To consider buying to let?

[Stormbabet]

A bit of background, I run a small business that has allowed me to build up some savings. DH and I don't want to move house and are happy where we are currently so it's not needed for our own housing.

I'm considering using my savings as a deposit on a buy to let property. I would only really want the tenants to cover the mortgage, I wouldn't be looking to make a rental income. In fact I would be willing to pay a small amount each month myself if necessary.

Has anyone done similar? Do you manage it yourself or use a letting agent?

Any advice is welcome.

The trouble is it's pot luck what kind of tenants you get. I've had the same tenant in our old flat for 6 years and had zero issues. I work in property law and have clients who have tenants who have trashed the place, not paid rent in 6 months and they are fighting to get them out.

@AhBiscuits that's my main worry although I know that will always be a risk. Do you use an agent?

Why would you want to lose money on it? Even an easy access savings account will give you better returns right now...

There are lots of costs on top of the mortgage. Annual gas and electricity checks, ongoing maintenance and emergency repairs, void periods between tenants, fees to any letting agents if you use them.

Are you thinking you'll make a profit in the long term if house prices go up? You'll also pay capital gains tax if you sell at a profit in the future.

You’d need to ensure you cover all of the legal needs like protecting the deposit and things like getting the gas checks done, providing the energy performance cert etc.

Also remember that every investment is a risk, a lot of people see BTLs as easy guaranteed income but you never know if you’ll have a tenant who can’t afford a rent increase (if mortgage rates go up etc) and refuses to leave requiring you to force an eviction.

I don't. I used an agent to find the tenant, do the referencing and get them in and then took over. I paid a pretty small one off fee for that.

Because of my job, I'm confident I've done everything right and could get the tenant out if necessary. If you do it, make sure you get landlords insurance with legal cover.

You could get an agent to run the letting for you. But there are a lot of rules now protecting the rights of the tenant. I don't think I'd bother if you are going to run it at small/ no profit. not worth the hassle.

Also bear in mind the proposed reform will make it harder to evict tenants if you decide you want to for any reason. At the moment landlords are selling rather than buying up more property, because of interest rates and uncertainty around the renters reform. You can get a good interest rate in savings accounts atm so I'd stick with that personally.

I've done a BTL. I found the tenants privately and manage it myself. I did it because I wanted to keep the property while moving to a different area. If it was solely that I was looking for an investment vehicle I probably wouldn't do BTL but would invest in my pension. In BTL you pay tax on the income and Capital Gains when you sell, whereas my pension investment would be tax deductible.

My goodness you’re brave to ask that question on MN!
My husband and I have 7 rental properties and we manage them ourselves. We made a loss on them for years but they were intended to provide income in our retirement. We are now retired and indeed they do provide an income but they also provide a headache because they require constant maintenance. We seem recently to always be replacing a bathroom here and a kitchen there, decorating and replacing flooring and white goods. It’s not just the expense although you need to be aware of that but sourcing these things and organising workmen.
If I were in your situation I would give careful consideration to investing in stocks and shares via Vanguard and working towards getting all your investments in a stocks and shares ISA.

Have you looked at mortgage rates for investment properties OP? People are leaving BTL in droves because the cost of repayment is killing them. Also, prices in most of the country are continuing to fall.

In addition a new Act coming into
force is going to make it more difficult to evict bad tenants Currently it is 2 months notice and you do not need to give a reason However most tenants leave job change etc rather than
being asked to leave so not all bleak
So much depends on tenants
you will get therefore where you will be letting is crucial in attracting the tenants you want

I had a BTL some years ago and the bank wouldn't allow you to make a small loss. You had to show you could pay the mortgage as well as make a decent yield in order to get the BTL mortgage. As I say this was some years ago and I no longer have the property so things may have changed.

If you are seriously looking into it and are only looking for costs covered it’s worth finding out if any local authorities around you have a rent scheme.

one near us basically rents your property for a set amount every month and then they deal with the tenants and who they are. They guarantee the rent each month, but obviously for that guarantee the amount is a bit smaller.

Whatever you do you must be sure of all your legal responsibilities as a landlord if you become one. A lot of people think getting an agent means you don’t need to know anything - it doesn’t. Legally you are responsible and a lot lf agents are shit so if they fuck up it falls down on you.

You want to see a capital rise in the property over time, as mortgage and costs will eat up your profit? You ll also pay CGT which is on the increase.

Fair enough but eventually you will have to ask someone who has perhaps been living in your property (but as their home) to leave and believe me, no matter how well prepared the tenant is for this, its a huge shock.

The changes in evicting tenants are in reality no different from before, you now just have to give a reason and selling is a good enough one or you wish to live it yourself or have a close family member who does.

After 3 or 6months, you can rent it out again if you for example the house failed to sell.

The new act doesn't strengthen tenants rights at all.

I’ve got one, it’s a good source of income, I charge a fair rent, lower than average and it chugs along. Tenants are happy and lovely.

I wouldn't. I'd buy a property that needs some work then sell it. I've had too many dealings with tenants through work to know I never want to be a landlord.

Why put yourself through all the stress?

Personally, no. We let our home in a holiday area year ago for about a year (we’d already bought when our sale fell through)

Even short term let’s were a bloody nightmare. Damaging furniture (someone even punched a fridge, just wtf?), threw the door back so hard the handle made a hole in the plasterboard. Kitchen equipment was regularly broken/went missing. Pillows and towels often disappeared and our no-smoking rule was regularly ignored. No pets allowed but two separate parties left dog pee on the fitted carpets and crap in the garden. I’d say during that year only about 50% of tenants were respectful.

Would be very hard to get tenants like that out on a longer term let.

STOP right there. Put your money in the bank OP.

BTL has been subject to an onslaught of hideous regulation and unfair taxation over the last 10 or so years. You pay tax on turnover not profit, and the upcoming renters reform bill will mean you can't get rid of a bad tenant without a hell of a lot of hassle.

Agents in my experience are lazy incompetent chances with no legal responsibility who just take money for nothing.

Tenants, I've had 50/50 good and bad. Bad ranging from hassling every week about non existent/self caused issues, to letting their dog shit all over the carpets (and wondered why landlords don't like pets?)

Good, are great but you've still got maintenance and so on, which can come at unexpected times. This year we've replaced all the windows, and the guttering has failed (which was recently replaced) so a 10k bill that isn't tax deductible either.

Buying comes with a huge stamp duty penalty, as does selling with CGT being massive.

As soon as our current tenants move on, we will be selling.

Are you higher rate tax payers or would you be after adding the rental income to your overall income?

If so, research section 24 (limits to how much mortgage interest relief can be deducted).

I was at a financial services event last month. There was a talk aimed at financial advisers and mortgage brokers about the buy to let and rental markets. There were several experts from various areas of the industry.

The tax treatment of rental income and the higher interest rates and stricter lending criteria along with proposed new legislation on minimum requirements and renters rights are all making rental properties far less attractive for individual investors.

The whole market is shifting away from individual landlords, people with small property portfolios and accidental landlords towards corporate landlords who have the infrastructure in place to service the properties and the corporate structure in place to make it tax efficient.

This is probably the worst time in living memory to be considering buy to let investments. If I had the money I would very much be considering other assets in a mix of funds, making use of tax efficient wrappers like pensions and ISAs.

If I really felt property was something I was interested in I would consider a property fund that invested in a wide variety of professionally managed properties. With this I could access the potential profits from a wide number of properties without the inherent risk of putting all my assets into one property and the hassle of tenants and property management. But to be honest I don't think I would even invest in property this way right now.

I don’t think it’s a great time to buy. I have a deposit to buy a flat (south east) or wait few years and house back up north where I grew up. I’ve been monitoring prices and they’ve dropped a lot lately, as you’d expect due to the high interest rates. A colleague’s mortgage is raising by £1000 a month in January, another's by £600. You could buy and the property loses value soon after. Sure it might recover over time if this is a long term investment - but might be better putting your savings into high interest account for now. I guess buying when the properties won’t drop anymore is ideal, but who knows when that is!

Join NLA they have a helpline Small annual charge Check what you can set against tax

@Lovepeaceunderstanding not really surprised it's a hassle if you've got 7!

There are too many defaulting tenants for smaller landlords to afford so it has to move to larger outfits who can weather the storm more easily