Buy- to- let - would you do it?

[user3964]

Considering buying a flat as a second income (& because I want to have somewhere to throw the DCs out to when the time comes) and to hopefully take advantage of property price gains, long- term.

It seems foolish to throw more money at the pension pots than we already do.

Not confident to play the stock market personally.

What else can you do to prepare for retirement if it's not buy a property? BUT having had relatives do this - it seems fraught with tension and pitfalls!

Would I be unreasonable to think that there's not much more I can do to invest for the future?

Does anyone have any advice for a first- timer? Or any reputable source of advice please?

I have on rental property, mortgaged, bought three-ish years ago in a dodgy part of Kent where the yield /return on my money is good.

As PP said, if you get stressed out by household repairs and breakdowns, think twice. I also wouldn't self-manage, at least initially. I did, because I'm a lawyer with an inflated opinion of my abilities, and it backfired. Get an agent, at least to find the tenants if not to fully manage.

Don't buy somewhere miles from where you live, because you'll have a shakier knowledge of the local market and likely know fewer reputable agencies, workmen, key cutters etc.

Don't invest every last cent into the property - there will be unforeseen costs for something at some point, and tenants shouldn't wait around for a new boiler just because your finances are all over the shop.

Check the tax implications carefully.

Check your responsibilities carefully - from verifying tenants' rights to be in the UK through deposit protection, gas certification, carbon monoxide alarms and landlord licensing, there are many.

I don't regret my decision to buy and would buy another in the right circumstances, but any of the above can hamstring you and needs careful consideration.

The ethical consideration / FTB point, is between you and Jesus - you need to decide what you personally are happy with.

If you are mortgage free and won't need the money back for 5-10 years, then it's a reasonable proposition.

I second pp who said to get a management company to take care of problems; otherwise you need standby cover when you are abroad, Christmas etc.

Basically someone needs to be on constant call - you can get home emergency cover but you will probably still need to supervise, or find a competent agent to do it. They do exist but it is a game to locate them.

Tenants cant be left with no heating etc until you get back from holiday. And you must indeed have enough ready cash to replace / fix what you provide.

Also never be emotional about a rental. Make it clean, smart, tidy, functional. Most of the time that is how you will get it back. You need to cope with the occasions when that does not happen.

And mn will hate you whatever - decent landlord, crook, we are all bastards.

Everything Hummus said - it can be a lot of work even with pleasant reliable tenants. And evicting someone is really tedious even when the process goes smoothly - and will take a good 4 months plus getting the place ready to rent out again, during which you wouldn't be getting any rent.

Also - sorry, this is one of my bugbears - can you cope with a "worst case scenario" eviction.

No rent for a good while, as citrus said, tenants who won't leave until the bailiffs pitch up (because that's what the councils advise them - if they leave sooner they make themselves "voluntarily homeless"), tenants using the internet for dodgy shit and it coming back to bite you, tenants running marijuana growing labs in the spare room, antisocial behaviour towards neighbours, damage to the property, damage to others' property, rent being late for good reasons, rent being late because they decided to piss it up the wall, tenants reporting you to the police/council as a form of intimidation, having to instruct expensive solicitors to handle court proceedings for you. And so on.

I went into it fairly idealistically at 27 - I'd had terrible landlords, and wanted to do things right and provide tenants with a good home - and that attitude didn't help, IMO. You need to cover all your bases.

Fyi eviction costs are the best part of £1k even without a solicitor, double or more with. As mentioned the council will tell tenants to stay put throughout, as of course the tenant is entitled to do. Make sure you have legal expenses and rent guarantee.

Your main policy may also exclude damage from illegal activity. Your tenant may not be a drug dealer but they might invite a friend.....

Small chance but massive consequences if you do get that rare worst case. Do not rent out a property if you rely on the income.

Some really interesting advice thank you for taking the time to describe the issues hummus et al.

Having just been an ordinary tenant myself in the past I had no idea what a great tenant I must have made!

Loads to think about...

Seriously where else do people put their cash these days if not in an additional property?!

We've looked at it but can't get the sums to work. Given the income tax position the rent we would get would barely cover the costs (and wouldn't cover the costs if anything went wrong - which it always does). We've had a couple of BTL before and only kept them for a few years due to the hassle factor plus the capital gains position.

You've got to be in it for the long term and be prepared to accept that in the short term it might be costing you money to rent out your properties.

Most tenants are normal decent people - the problem is when you get one of those who isnt.

If youve worked and saved cash, the government would like you to waste it on new cars, silly tat etc etc. Carney works to discourage saving. As it is also very difficult to get a mortgage it is hard to see who benefits .

We put our spare cash into pensions (tax relief) & mixed shares investments.

2/3 of our wealth is already tied up in the house we live in, so I see ours as a diversified strategy.

You could invest some money into peer to peer lending eg www.wellesley.co.uk/products/
However there is some risk involved

Buy to let crunch the numbers

Pension investigate

So I'm an accidental landlord and have been for the last 15 years but I'm not going to be buying any more in the UK.
I personally think the housing market in the UK is way over-valued, especially if/when Brexit occurs. None of the things the government is doing to prop house prices up right now are good socially or at all sustainable over the long term.

But if it's part of an investment strategy that includes other assets, it might be worth taking a punt. I used to be the same as you OP regarding the stock market but I did some research and I'm much more comfortable with it than before (see this thread so I suggest investigating everything before you make a decision.

The thing is, over the very long term the stock market has outperformed property but whether that can continue for another 200 years is a moot point, but the returns on property are never as good as you might expect given maintenance, management, tax, legal fees etc etc.

It outperforms money in a savings account but that is about all you can say.

Too stressful. I'm in the process of selling my let property to one of the tenants. I didn't buy to let though, I bought a house and let to a lodger. Then moves in with partner so let it to my lodger and his friend on a full lease. They have been the best tenants you could hope for and I've been very lucky but I wouldn't want to let to people I didn't know. I might add I made very little rental profit either. I don't think it's worth the potential hassle.

Bring it on! Delivered by the tooth fairy, no doubt...

Not the tooth fairy as it happens, but a professional property company offering an honest straight forward deal. If you need further details let me know, if not, no problem.

Absolute guaranteed? I am very sceptical but will be interested to find the catch. So if you have a moment details please? ( perhaps pm as is advertising).

Special if it's a model like Northwood's, the catch is usually that the rent offered is 10-15% lower than market (but guaranteed). The other red flag is someone coming on MN to offer this great deal and fishing for punters...

Hummus - this thread is throwing up all sorts of useful and interesting information...! Good to get a critical eye, appreciate your contributions.

Might just pay off the mortgage and put more in the pension, but I'm not a higher rate tax payer so I'm not sure if it's even worth it :(

thanks essentialhummus - there has to be a catch so I'm just intrigued what it is. Rest assured I've no intention of getting into it. Things that are too good to be true...aren't true!

We have three, and have mixed experiences, but overall good. Yes to having a repayment mortgage - and have a flexi one, so you can make lump sum payments, and not on a 2 year deal or you have to pay loads to keep re-negotiating. As a PP has said you can offset mortgage interest against tax but only at basic rate, going forwards. We don't use agents and my husband does maintenance himself where poss - or uses an electrician friend etc. Downside is phone calls on Boxing Day when ceiling collapsed - but huge saving on agents. We have had issues with non payment - took one lot to court and they found in our favour but doubt we'll ever see the money - not sure if using agents helps with that, or you can get landlords buildings insurance which also includes loss of rent, and also legal fees if you do have to go to court - worth looking into.
Just had one come empty and put it in the local paper - never had so many calls! One person said that agents now demand prospective tenants pay three months up front and a fee per person to even register, so 'direct' tenancies are popular - but we were the only one in the local paper! No risk of empty periods! Anyway, we bought one in 2006 on a ten yr mortgage (£110K, with £30K deposit. Income avge £520 over the term, mortgage £560 pm. Cost to us - v little, now paid off! Yay! House now worth £170K! Recommend mid range places as easy to rent out and higher rent per value than big houses - but not small flats/cheapest houses as you get high turnover/flaky young couples etc. Definitely don't recommend leasehold flats!! We like 3 bed family properties. Ours aren't too smart then no issues with a bit of redecorating when people move out, and we keep the rent reasonable. We don't go round and check up on stuff or interfere. Also we allow pets as long as not crazy puppies - it massively increases your catchment. Good luck.