Should I invest in a property to let?

[yetanotherdaytoday]

I am about to inherit* some money. It's enough for a cheap studio flat in my town, or a 1 bed if I go a little further afield.

If I don't invest it, I could easily spend it topping up my income as we're always living one paycheck to the next, and it'd be gone in a few years.

I'm thinking about buying a small property with it and letting it.

Is there any reason I shouldn't do this? It seems to make sense to me as it'd provide a modest income, and be an asset I could cash in at some point, or leave to my own DC.

Has anyone got any tips about being a landlord? Thanks.

(*Full disclosure, my mother inherited the money after my father died, and she has said she wants to give me and my siblings a large cash sum).

You will hear lots of awful stories about landlords and tenants, OP.

Of course if you buy somewhere that doesn't need any work and if you have a tenant who pays regularly and keeps the place looking nice, then you would be fine, but perhaps do some research into how long a tenant can go without paying any rent, and think how hard it would be to get money for repairs off a really bad tenant before you decide.

You could invest that money for a number of years and reinvest the interest, too, so that your money grows.

If you post this in the money section - just say "I want to invest £X for X years - which is the best way to do it" then you'll get some really good advice.

I should have said, I'm really sorry you lost your dad 💔

Hi, maybe do some research into how much the value of the type of property you wish to buy may rise in value at the moment/ future.

Compare the amount of money you would get in interest with it in a savings account as rates as they are at the moment make the investment income on property less favourable. Especially if you run in to a bunch of repairs. Also do not forget if the property increases in value and you sell you may be liable for capital gains tax.

I'd rather get some self control and put it in a high savings bond/account where you can't get access for frivilous living. You can get some very good rates at the moment, which will surely be better than being a landlord.

The only other profitable and enjoyable thing to do with it would get a better home for yourself either through moving or home improvements.

I anticipate you will be roasted on here for suggesting you become a buy to let landlord, but really unless you fall extremely lucky the numbers do not add up so it isn't even a capatalist a-hole thing to do anymore....it's actually quite charitable. But duck now. You're about to be roasted methinks.

Letting is a double edged sword. On one hand you should get a better return than investing the money, and it is index linked in so far as property prices generally rise with or exceeding the rate of inflation. Good for the long term.

However, and this is a big however, the government have changed the tax system which makes it less profitable in the short term if you have a mortgage. Even more important, the laws are changing to make it far more difficult to eject a tenant. This is great for honest tenants as it protects them, however it is a nightmare when you get a dishonest tenant as it can take over a year to eject them. And they can stop paying for the whole of that year, and you have to go to court to get compensated, which may be awarded at some ridiculous rate. (Don't ask me how I know all of this!)

So, it isn't a bad investment as long as you are in it for the long term, don't rely on the income (I.e. can afford to take the risk of potentially take long periods without rent and the subsequent court battle to retrieve it), and don't have a (big) mortgage on the rental property.

I have been letting for over 20 years and am selling up due to the increased occurrences of nightmare tenants.

With the possibility of a Labour government: don’t. You will have expenses and many tenants don’t look after properties. Labour might make it more difficult to get rid of unsuitable tenants and make it more difficult for you to evict a tenant if you want to sell. I’d be very very careful.

We invested money for our DC in trusts. They have done well and no tennant hassles.

Don't.

It's true that people need to rent but it's much better for rental properties to be owned by larger organisations who know what they are doing. Hobby landlords with only one property cause an enormous amount of grief and it's also loads of work to get it all right for minimal reward when it's only one property. A multiple property organisation has efficiencies of scale that make it more feasible for them to get thongs right.

The property market is broken, supply and demand is in the hands of building companies who donate enough to political parties to ensure that no legislation is passed to force them to increase supply to meet demand and thus lower prices. It's not the very poorest that pay the price for this but the taxpayers (some of which are also housing benefit recipients as housing costs are so high that even being in work is no guarantee that you can afford vasic housing) and the worst hit are the people whose income is just above the thresholds for benefits given that the thresholds are far too low. It's a total mess that will take a generation to sort out but please don't become part of the problem. Invest in something ethical instead.

• I've given my thoughts based on your inheritance being over £100k, but just realised you might have just enough for a deposit and then getting a buy to let mortgage.

I'd still avoid buy to let though. Too much regulation, red tape, tax and hassle. It's unattractive, by comparison to other investments.

Bad idea. Take professional financial advice and get it invested in tax efficient manner. There are a number of ways you can invest tax free and without having to do tax returns and lots of other headache inducing paperwork and management. Look at online landlord forums to see what is involved in renting property.

I rent property and I wouldn’t advise it. Put it in a high interest account.

Oh my gosh, OP, if you are living paycheck to paycheck you are not the sort of person a tenant needs for a landlord. Sorry to be blunt. You need it as emergency savings in a high interest account somewhere which limits you taking it out to spend willy nilly. There are limited access savings accounts where you can withdraw maybe 3 times a year or so. You could put some in an account like that and the rest in a bond which you can't touch at all for a year/2 years/3 years/whatever term you choose. Don't even think about setting up as a landlord unless you have enough proper cash behind you.

If you are living one pay check to the next, you can’t risk being a landlord.

what will you do when the tenant phones you in the middle of the night to say the boiler has gone? Or you have a catastrophic leak and the bathroom needs replacing?

terrible idea.

it’s a huge responsibility to provide housing. Both me and DH rent out our properties from when we were single. It costs money to keep them and we are getting rid of them soon because it’s too much hassle, and that’s with a rental company managing it. We have been good landlords but I do not want to the stress of it.

the funny thing is though- when we sell they won’t go to to families and FTB. They will go to bigger landlords who have the resources to ride out all of the legislation that is going to hit second property owners.

Equally, don’t use it to top up your pay check. That’s insanity. Get independent financial advice. A savings account is going to provide better returns than BTL right now.

What could possibly go wrong? 😂

Seriously though @yetanotherdaytoday for a stress free life you might be better off putting the money in a high interest savings account.

Thanks for all the posts, I'm reading and thinking about them.

Just to clarify a couple of things, I don't plan to take out a mortgage, it would be a cash buy. (I don't have a mortgage on my own home either).

I thought, if people are making money doing this with mortgages and I won't have that expense, then I'd be in a good position, surely? But maybe I'm being naive?!

I liked the idea of having an extra income, while the flat would still, hopefully, be rising in value.

I understand I'd need to build up a chunk of money for emergencies before taking any out as income.

Also, if catastrophic work was needed, I guess I could at that point take out a mortgage as a last resort.

Thank you xx

For balance - I have two BTLs. I’ve been stung with rent arrears once in ten years. Generally I’ve been very lucky and have long term tenants who look after the properties.

Everyone always says it doesn’t stack up commercially nowadays, and maybe the model of interest only mortgages and generating an actually monthly income doesn’t. But the rent covers the mortgage (it would give me a surplus if I charged market rate, but I have good tenants so haven’t put the rent up in 4 years.) And the properties have gone up in value - so when I retire I’ll have two rental incomes as extra cash. That’s good enough for me.

My dad has a few properties he rents out via an agent and he’s largely done ok on them as a retirement income. He owns them outright so no mortgage, they’re in good condition so don’t have things going wrong all the time and the letting agent deals with communication with tenants.

Would you have enough from the inheritance to keep a decent amount back should there be any repairs that need doing that you keep in a high interest account?

It’s worth using a tax accountant unless you know exactly what you’re doing with a tax return to make sure that’s all organised properly.

Stay clear, rents are falling, and I`m confused as to why you think the flat will be rising in value? We have just moved back to more normal interest rates from near zero "emergency" rates, any property you buy just now will be well overpriced.

https://propertyindustryeye.com/rents-fell-last-month-as-market-returns-to-seasonal-patterns/

High interest rate account and premium bonds would be my advice, if you live "paycheck to paycheck" you are not ready to be a landlord, sorry.

@YireosDodeAver We don’t have enough housing because we take years for schemes to get planning permission after the land is in a neighbourhood plan. We have millions who don’t want housing near them. Smaller landlords have taken flight and sold up. We want to build on brownfield sites but they cost millions to clean up. If we don’t have larger housebuilders, we don’t get anywhere near a higher volume of building. There’s no one else. We need to be more creative about where we can build and let’s see what Labour can do if they get elected. 1.5 million homes in 5 years. Let’s see where they go.

If the op has no savings, definitely don’t buy to let. No financial adviser would suggest this.

This

Being a Landlord is not for the faint hearted, or for anyone looking to make ‘easy’ money. Take plenty of advice OP.

You would be better off with a couple of bond funds and a handful of good dividend paying stocks, what happens if the housing market crashes and the tenants decide to buy something? The stock market is there are long as civilisation is there, your rental income leaves with the tenant?

Hell no
you could invest the money in a bond
roughly between 4and 5% interest on just over 100k you’d probably get about £350/£370 after tax for doing nothing

Tenants can stay put not pay rent for months trash the place and legally it will take months and cost you thousands

No. Currently trying to evict tenant (7 good years one hideous)...it's prob going to cost around £6K by the time I've paid court fees, bailiffs fees, storage of their belonging etc....even good tenants can turn bad and then it's a nightmare of damage greater than the deposit, plus legal hassle. Not something to do unless you can easily afford these costs. I might consider investing in purpose built student accommodation where you don't have the hassle of being an actual landlord but the income is good/pretty guaranteed but I haven't looked into it enough yet!

Op I don’t think it’s such a bad idea but you firstly need to have a household budget that gives you the opportunity to save an emergency fund.

You also need to do a budget on the flat that looks at likely rental income as well as costs like ground rent (is this likely to dramatically increase), maintenance (are there any expected large maintenance jobs), letting agent fees, any jobs needed to make it environmentally friendly or generally habitable, boiler services etc.

Rob Dix is an expert, he has written a good book on the subject and has a podcast.

I’m considering buying a rental property when my divorce comes through but I think I’m in a good position because financially I can afford it and having lived in my area for over twenty years I now know trustworthy builders, plumbers and electricians. I also have friends who own but to let properties and can recommend letting agents.

Is anyone else wondering why OP is living paycheck to paycheck but doesn't have any mortgage costs? Am I missing something?