Buy to let

[clayspaniel]

Would you do a buy to let mortgage? Just wondering how risky this would be, or would it be better to put what would be the deposit into something else? If you have any advice or experience with this I would love to hear it. I am not on a large salary and don't really have any other savings.

I'd suggest you need a bit of cash behind you to go into buy to let. You need money for repairs and upgrades, to cover times when property is unlet, general maintenance requirements etc.

Thanks Olly. How much would you keep back after paying the deposit?

You need to do your sums.

The property will be empty whilst you get it ready to rent and the first tenants move in.

You'll need to bring it up to rentable condition (I like it to be good so I attract more rent and a better class of tenant rather than the bottom end).

You'll need gas safety cert and I had an electrical inspection done (although it's not law) and fitted fire alarms.

You'll need insurance.

There's the cost of finding and vetting a tenant and management fees, if you won't be managing the property yourself.

If it'll take a while to bring up to standard, your council may charge some council tax too.

You'll want an emergency fund just in case the boiler or something else goes wrong and be prepared to pay more for repairs as things will need doing quickly as your tenants are paying you, rather than with your own house when you can wait.

Oh and stamp duty depending on how much you're spending.

Much can be offset against tax but don't forget to put aside money each month for your tax bill.

It's worth paying an accountant in the early years as it saves you money. They'll be able to carry over and calculate losses.

Oh and any mortgage set up fees too.

Fine as part of a portfolio but you don't want all investable assets in one asset class and geographical locatiom ie UK domestic property... or put more simply don't put all your eggs in one basket.

i probably wouldn't go into buy to let now with the new tax changes. You won't get much back when interest on mortgages is taxed as well.
I've got two properties. Both rent at £750. Mortgage payments (with repayment) are only about £100 less. With the new tax suggestion, I'll end up losing bout £120/month per property rather than gaining £200/month.

Move your properties into a company and speak to an accountant about it - you can charge certain things through the company and avoid the corporation tax and get various tax breaks - could put you back in profit if you have enough BTL's.

We have three BTLs and DH is unaffected by change in tax as it only affects higher rate at turnover and we come on comfortably below that. Accountant made it clear cost of putting into a company and the tax implications of that were not a realistic option. We make it pay as each property has a good LTV and we ensure through a combination of good maintenance, contract terms allowing a half day of viewings at end of tenancy (which tenants prefer rather than as and when), efficient advertising via openrent and keen prices that our voids are at a minimum. Typically our properties are empty for between one day and two weeks. The latter being a one off. I know many landlords who often have a month or more a year void. Demand is also very high in our area (outer London). We also manage ourselves so it is an even better financial proposition. Careful though as the legislation is tough and you need to be organised and prepared to learn. Worst case scenario is never living with yourself as a tenant dies of CO poisoning and rotting in jail. We have also had to go to court to evict someone. Heart wrenching but when you can't pay the mortgage and your own home is on the line, sympathy and sentiment after six months of belt tightening and all credit cards maxed out worse means you have to toughen up. I know that is extreme but mention it as being a landlord is not without real personal and human risk.

We have every hope that at the point we retire then all mortgages will be paid off and income will be our pension. We don't have the luxury of a final salary scheme or a generous public sector pension so for us this is a major part of our pension but not 100.% As another poster pointed out having all your eggs in one basket is not ideal.