Is Buy To Let a Good Idea at the Moment?

[JandLandG]

Firstly, I do understand that there is a bit of a moral issue with Buy To Let. I'm not naturally a landlord type myself, but laying aside the arguments about exploitation or artificially keeping the housing market out of reach for younger people, I wonder what people might think about getting into Buy To Let at the moment.

Bit of background first: we're lucky enough to have plenty of equity in our home, but we don't really have much in the way of savings or pensions.

What I'd like to do would be use our equity to invest in property and rent out long term so that we would have the asset more or less paid off in 20 years time.

With a fair wind, I don't see why we wouldn't be able to build up a little portfolio so that as well as some pension provision for ourselves, we could also help ensure that the children could go through education without ending up in 60/70/80k worth of debts or whatever it would be.

So, what does anyone think?

I wouldn't expect any capital gains in the short or even medium term, but it would be nice to have something ticking over in the background.

Having both been a landlord and a tenant over the years, I was happy with both arrangements both times and am just wondering whether now is the time to delve back into that world.

I don't think the Euro will collapse, but we'll wait and see. The economy round here (SW, not too far from Bath) isn't too bad, fortunately and obviously I'd take into account the interest rates won't always be this low. Families rent houses now in a way that they didn't a decade ago, so that's the market we were thinking of going after. We rented here ourselves for 18 months after re-locating.

So, risk some our our (not-very-hard-earned) equity to feather our nest for the future? To be honest, I can't see of any other way of providing a decent pension for ourselves. Or helping the children out when they need us.

We're in our 40s now, 3 young children and all fine, but feeling like we're all getting a bit older and would like to plan ahead. We're very lucky to be healthy and happy, but don't want to struggle when we're older.

Anyway, sorry for the long one, but any thoughts/ideas/opinions/experiences would be welcomed.

I wouldn't and never have got involved in letting. The rewards have been good for investors but the hassle is enormous. I prefer a straightforward refurb

My dh and myself have been landlords for 15 years, myself a reluctant landlord, I could see my dh point of view that we won't get much from our pension when we retire so that's why did buy to let. One thing you must beware that not all tenants pay on time, and the fact that you have a mortgage on the property does'nt seen to bother some of them when their rent is late, or if you are really unlucky they don't pay at all, so you really need some excess capital to allow for late payers and also work that needs to be done.
Sorry did'nt mean to put you off.

We have a couple of buy to lets and I have mixed feelings about them. The student house is more than paying its way. It was cheap, we pay interest only on it at the mo (though have repaid half in yrs past). The rent gives us 3x the mortgage payments and the students pay half rent over the summer. Very little maintenance once it's set up.
The other one has been an absolute nightmare. It is an apartment in a housing association -owned block. We pay a maintenance fee to the HA so should be maintenance-free. A small leak from upstairs's soil pipe wrecked the apartment, because the HA messed about so much ignoring it and pretending to fix it. The apartment was uninhabitable for nearly 3 years while we fought and fought with the HA, their insurance company, their loss adjusters... The mortgage in the meantime crippled us.

Unfortunantely, this is not uncommon. So I guess I'm saying avoid HA properties.

Interesting to hear from someone in the market Madmomma, given that the Russell Group unis are reporting thousands of vacant places this year and are struggling to fill them - do you think that student letting will still be a 'cash cow' in the future? I have to confess to struggling to see it as an expanding market. But I'm a cynic!

I think it will continue to thrive. I know landlords with about 6 or 7 in each house who would still make a profit with 3.

I think student lettings will always be a cash cow, but the students will be from further afield. For example we're in Manchester and there seem to be more and more 'foreign' students and less local ones. We undercut most of the houses in the area. We also offer the first student in the house a discount on their rent if they can fill the other rooms (with their mates). Then over summer, they get free rent if they can fill the other rooms and manage any little issues. It's worked well so far. I guess we just try and work hard at the relationships we form with the tenants. Word of mouth etc - one nice tenant seems to lead to another. There is the issue of a lot of new purpose-built student flats in the city centre, but I think there will always be groups of students who would rather live in a house (and it's probably cheaper)

Madmomma it sounds like you are one of the few landlords to treat students as human beings and recognise the good business sense of relationship management and word of mouth. I think landlords like yourself will always continue to thrive. Good for you!

YellowWellies, student landlords who got in early enough (i.e. bought cheap enough) will always do ok. However, it is absolutely the last thing I would suggest new LLs get into. Reasons:

1. Fewer students due to costs as you point out.
2. Remaining students looking to save money - easy win is to study close to home and live with parents.
3. Student accomodation being thrown up in many uni towns/cities.
4. Expect demand from foreign students to drop if/when sterling strengthens.
5. Expect UK students studying abroad to increase especially if sterling strengthens.
6. Importantly, by 2020 the number of 18 year olds in the UK i.e. the potential demand will have dropped by over 20% from its peak a few years back.

In my opinion, there can't be anything but downwards pressure on student rents in the short-medium term.

Alabama there are some facts there that just can't be ignored... wow. Anyone thinking that the student letting business will always be a go-er just because it has been in the recent past needs to read that list with a rational mind. Really interesting post.

There will always be demand it may not be lucrative for capital gains but for investment it is a surer thing than the residential market. It is so buoyant here there aren't enough and unis are putting cards through doors seeking rooms in family houses too. Just met a couple of my 'property' mates this morning and they still have several houses but they bought years ago so no mortgages. In fact I know very few people who are doing well who have mortgages. If the margins are tight its pointless

op, a really good thread.

I would try and increase your cash savings a little bit more. 12k to me seems slightly on the low side. Is there a way you can pay off the 80k faster than 10 Years?
To me your btl, of chosen very wisely seems like the way to go. I would also try and invest say about 5 or 10k in shares too as just another basket.

Aww thanks yellow you're too kind