advice for wanting to retire on btl

[marieinlondon]

Hello,

First post here, I was recommended mumsnet for advice on btl.

We are currently in our early 30s and want to retire in 10 years time. We have been working really hard to pay off the mortgage on our house and only have 30k left. We bought our place for 120k several years ago and is now worth over 300k. In a years time the clause from right to buy will end and we can finally sell it on and start planning our future.

We are planning on selling it next year and this will leave us with 280k ish in cash. We want to buy a slightly bigger place on a mortgage for about 450k using 150k deposit and then use the rest to buy two or three flats in good areas to rent out. I only work part time so take in just 8k, but my husband earns a heahtly 56k + bonus.

Can any one give me tips and advice? I want to remain in north London and have my investments in north London also. We plan to work hard for the next ten years to pay down the mortgages and then hopefully we will make enough to retire

Can you get a 300k mortgage on that combined income?

I think so, with a huge deposit that is only 4.5 income based on last year and I know people that have 6-7x income. But I know they have got stricter recently

It's all based on affordabilty now, not multiples.

I think you are being very optimistic about what your money will buy you in north London and what the remaining 130k will buy you - I would be very surprised if it would provide you with two or three rental properties anywhere - certainly not one that would be problem-free and allow you retire in ten years' time.

I've seen your other thread, Marie.

I agree with all the other posters who have said that your figures don't add up & retiring at 40 based on BTL income is unrealistic.

People have made lots of money from btl, but that does not mean there will be a lot of money to be made in the future.

I think politicians of all parties have woken up to the problems caused by uncontrolled house price rises, including how exposed some btl owners are. The Conservatives in particular should be worried that further instability might flow from money freed from pension funds into btl.

1. It is very hard to make a day to day profit, and really only possible if you do a lot (management etc) yourself. If you end up with a problematic property you could end up with lengthy voids and significant loses.

1. Scope for big capital inceases is not guaranteed, especially in London. Interest raters are almost bound to rise, tax breaks are being reduced, and there may be increased scrutiny on btl mortgage borrowers in the same way that residential buyers now have to proved they can afford a mortgage. And yes, London property is seen as a place to shelter overseas money, but I think think, all parties have woken up to the disadvantages of having residential accomodation become an international property. Not least foreign investors are flighty and it would not take much for London property to go the way of the Tunisian tourism industry. And transaction costs are high.

BTL as a business is entirely fucked which is going to decimate house prices. This is the worst time in history to get into BTL - think Newton buying back into the South Sea bubble. The recent budget made some tax changes that mean that landlords who were just treading water or even making a profit will soon be making a loss and have to sell.

You'll be lucky to make 5% yield. This wont pay off the mortgages in 10 years. You cant reply on capital increases either.

I wont even bother with the logistics of being a ll and the time and effort and knowledge you'll need to do it successfully (and legally and properly). Being a ll isnt a sideline or get rich quick, its a job, a profession.

You need to go back to basics to look at how BTL works, Mumsnet isnt the place. Try Property Tribes or Property118

we have 3 small btl two are mortgage free and that's not enough for us to retire on in our fifties. I would reassess your budget, we assume 1/3 pretax rent will be spent on maintenance/bad tenants/temporary empty etc. One of our tenants moved on and that was empty for four weeks whilst we whacked in a new kitchen and boiler and that has cost the equivalent of all of the rent for that year. It's very hard to retire on btl.

I think it is a good plan to have, but you need to adjust your expectations regarding both income and age. I think you will struggle with a combined income of £64k (given that not all lenders will take a bonus into account as it is usually not guaranteed) to secure a mortgage for £300k.

Don't forget you're not going to be left with £280k - if you still owe £30k and its worth £300k, then that's £270k. You'll incur estate agents fees selling (usually about 1%, so £3,000) and you'll pay £12,500 in stamp duty on a house worth £450,000. So perhaps with removal costs, legal fees, maybe a bit of repair / redecorating to old & new place, you're going to have spent the best part of £20,000. That leaves you with £100,000.

I don't know what levels of deposit you're looking at for BTLs, but I would be surprised if any were below about 25% at the very least. If you want to buy 2 properties, that gives you £50,000 for each property, so you're looking at a maximum of £200,000 for each property. Again, I'd be surprised if you can get decent properties in North London for £200,000. If you do, as pps have said, the rent is likely to cover only the mortgage and the maintenance (if you're lucky). Don't forget the tax implications.

I am quite risk averse so I would be worried about being able to cover a mortgage for £300k, plus potentially 2 other mortgages (probably at a higher rate than your residential mortgage because they are BTL) for another £300k if there were to be able issues with tenants not paying rent / void periods. That's a massive amount of money to find on an income of £64k.

You might do better with having a couple of flats as holiday lets. One I stayed in in London charged about £170/night for a 2-bed flat.