Experienced Buy to let people.....

[ohhelpohnoitsa]

I am fortunate enough to have some 'spare' money which I don't want to fritter, I want to make it work for us. Thinking of buying a house - area is always easy to let in due to high demand for places at the local schools. So, research all done and figures work on paper. However, I haven't yet looked in to letting agent management fees / tax etc. The rent is likely to be around 800pcm. How much of that could I reasonably expect to net? Thanks.

I pay letting agent 10% of gross rent.

What figures work on paper? Do you mean that you'd be able to buy it? Or have you done ongoing figures too?

I manage things myself so don't pay management fees. Otherwise, there are many things to fork out for out of the gross rent, e.g. service charge if applicable, boiler inspections, insurance + ongoing repairs and maintenance. So you need to make sure you can fork out for a new new boiler at the drop of a hat for example. You also need to account for possible void periods or non-solvent tenants that take a while to evict. Cost wise, btl mortgages have higher interest than residential ones and usually high fees.

Income from property will be added to your other income and you'll pay income tax according to your overall earnings. One thing worth noting is that the regulations are changing re offsetting the cost of interest so you can read up the details on the HMRC website.

It's also worth bearing in mind that the government has been working very hard to discourage btl and encourage other investments. So it's likely to become more difficult rather than easier.

I pay 8% to an agent for fully managed but I have a deal with a couple of other properties, anything from 10 to 15% is usual depending on where you are and the level of management you want. You'll need to keep money aside for costs each month. Running repairs during a tenancy, replacement of carpets, decoration and so on when tenants change over. You'll also need to cover costs for annual gas and electrical checks.
You'll need to declare the income to HMRC via a self assesment tax return and pay the tax due if you also have any other income.
The agents will also charge extra for renewing tenancy agreements or providing a new one when tenants change over and completing inventories and inspections so it's worth reading their small print.

Tax.
Insurance for buildings, your contents, home emergency , malicious damage, legal expenses, rent guarantee. Get quotes, won't be cheap.
Gas safe and service annually.
Electrical check good idea but not mandatory except HMO. Five yearly when it is.

Thank you all. We would hope to buy outright so the mortgage isn't an issue. Hadn't remembered gas safe so thanks for that. Thank you all, lots to go on here. Will start a spreadsheet!

thoughts when looking for a property:

1. would you live in it?
2. is it in good nick? Or can you afford to fix it so it is?
3. does it have backups - two sources of heating, two of hot water (e.g. boiler and electric shower). That means the tenant isn't stuck while you sort out fixes which are NEVER instant. It's what I have in my home so my tenant has it too.
4. is it simple to 'operate' - no trick doors, no strange quirks. Bathroom needs a shower screen, not a curtain. No wacky fiddly stuff in kitchen.
5. is the EPC B or C? Nowhere is A, lower than E is illegal, lower than C is cold.
6. will it appeal to the kind of tenant you plan to have? Ask around for the demand in your area.

Thanks special , I am on the same wavelength as you. The house is not a quick turnaround of cash for us at the expense of the tenant, it's a long term investment which will pay off about half our mortgage each month or more likely fund another cheaper buy. The village is a mumsnet 'niace' where tenants tend to be families and more importantly, relatively long term. I think it's the way to go. Thanks all.

I don't want to use the money to pay off our mortgage as there's no way we'd invest the surplus cash from our salaries!! It would get fritters because we'd feel 'better off'. Ultimately I'd like an investment house per child - to sell as and when for them. Our own mortgage is manageable despite the interest we will pay over it's lifetime

If you are buying outright and are a 40% tax payer you will be paying 40% tax on the £800 rent each month and then you have all the expenses of management fees and maintenance etc so it would be a very poor return. If you are not a tax payer ie sahp then the £10k rent per year would use your tax free allowance and it would be a viable return.