Should we buy a flat as investment??

[kizzie]

((Sorry if this comes up twice - just lost a message somewhere))

Hi everyone - DH and I are thinking of buying a flat as bit of longish term investment.
Are we mad in current climate?

We would need to put about £70 a month towards it (in addition to the rent we would get) to pay the mortgage.

Idea isnt to make a quick buck - or even loads of money long term. Just in about 12-15 years time to get a few thousand back to help with Uni fees etc. (Hopefully a bit more than if we'd just put it in a bank.

We cant afford to do it here (in SE) but could just about afford it near my mother.

Any thoughts???????

Thanks

Kizziex

How is it a good investment when you're having to put £70 a month towards it? Over 12 years, that's £10,080 you could have invested in something else. Over 15, that's £12,600.

Is your mother going to maintain it for you? How will it work if you are far away from it?
Why not buy something where you would want to holiday - then you could rent it out and use it yourselves in between rentals??
We had a flat in Glasgow (fil maintained it for us) - but it caused so much friction between dh and fil that it wasn't worth it - plus the flat had kind of peaked at that point so we sold to get out.

How long would you be getting the buy to let mortgage over?

Think realistically about how much maintenance it will require and how much potential damage tenants will cause.

Will you be able to cope with the mortgage if you don't have any tenants for a while?

I think the idea of getting a flat in a holiday area is a good one.

Also think about when you sell, as it's a second propety you have to pay 40% capital gains tax

Also how sure are you about getting tenants? If you need to pay for the mortgage yourself for say 3 months a year, then is it such a good deal?

The average rate of return on buy to let investments always varies somewhat by region. In some areas, it's only about 6%. For a max. It's entirely feasible to see such returns on other types of investments that are far less hassle and risk, and may be more liquid as well.

Think I'd do some hard research and maybe see a qualified finanical adviser before making a decision.

Thanks everyone for all the useful points. Its really good to try and keep it all in perspective. Interesting that not really many positive comments. i suppose the reason we're thinking of it seriously is that property is only thing we've ever really made any money in and other things (small investments / pensions etc.) have performed badly.

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Kizziex

You would need to plan to put a lot more aside than £70 per month to fund it. That presumably assumes that the flat will be permanently let and that you will have no gaps between tenants. Also, if the flat is not close to your home you will probably need to pay an agent to manage it or otherwise you will spend a lot of time driving to the flat to do repairs or hunting down tradespeople to do the same.

You also need to allow a budget for decorating the flat to begin with and then an amount for each year (or between each tenancy) for redecoration, replacing broken items etc. If you rent the flat furnished, this will obviously need to be a larger budget.

And finally, you will pay tax on any profits from the rental although you can set off a sertain amount against rental.

As a jaundiced ex-landlady (only of our own home when we were abroad) I personally wouldn't do it again. If you really hope to go ahead, I'd certainly choose your area with care, research the market thoroughly and speak to local agents to find out what works and what kinds of properties are best in that location.

I'm afraid I agree with the negative comments already here. It is loads of hassle to rent out, you need to be sure it is very desirable or you could have it empty for periods, and if you pay an agent to market or manage it that takes another 5% at least off the rental income, plus tax, maintenance, insurance etc so it becomes less financially viable. Unless it will pay for itself net of these I wouldn't consider a good investment.

Im not so concerned about the maintenance as my BIL has his own building co there and has agreed to sort out any probs that might arise (obviously we'd pay him - but I wouldnt need to look around for tradespeople.)

The biggest worry is if we couldnt find a tenant. Its a very busy town with a good rental market and the amount we've calculated (to innclude the £70) includes agent fee/ insurance/ service charge etc.

Oh - I really thought there's be at least a couple of positive notes from people who thought it was a good idea. Im a bit suprised now .....maybe back to plan b. (Selling some spurious story to News of the World).

Kizziex

do you post as kizzie on any other websites?

sorry blatant hijack

Buy to let is deffo not the cash cow it once was in some areas a couple of years ago. The returns just aren't what they used to be and in some areas it's hard to get a tenant b/c of market saturation rather than location.

Hi Fio2 - just a one about fertility treatment and an american one about a drug called seroxat i used to take. Thats it I think.

Kizziex