Would we be made to buy a buy to let in SE London ?

[Levantine]

We are under offer. Have a budget of upto c£525k

We have unexpectedly seen a hosue that we really like - for £300k. - it's modern but in an area we like, big garden, very extendable, and we think we would be happy there

Would we be insane to get a buy to let with the rest of the money?

Thinking Honor Oak/ Crystal Palace/ Forest Hill - a good victorian conversion near the station. DH very very handy and cd do the maintenance

Are we nuts?

sorry, mad not made

It all depends on the maths really. What would you be paying on the BTL mortgage (including if interest rates go up, which they will). What rent would you be likely to achieve (including void periods). What would you have to spend on maintenance & servicing & advertising. Don't forget stamp duty and purchase fees. And tax on your rental income. The question is would you actually make any money after all that?

Mortgage interest and maintenance costs can be deducted from tax on rent income but the rest can't.

You say the house you like is extendable - extending costs money so you might want to keep some in reserve for that. Plus the usual repairs, redecoration, furniture that you will want/need for the new place.

All this sounds very negative I know! It could still be a good idea, just saying you need to have done the maths very carefully in order to know.

My primary concern would be the prospect of capital depreciation. London appears to be a bubble on top of a bubble at the moment and the problem is this is based less on fundamentals and more on a number of temporary and unsustainable factors.

For example, a lot of money is coming from abroad due to global geopolitics (Greek, Italian, Middle Eastern etc.) - when the global situation eventually stabilises, then what?

Another example is the current weakness of the pound, making property investment, particularly in London, much more attractive - again likely to change in the future.

Again, the Local Housing Allowance changes such as the benefit caps being discussed will affect London the most - due to the high rents - what affect will this have on yields and thus prices?

Finally, and due partly to the above, the London property market is increasingly resembling other investment markets, which means it becomes more susceptible to the whims of investors. What happens if investors suddenly decide to take profits? What happens if a more attractive investment opportunity comes along? Would you be left stranded if there was a dash to get out? Remember the dot.com bubble? These things can change in no time.

Other may disagree but far to risky for me at the moment I'm afraid.

Thank you both, that is really helpful. Am trying to get hold of our mortgage advisor. I think I am veering away from it now as it would probably be more sensible to just keep the money in a more expensive family house. I just can't blinking find one!

There are alternatives you know! With a bit of research you could put together a decent conservative investment portfolio, which would provide useful diversification from (probably overpriced) London property.

By the time you've extended, would that not be most of that pot gone?

Hmm yes, possibly.

Well we would still be mortgage free, but would have to remortgage I suppose. Jsustr spoke to mortgage advisor, the fees on btl mortgages are astronomical I had no idea