Buy to let - is it worth it?

[Cocothebear]

Basically my husband and I both have ok jobs but I don’t have a pension and my husbands is the absolute minimum. Neither of us will get an inheritance so understandably we are nervous about our future and our Childrens. My husband wants to remortgage and get two properties on an interest only mortgage and rent them out. He understands there won’t be much of any return now but is doing this so in 20 years or more this could secure our futures a little more.

I just wanted to get some reasonable, intelligent responses from people who’ve done this and their experiences. We understand this is a pretty hefty undertaking so any advice welcome. TIA

Do you have enough money to replace boilers, washing machines, etc quickly & upkeep the property properly?

Do you want to be dealing with tenants for the next 20 years?

Do you understand the tax situation?

Do you know about current legislation & what is likely to be changed?

The leverage is a good way to increase your pension provision but it does come with obligations.

I have had a BTL for 15 yrs now and I also did it towards pension provision . However if I had my time again I wouldn't do it . More and more legislation is coming on board for various property upgrade things together with less and less tax benefit . Coupled with the mortgage rates rising to goodness knows where . I am lucky in that I can whether any financial storm but if you don't have deep pockets and could for example buy a new boiler or expensive repairs then don't do it . Tenants who are paying money expect things done by return as opposed when you own you can wait until you want to do it .

It's also another thing if you are prepared for the admin , swapping tenants , sorting repairs etc when you are retired and should be stress free .

Thanks @hattie43 that’s really helpful. The changing legislations and tax issues are our primary concerns. It seems they’re making it harder and harder to do now

Echo the above. I know plenty of people who have lost fortunes due to having to get the courts involved/properties being trashed etc.
Legistlation and tax changes have mean it’s not that profitable at all.

Go over the legislation with a fine tooth comb, you can get yourself in incredibly hot water very quickly.

Also yes unless you always have enough in the bank to replace a boiler within 24 hours I wouldn’t do it.

I think it would be better to start putting money into a SIPP or S&S ISA if you have 20 years to go.

My husband wants to do it through a business so the tax benefits will be better. I’m in the process of looking into this and it does seem to be a better way of doing it now. It’s a minefield for sure

The problem is not just legislation changes but that they do it in retrospect. So for example reclassifying many houses as HMOs and bringing in very expensive charges and asking for ridiculous measures put in place. It means where there was maybe a couple of hundred cash flow a month it gets completely eaten up with all these changes.
Mumsnet hates landlords but I do think councils are being incredibly short sighted. Most smaller landlords are trying to sell up and there is going to be a dearth of rental properties or rents will have to be increased to cope.

I would look at air B and B if you have a business already.

We did this 20 years ago as our pension- we bought two tiny houses rather than one normal sized one.

It has been great in that I have been able to 'take' my pension and semi retire early- not at all why we did it but a really great consequence.

We are looking at having to sell if/ when the new EPC regulations come in. You just can never tell what legislation is coming in the future.

Looking back I used to wish we could afford to live in a slightly bigger house ourselves- we basically lived in one and a half bed just so we had a pension for the future. Everything was tied up in the rental.property so we couldn't afford to move until fairly recently.

In 22 years we have had one major trashing with no rent for over 6 months. We now use Open Rent as you can vet tenants yourself.

Terrible time to start this, just when many landlords are getting out of the business.

There is no guarantee that tenants will pay rent. They can live rent free until you evict them. Would you be able to meet mortgage repayments under those circumstances?

No I’m selling mine. Mine is mortgaged tho (70% mortgage) and with the interest rate increase and recent tax changes, it’s not worth it anymore.

I agree that lots of landlords seem to be selling up.

My daughter is in the process of buying her first flat. We went to see two last week, both of which were rented out. In both cases, the landlords were selling up because they have decided it's not worth the hassle any longer. The estate agent said it was very common.

Out btl is 17 years old now. It's not for the faint hearted. Our first Tennant tried to kill his partner with a sword and I only found out when she defaulted on the rent. She took him back and it took three months with no rent in that period. Found out after they had paid zero bills on their time in the house ( two years). They left 3 months of rubbish and dog poo in the garden. Burnt every carpet with fans that was brand new snd put bleach on all the other soft furnishings.

But since then I've had the same tennants as now. These tennants started paying rent later amd later and less and less and we had to go down in out 40's and explain to them ( after serving a section 21) that if they don't pay rent we can pay the bank late in dribs and drabs late. They are 20 years older than us and it was so uncomfortable and they was genuinely shocked two 30 years didn't out right own the house.

During covid it felt like a government seized assess and we was providing a public service, dispite having no issues at the time with our lovely tennants it was scary realising we didn't fully open our assess. It's not like money in the bank and even if we was on street ourselves we can't immediately draw on it. Plus Labour talking about tennants right to buy, we now want out.

Many good points too. It initially dropped in value then stagnated but it's 2x what we bought it for now. We only care about the capital growth, rent isn't worth the hassle on its own.

Yearly tax returns for its lifetime. Yes you absolutely need to have a way to get through 6 months empty and major emergency works which must suck up immediately.

I'd do the whole thing again as its kept us on the hosing ladder ( live in rented in very very desirable expensive commuter village through work) but I'm not sure I'd do it today. There is shift towards feeling insecure about the future. Would you want a scheme like right to buy? I personally didn't sign up for that kind of thing. Would you need the cash I'd one of you God forbid died? I'm not convinced I could get my house back in those circumstances. Legally I could but I know I would be on the streets before I exhausted the process.

You need to be cold to it too which I can't. I do care about my tennants.

Sorry for spelling. Dyslexic before I get called thick

I've ended up as an accidental landlord as we moved into a bigger home when we had a family and realised that we could still get a mortgage for the new house while keeping on my first house and renting it out. I don't earn lots by the time I pay the mortgage and I have had to pay for a new shower and oven in the last year, but the money I earn is put into savings and the plan is that it will go towards uni fees or a house deposit for our children when they're older.

I'm a lower rate tax payer which helps. I'm not sure how long we'll keep it for, my main concern is the increasing mortgage rates. While it's earning me something and not causing too much hassle I'll keep it, but if things change then I'll probably sell it.

I don't think I'd make the active decision to buy a buy to let if I was looking at investment options for my retirement.

If you smart and buy a house with a good yield its still a good thing....banks pay 1% interest on savings...inflation is high....I am looking to buy....have 65k sitting earning nothing really.....already have a rental....paid off....long term lovely tenants...no stress.....do long contracts and dont be greedy and tenants will stay for years....yes we had one horror years ago ...trashed the house and never paid but the rent guarantee ins paid us out....lost only one month rent....ins also covered court and bailiff fees....230 a year premium....there is a huge shortage of rentals....if you worried then let to council on a long contract....pay even if empty and they cover damages etc.

Thanks @earsup are you doing yours through a business? I’ve read a lot of these to hubby and he seems to think many of the negative ones don’t apply to us as we will be setting up a business to do this through. I really need to get clued up on it all. I do think being bloody careful about where we get a house and getting our own tenants is important. Thanks a lot for the advice. We are the same, it might not be the right time but like you we will otherwise have the money just sitting there so we’d prefer to invest it, just very carefully

*vetting our own tenants

We had a rental property and rented elsewhere. When we came to buy the tax on keeping the rental property was just too high.

Buying the property but also on the rent, If you earn over £40000 the rental income is taxed at 40%.

Also you used to be able to reduce the income you paid tax on by deducting the mortgage interest, but that's stopped now too.

No....no business...just do the regular tax return...takes 10 mins....I bought first house in london suburb years ago...got a repayment mortgage on it, lived at home to care for elderly parents etc...also paid extra from wages...now retired..have small teacher pension....currently get £1800 a month from that house...its money for nothing really..It is appx £400 a month below the market rent.....Join the face book group.." buy to let property".....the admin is Wes....excellent for tips...lots of very helpful members with tons of advice....I am looking to buy in yorkshire....something ready to go....no refurb as now expensive etc...dont mind doing a bit of painting and carpets etc...no more....when you find tenants, you will soon know if they are going to be a pain...asking for a new light bulb etc...!!...so i do the 6 month let...if all goes well then i do a long contract ...currrent tenants have been in house for 8 years.

If you buy the property through a company you can deduct the mortgage interest from your tax bill but you will also have to use a commercial mortgage which can have slightly higher interest rates.

@earsup thank you so much this has been so helpful, I’ve just joined the group and we are already getting ideas. Really good idea on the initial 6 month trial period. I’m glad it’s all going well for you.

I became an 'accidental landlord' ten years ago when I moved cities due to work. For the first 8 years, the rental money covered my mortgage, repairs, insurance etc. and with the small amount of extra money, I overpaid the mortgage. In effect it was costing me money as I wasn't taking any income from it but I was paying tax on the rental income. But I was focused on paying off the mortgage asap. Now I've paid off the mortgage, I'm able to take an income from the flat for the first time.

Things to consider -

• Do you need/want to take an income in the short to medium term? This can be difficult if you have a sizeable mortgage on the property, and you have to budget for unoccupied periods, repairs, redecoration, insurance, changing regulations (e.g. I had to pay over £1k to meet new electrical regulations a few years ago).

• Can you manage the property yourself or will you need an agent (in my city they charge around 15% of rent).

• what kind of tenant are you targeting? In my experience I've found keeping my property in very good condition has meant I've attracted a good quality of tenant who treat the property as their home, look after it, and all have stayed for several years. But this means I've spent quite a lot of money between tenancies redecorating, new flooring, new furniture etc to keep it in tip top condition).