thread for prospective buy-to-let landlords

[LordElpuss]

Anyone thinking of investing in a buy to let or two? Any experienced landlords willing to share their experience?

DH and I are just starting to talk about this as a way to hopefully provide some pension income.

Is it best to take out an interest only mortgage to avoid paying tax on rental income? If so, what do you do at end of mortgage period, i.e. do you sell and pay off mortgage and hopefully have some capital for retirement? Or do you save separately to pay off capital and carry on renting out and use rental income as pension?

Can you recommend some websites?

Many thanks.

Thanks for the link - they appear to have a free seminar coming up in my area plus some courses (with a fee).

I'll join you altho we're slightly different. Can't afford to sell current home so when we move in December we're going to let it out. Fortunately our current lender's letting us continue our current mortgage instead of B2L.

We're not expecting to make much, more see it as an opportunity for someone else to pay the mortgage. Plan is that long-term we'll have property to sell/finally make money on.

Exciting, but scary times!

Good luck, Mehrida. Are you planning on using a letting agency to find a tenant and manage the property or do it all yourself?

first time landlords (and others) would be much better to use an agent, belonging to ARLA or similar. No guarantee of service (you'll still do a lot of work) but stops them legging it with your money. Letting agencies are NOT regulated (scandalous) so any crook can set up as one.

lots to know about safety, insurances, vetting etc.

plenty of people doing this now as it is not possible to get any real interest on savings.

Interest only mortgage. Yes sell after mortgage term and pay off the capital, you will be taxed on the profit but at this stage it's all pye in the sky as things can change in that time frame. Always treat as long term investment.

We always use an agent to find a tenant and then manage the local ones our selves and the ones up north are managed. We prefer to manage ourselves as really you are just cutting out the middle man, tenant calls agent, agent calls landlord. Managing yourself means tenant just calls you direct so they get a better service.

When buying don't get emotional about the property, look for functional and hard wearing, but obviously nicely presented. Fancy, expensive bits and pieces will get damaged but won't get you anymore rent. If you get emotional then you can quite easily be upset (I know I used to), 99% of the time a tenant will not treat your property as if it where their own.

When checking someone in always take loads of photos of the condition and provide a copy on CD to the tenant. We find this helps the tenant understand how we expect to receive the property back and has helped us in the past with deposit deductions.

And last but not least be a good landlord and treat your tenants with respect, they will more that likely treat you (and your property) the same.

Best of luck it is very exciting.

We're going to use a letting agent to start with as we are complete novices. We're going with a wee local firm that seem to rent similar properties fairly frequently and successfully.

After a year or so we're going to re-evaluate and possibly take it on ourselves. Just seems too big a step at the mo, with everything else we havew to do as well!

Buying a house is easy - being a landlord for 20+ years is not! Its a profession, there's loads to learn (safety, tax, contact law, maintenance) and keep learning as it changes regularly, even if using an agent this is your responsibility and agents in my experience dont provide much help beyond finding tenants and collecting rent.

Also, interest rates are at an historic low, over the next few years they'll return to their average of 5-8%. How does your profit look now? Do you have a separate income to see you through any hard times? Pay for any large maintenance needed (boiler, new windows, new roof).

I dont mean to be negative, BTL is a great investment but getting it wrong can have disasterous consequences.

Thanks for replies. We're looking at it being a 15-20 year investment. We've never been in jobs where decent pensions were offered (not that I trust pensions anyway), hence we're considering BTLs. It's possible that I won't be returning to work even though DD is now a junior so managing our property empire would be my "job" and a way of using my income tax allowance.

Is it best to take out an interest only mortgage to avoid paying tax on rental income?

Yes, the interest is deductible against rental income but you still need to pay tax on any profit thereafter (after all other expenses also).

Although you can use your income tax allowance against ie 50% of the profits, you cant get paid for managing them unless you are a seperate business entity.

This is quite a timely thread as we have just started looking into doing this too. Had our first day of viewings today. It was much harder than I thought.

I thought that buying a BtL would be much easier than buying a house for myself as I thought it would just be a simple case of price and rental income. But actually I found that with buying for myself you automatically rule out loads of places as you have particular ideas about what you want. But with a BtL you don't really have that.

Plus, glancing at right move doesn't actually tell you how much rent you'd get, how much the service charge would be for a flat and so on. So although you can get rough comparisons online each house is going to be different in rental value depending on the condition and standard of fittings etc. Then there is deciding who to rent to. We saw a couple today that could be good for students or young professionals, others that would be better for families. Each have their own merits. Student housing is generally a higher yield but the turnover is higher so more work and potentially greater wear and tear.

Then there is the fact that I walked into one property and totally fell in love with it and now can't decide if it is in fact the better but or of it is just because it would be the one I would choose for myself. It's a mine field!

Sunny try to detach yourself. You need to decide who your target market it, this can make a difference to what you buy. In our experience buying on a good transport rout into city/town center is a good option.
Professional people tend to want this but also families.

Remember also that a high spec property will rent for very little more than a clean, tidy, functional property.

Happy hunting.

Thanks heels

The lovely house is actually on a major bus route into the nearest city which is about 10 minutes away. So it is well located. Has a great park, lovely bustling neighbourhood with cafes etc. but it is a repossession and needs a bit of work (nothing structural, just new kitchen, bathrooms, flooring and radiators). We have never done so much work to a house before so worried we would be in over our heads. But the potential is huge. The only negatives that I can come up with are that it is on a busy road, but hence the great bus routes, and it has a small yard. But as we would be targetting students, post grads or young professionals I don't think that would be an issue.

We saw another house which is in a popular student street, is clean, functional and ready to go. So it would be much easier, especially as it is our first step in BtL, but the potential rent is lower than on the doer upper.

being on a main road wouldn't be a problem in our experience. If you bought the doer upper you probably wouldn't need to spend loads just a basic kitchen and bathroom. Only down side is you be loosing rent while you do it up, but sounds like it could be a better long term investment as you will have added value straight away.

Tax needs to be paid on rental income after mortgage and other expenses have been deducted. Capital gains needs to be paid on any capital appreciation when property is sold.Take into account rent loss in void periods also the cost of repairs and refurbishment.

Beware when letting that the tenants do not sublet, you could let your property to 4 individuals and find 6(or more) living there, managing agents do not always check up on this.

You are lucky if you find tenants who really look after your property

Forgot to say service charges on flats can be horrendous and are outside of your control. Once a flat is several years old the service charges can rise quite steeply and there is no way of anticipating by how much. If you take on a flat under a right to manage agreement you and all other owners will need to be fully involved in the managing of the whole block, not something to be taken on lightly.

Thank you so much for sharing your experience. I want to get a BTL to top up my non existent company pension. I am in my mid 20s and can only afford BTL outside London. Any good recommendation area wise for a £20-£30k deposit?

For the experienced BTL landlady, does your partner know? I don't really want him to know anything about it.