Buy to let

[Egghead68]

Is it a stupid idea to do this in the current climate?

I’m think of buying a 2 bed house within commuting distance of London for around £350K.

I’d need to remortgage my current property to raise at least 50% of the cost.

I’m 52 and need some extra passive income to fund early retirement.

Any thoughts or tips very welcome.

Done properly, it's not passive. No guarantee of positive income.

I'd do it if you are interested in providing good, secure accommodation. But as for making money, nope.

I think the BTL ship has sailed unfortunately, OP. I suspect the only people who stand to really benefit from BTL now are property market insiders who really have an angle. For the rest of us 'civilians' I'm not sure it's a great option now.

I would recommend doing some research into all the requirements for landlords these days before going ahead.
Are you sure it's going to provide that much extra income: you will have to pay an increased mortgage on your own property as well as the buy-to-let mortgage? Would the rent really cover this as well as annual gas safe certificates and all the other landlord expenses?

Speak with a letting agent in the area you are looking to buy in and ask how the rental market it doing. Then speak with a mortgage broker who will be able to advise the best course of action for the remortgage and the BTL

Really depends on your circumstances OP, especially if you’re a higher rate tax payer.

The tax implications for landlords currently do not make it as profitable as it once was. Factor in also, increased stamp duty, mortgage payments, repairs, insurance, gas checks, letting fees if you’re not self managing, EICRs, licensing by the local council (if applicable), void periods, problem tenants etc, it is certainly not passive income at all.

And how can you retire early if you’re increasing borrowing costs on the place where you live now by £175k?

Hard to say as I said without knowing more about your current financial circumstances, current income and projected rental income.

Income tax on all rent -can’t offset interest
His will that I is the on your tax liabilities

I own several BTL properties. However I have v little mortgage borrowing in them and none on my main residence. It’s not something to take lightly and the changing tax rules make it a less desirable proposition.

Make sure you can get a fixed mortgage deal so this element is predictable.

Consider the tax implications (far fewer expenses are deductible when calculating your profit).

What might happen if you have a lengthy period of no rental income either because the property is empty or your tenants stop paying? (Most of 2020 I had no income).

What reserves do you have for repairs, insurance, maintenance, legal costs for evictions?

Are you in a position to get a plumber to fix a boiler when you receive a call from your tenant when you are waiting for a flight to go on holiday (real life scenario)? Or will you get a manager (if so deduct a further 10%).

Other expenses: insurance, gas and electricity certificates, possible HMO licence depending on type of property.

Can you afford the costs of purchase? The capital gains tax payable at the other end (likely to be aligned with marginal income tax rates shortly)?

After all this will you have a markedly increased income? Worth the hassle, time and potential heartache?

Or is it worth seeing a good IFA and seeing if there’s another way to secure additional income?

Thanks everyone. This is super helpful. I’m not too surprised it might not be a good proposition.

I do rent out my old house currently so I am aware of all the associated costs and tasks. There is no mortgage on it or my main residence.

I think seeing an IFA is a good way to go. A shame really as I am much more interested in providing decent housing than in stocks and shares.

If you are currently mortgage free and considering early retirement you’d be mad to take on considerable debt in order to buy another property!

Yes, I guess I was thinking I could pay off the debt in a few years and then retire with the rental income from 2 properties to support me. But it’s not sounding like a good way forward. I will talk to an IFA. Thanks again.