able to cover the additional stamp duty and fees etc. As soon as we are able to buy more BTL we absolutely will!!

My advice? Get an agent to manage (about 8% of the rental) and fix the interest for 5 years. Look at landlord insurance and insurance if the tenants don't pay. Good luck!

Horst it is an investment if goes it goes up 25% for example or doubles in value.

My parents have done it and are fed up of it and selling the property. Basically they’ve found it a lot of hassle for a relatively small income - after tax, agents’ fees and maintenance costs they don’t get that much in comparison to the amount of money that’s tied up in the property, they could do better investing the money elsewhere or just enjoying it.

I think its probably worth it. But make sure you can cover the mortgage if you get a non paying tenant or have a period when it isn't let out. I agree it's quite risky at the present time with interest rates and property prices uncertain.

My aunt bought a small house to rent out and got a company to manage it, so it's fairly easy income. She was also very picky about her tenants, so the house is still in very good nick.

Oh, another thing to bear in mind is a) the increased stamp duty on second homes (an extra 2% I think, which doesn’t sound like much but is a lot when you have to cough it up in cash) and b) capital gains tax when you sell.

Personally I'd invest the £30k elsewhere.

One of the best investments you can make, I’d say. Do it.

I could also add it depends on the type of property- mine is very old Victorian basement conversion so high maintenance and repair costs. I I imagine a shiny new build would have less issues

A new build might have higher service charge or maintenance charges (to cover communal areas/lifts/gardens etc) though so other things to consider

We’ve done it and have had great tenants over the years. We accept housing benefit, allow decorating etc within reason and accept pets so our tenants tend to stay for many years.
I wouldn’t buy a house to rent unless I owned it outright tbh. Definitely not with an interest only mortgage.
Buy a property in the area you live in so its easy to manage , you can let it to tenants from the area .
Manage it yourself.
In your situation I’d clear your first mortgage first. Then start saving for another house.

We have, its a holiday let (year round occupation isn’t allowed), we also use it ourselves.

We have gone with an agent who specialises in respite breaks for families of lac children and families with a member with a disability. It has been fine so far.

My husband used to rent his flat out when he had to move for work, he didn’t use an agent and everything again was okay, he had appropriate insurance etc, and it was close enough that he could go to the property if needed.

The only reason BTL makes sense is the ability to leverage yourself with debt. Though funnily people who are debt and risk averse still believe property is a one way bet. I'd always pick a balanced stocks and shares portfolio over a BTL. At least with that you have virtually no ongoing charges and requires no investment of time or energy (or tax implications for most people if placed within an ISA).

I work in housing law advice and I would not be a landlord. There are so many legal requirements to follow that change incredibly often that can have huge ramifications on a tenancy.
If you do want to go ahead, I would recommend going through a registered lettings agent to vet the tenant, set up the agreement and initial legal requirements and then ideally to run the tenancy too. Also, take out landlord insurance as far too many landlords need legal advice specifically that they can't afford and end up in so much mess because of it