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).

Sales volumes are down about 50%, mortgage applications are down about 40%, those people still live somewhere, we have plenty of housing. The political parties have been talking about "mass building programs" for decades, if that level of building was really needed there would be tens of millions homeless by now, it is just scare tactics (No more land!) to get people into mortgage debt, don`t people get this yet?

Good point.

I feel confident that I would easily find new tenants - generally had 15 viewers first week of advertising.

And it’s worth double what I bought it for ten years ago but hasn’t cost me anything (or very little at least) as the rent covers the mortgage and tax.

If I take the value gain, it’s an average of 9.5%p/a interest over the last 10 years. So if prices crashed as long as they didn’t halve I’d have made money.

But - like I said originally, it’s good enough for me, I accept lots of people don’t think it stacks up nowadays.

Depends what you are buying and where.
Local to us HMO's are still making considerable profits, Facebook landlords
are also doing well (hint they don't use traditional eviction routes) but single property landlords with family houses are struggling to turn a profit.

If you go down the route of becoming a landlord, you can grow the business. I would consider maybe using the money as a deposit on two properties or something big enough to be a HMO.

Landlord insurance with legal protection and rent guarantee is a must but eats into your profits.

Put it in a high interest account and then each year shift some into a stocks and shares ISA to max your ISA allowance. In a few years, you will have the whole pot safely in an ISA where it can grow tax free.

This is much safer and easier than being a BTL landlord.

Ten years ago interest rates were at half a percent! There is no way it will sell for double that now with wages going nowhere and a cost of living crisis ongoing and possible recession looming.

https://www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp

Rents are also falling, that implies less competition for properties now?

Just as a heads up, you would struggle to get a BTL mortgage on a studio flat, so don't plan to have that as a fallback strategy.

Higher interest rates are designed to bring down prices, why wouldnt you take advantage of higher rates in a savings account and wait for lower prices, doesnt make sense to dive in now.

I have one, a 3 bed house in a local town but I’m a SAHM and it’s my insurance policy, not a source of income I rely on (I just over pay the mortgage)

I would avoid flats as you’ll likely have lease hold charges.

Dealing with tenants can be very stressful. I’d invest the money.

Yes, interest rates were that low and so what I’d have got in interest rates over the last decade would have been pitiful. So even if the value drops somewhat, I’m still better off. Not that I have any plans to sell.

@TizerorFizz 5 years? Did you miss the line in my post saying It's a total mess that will take a generation to sort out ?

I’m saying Labour don’t think so. They are trying to increase supply. I’m rather with you but voters might believe Labour!

I have 2 flats.
Tenants good over the years
But it's a PITA - my heart just sinks when I get emails from the estate agents about something going wrong - new cooker needed, garage door broken etc etc
I just pay to get all stuff done asap as not fair on tenants otherwise - I suppose it's just having the responsibility for someone else's home that I find a worry which I didn't appreciate before I was a LL

Thanks, I didn't know that, why is that?

How about a 1 bed?

Yes that is a fair point, you probably did BTL at the right time, I don`t think the OP should go into BTL now though.

Yes, friends I know who rent round here are finding it really tough to find decent places not at ridiculous prices. Good ones get snapped up quickly. I know there is the demand here.

I can't afford a house within about 300 miles of where I live. I'd like it to be within relatively easy travelling distance, say 30 miles of where I live.

Good food for thought, thanks.

At the moment I'm thinking of buying a studio or 1 bed flat in the South East.

I think it’s an okay idea as long as you have enough money to keep the property going if you don’t have a tenant paying rent. You need to be able to afford the bills, council tax, service charge etc for a long period of time in case a tenant doesn’t pay up or it takes a while to rent out.
I would probably say it’s going to be better to go to an IFA and get some advice.

The OP has already said they’re not looking to get a mortgage.

I think it'll rise in value because I'm thinking long term, and the trend is up, consistently - and considerably - over a long time period.

When I bought my first flat, people advised me not to as prices would fall.

They did, eventually, but not before my flat had increased in value considerably. Had I hung around, I would never have got my foot on the property ladder.

My parents were less lucky - they bought their first family home at the height of a boom, and soon after they bought it, it plunged into negative equity, where it stayed for several years.

However, when they sold it 40 years later for well over a million pounds, that initial £15k investment seemed a good one, after all.

I'm not trying to make a quick buck, I'm trying to put the money somewhere solid.

It can work if :
You do your sums correctly and make sure you leave enough aside for repairs, charges, ground rent and anything else applicable. I would advise putting 30% of the rent each month aside for this.
You accept it's not free money. You are providing a service, so will need to work a bit, which involves getting things fixed quickly, vetting tenants, doing checkin and outs etc. You can pay a management company to do this as long as you factor in their costs.

It helps to have the number of a reliable plumber and electrician.

Buy a flat already in good condition, make sure everything is in good working order when you rent it out. Charge a fair rate for good reliable tenants who will stay.

Get the right flat. Look around, get somewhere practical near transport links, shops and other services. Pay the right price for it.

Be in it for the long term.

The costs are insane and everyone wants their cut.
My tenants contacted the managing agents because the heating wasn't coming on.
End result: I've paid £78 for someone to put two AA batteries in the thermostat.

Has your mum fully considered the possible implications of giving away large sums of cash ?