is it possible to break even or make a profit if you buy a property to let out

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We could take out a massive mortgage on our house and buy a flat to rent out, but is it worth it. at the moment we are fortunate to have paid off our mortgage but we are faced with 2 children off to university, and pensions worth next to nothing, would a buy to let be a massive mistake or the first step to a financially stable future

With interest rates likely to rise before property values, it could be very difficult short term.

I would wait 6-months to a year and look again then. In the meantime, keep an eye on your local market and use PropertyBee.com toolbar to track time on market and price reductions for specific listings. Read property-related media - FT, Indy, MoneyWeek.

If the market slides there will likely be investment opportunities. Personally, I wouldn't go for it right now.

We've not done too badly on our house, we specifically bought it to rent. I think we paid around 70k for it, the value increased to 120k and is now worth around 80k. We haven't been able to sell it on any of the three occassions it has been untenated and the rent just about covers the mortgage.
Think very carefully and choose a good agent is my advice.

Thnaks for your feedback, a few people I know are getting into buy to lets, but every time I do the sums - looking at monthly rentals and the probable mortgage payments I can't see how a profit is made, or is it short term pain for long term gain?

The money is made if the value of the property increases over time, buy to lets are not great reliable sources of income unless you own 10+ properties. They are long term bets, and best as a portfolio of invesments - do you have shares/ISAs etc. I think its a highly risky strategy for you to buy a buy to let property given your circumstances. When do you want to retire? Do you aim to downsize in the future to release capital for retirement/university fees?

hoping not to have to downsize as only have 3 bed semi at the moment. this would be for a retirement income and maybe for university fees. We didn't start saving for university as when children were born it was free with a grant and it has only just got unaffordable.

Kreecher, interested to hear you say you've not done badly as you go on to say rent just covers mortgage and house has gone up about £10000 but you havn't sold it. Depending on how long you've had the house that doesn't sound fantastic and prob risker than stocks etc but with more hassle. Not trying to be narky just interested in doing it myself one day and unsure as to if it stacks up.

stocks seem to be risky as well I have made and lost money on shares, money tied up in Isa and premium bonds give very little return. have an endowment policy for 60k about to mature in 3 years but that is unlikely to bring in any more that 30k. So nothing seems to be guarenteed to bring in an income

My Dh bought his first house outright with the money he made from shares, of course they are risky but so is any market where you are likely to actually make any money, people don't seem to see BTL as a risk but of course it is. And the share certificates won't call you in the middle of your holiday to demand a roof repair.

Fuchzia, had we not invested the money in a house, we'd have pissed it away. Neither me nor DH is money savvy.
We've had it for around 8 years I think.

Yes i realise that buy to let is a risk, but what are the risks, and is the long term benifit worth the risk.

oops benefit

The risk are the same with any market, you either win and make lots of money or you don't and lose some or all of it, if you are asking us to run through a whole risk analysis v's shares and stocks I can do but like most accountants i'll charge you £100 per hour
The best thing to do is sit down and ask yourself honestly, are you a gambler, are you prepared to lose every penny of this money in order to double it ?

There are lots of products around that are for people who like a little bit of risk, a medium risk or lots of risk you need to chose the right one for you but we'd need a lot of personal information and you're bank if you like/trust them or an IFA or accountant is the best place to start.
You can spread your bets and go for a managed fund where somebody will put some money into property, some in cash and some in shares, but of course they will charge you for this service.

I want to get away from paying someone to manage my money for me.

I want to know specifically about buy to let experiences good and bad.

The people I know with good financial sense seem to be getting into it.

Yes you're right about the risk factors mamatomany I am medium risk person my husband is very low risk - think keeping it under the bed but he said if I can full research it and show how a profit can be made he will think about it and obviously this is joint decision stuff.

We went in to buy to let about four years ago, working on the assumption of continuing rises in house prices. As you might imagine, that plan has taken a bit of a battering! We reckoned on making next to nothing from the monthly rental income, but making our returns on capital growth in property values. We've had to completely rethink our plans, but have the fortune of having managed to secure some very low mortgage rates when we started, which are ongoing for the life of the mortgage.

We never went in to this as a short term solution, and equally we never anticipated significant rental profits. Our longer term plan was to buy a few (we bought five), then sell one or two when property prices increased and use the capital growth to pay off part of the buy to let mortgages on the others, thus increasing our profits each month.

In the current climate, we have lost capital, but are managing to make a fairly healthy profit from rental income instead. Overall, we are worse off than when we started (as in, if we had to sell, we would have made a loss, even with the rental profits).

DH is always keen to buy more, but in the current climate I am reluctant, not least because we are already heavily exposed to dips in house prices. If I had a stack of money to invest, I may still consider property on the assumption that prices will rise again. However, it is much harder to make money on the rental income these days, and there are no certainties on capital growth either, so it is a much more risky prospect than it was.

I'd be very careful about shares and get expert advice. Many big companies have propped up share price in recent years by cutting (jobs etc), not actual growth. And many are still facing a tough future.

If I'd known at the time, I would have bought into gold a few years back....be a millionaire by now!

LemonEmma - think you're very wise.

DH is always keen to buy more, but in the current climate I am reluctant

Your DH is very wise, now is exactly the time to buy the right property at the right price, unlike 4 years ago at the peak of the biggest bubble known.
In business generally the price you buy at determines the profit not what you sell at.

I disagree. The market is in a very dangerous state of uncertainty at the moment. (Depends exactly where you are possibly)
And if exposure is already high? Are you really saying they should go further??

Thats how you make money by gambling, buy low sell high it's not rocket science. unfortunately they've already bought high so it's not going to plan at the moment. A way to make up for the first loses would be to buy low now.

buying low? prices are only 10% to 15% off their 2007 peaks - the medium-term correction has a lot further to run than that. I think it would be madness to double up now.

You can break even or make a profit. I bought a flat about 5 years ago and it has been fully rented, with only 1 change of tenant. The flat has not really increased that much in value (maybe £20k) but as interest rates are lower than when I bought it, the mortgage payments have been lower so I have made a profit for the past few years when at first I was breaking even.

The key is to buy well - the flat is period, has its own parking in a very restricted area and is in the centre of town - both tenants have asked if I would consider selling it. I am pretty certain in the long term its value will rise again and if I needed to it would sell quickly. It may not provide the pension I was hoping for but it is ticking over nicely and is no problem to manage - I used an agent to find the tenant but manage the flat myself - this means getting a yearly gas safety cert and sorting out any maintenance. Luckily thus far I have only had to replace the dishwasher (last week.

I previously rented a house to students who although were quite hard on the decor were no trouble. You can also charge more as one or more of the recpetion rooms can be used as bedrooms. I never quibble about dirt or wear and tear (it's lived in,it happens) and cough up all the deposit and get things fixed quickly.I never had more than a few weeks void in the summer and the groups usually stayed for 2 years at a time. I only ever really broke even or made a small amount( 3% ) but gained when I sold up to move location as house prices had increased since I bought it.

I'll never be a property magnate but I think property in the right location is still a solid investment.