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).

@CrashyTime honesty ours is no bother . It's a one bed and we get a £900 return on the cost of it which was £170k 10 years ago .

It's now worth £220 k and had given us £100k in rent so to me it's well worth it .

It’s quite expensive letting a property, the rent won’t be anywhere near your income, even if mortgage free. You can save a bit by not using a letting agency but that does mean taking on the work yourself and keeping on top of legislation etc.

I do think it’s a good investment for the future though.

It’s useless quoting gross figures! That’s nowhere near what you get! The OP said she had £80,000! That’s nothing in the SE so it’s not SE rents. I got £850 a month for a 2 bed in an average town 1 hour on the train from London. 25 years ago it was £66,000. Sold for £272,000. I’m sure there’s no longer that increase over 25 years. I have now invested that sum in high interest bonds for 1 year. As I said earlier that has no expenses and no hassle. My house was serviceable but needed updating. Anyone spending £80k won’t get £900 a month. That’s about what a good 2 bed gets in our town now but you will be paying £280,000 plus for a nice one. A 13 % gross profit is not possible. 900 x 12 is £10,800 pa. If it was that good no one would be selling up! Plus over 10 years you can get decent returns from a share portfolio in ISAs.

OP income from Airbnb is much higher. For example for one of our homes we charge $1,100-$1,800 a night. For long term tenants we would 'only' get about $1,100 a week.

We manage it ourselves. Yes - a lot of hassle, stress, time consumed. Wear and tear. Worry about the damage. But the income is great.

How will you get that from a 1 bed flat in the uk costing £80,000? Virtually impossible. We don’t get that every week for a 3 bed house with glorious sea views in Cornwall worth £650,000!

With savings of 80,000 you might make 7% a year in a good savings account (at the moment anyway) but this is going to be offset by inflation.

Apparently, the average UK savings account lost over £4,000 in real-term value between May 2013 and May 2023 due to high inflation. (This was a figure from finder. com, think the percentage value would be helpful)

In 10 years you would at least expect an 80,000 property to rise in value, in addition to any income you could make as an airbnb or serviced apartment (should at least be able to match savings interest this way, depending on location).

As others have said, definitely worth getting proper financial advice from an IFA.

I don't think the risk is anywhere near worth it.

What sort of flat are you going to buy for 80k ? It's hardly going to be prime airbnb material.

And is that 80k before or after you've decked the place out for renting with new carpets, furniture, appliances and purchase fees.

@GasPanic Exactly. And how much does listing cost? Plus time you need to be available and cleaning costs?

Think it depends massively where you’re based. In some places in the north (and possibly elsewhere) you can get a house for £80k in a popular location.

I’ve just posted a link on another thread to an 8-bed house next to an enormous park and within walking distance of Liverpool city centre for under half a million.

Yes in a well maintained block where you can afford the charges Then you need rent damage and legal expenses insurance

Exactly, stick 50k in Premium Bonds then buy some tracker funds and a bond fund with the rest, and in the time saved from not fixing toilets/showers investigate Gilts etc.

Can't be that popular or everyone would be buying them !

I think property investment, fine if the market looks buoyant (it doesn't at the moment).

Also IMO you need to have some cash in reserve in case big bills come in. This is relevant for BTL because tenants don't like houses to be in a crap state of repair.

Sounds like the OP is living pretty much on the limit of their finances anyway.

What happens if a £5k bill comes in to fix the new property within a few months of buying it/renting it out ?

As a landlord you need to have that sort of contingency. You may be able to make money in the long run, but you need a cash reserve to get over any potential humps.

Investing in a illiquid and potentially expensive to repair asset when you are already at the limit of your finances, that would be a no from me.

Well Liverpool is a popular location I believe? Fairly sure you get a few visitors here and there…

The price band I’ve referred to is within walking distance of city centre.

I haven’t suggested the OP goes for BTL. I have friends who do Airbnb and for lots of reasons (including return and risk) can make a lot more sense than BTL. Obviously depending on whether you live in a place where there is a steady flow of visitors. Liverpool, as given in the example, is one of those which is both cheap and popular. Info based on knowledge rather than generalised assumption. You’d charge less per night than in, say, London, but obviously that reflects the size of the investment too.

DC has recently bought in a large block with quite a few tenants Could the new law impact there
How does it work if tenants have contract with LL and LL has lease
agreement with freeholder and te nant break the main lease Surely the main lease overrides

AirBnB will get hammered in a recession and there are moves to make them pay their tax, plus moves to get rid of them all together because neighbours are fed up with the disruption, not the best investment going forward IMO, predicting that people will always crowd into certain locations come what may economically is dangerous, just ask WeWork.

Just another option to explore 🤷🏻

Yep, £1000-1500 per week for a whole house in peak season in a very desirable seaside town like Whitstable. Not per night!

Still not the return you can expect for £80k though is it? Holiday lets are very difficult for a low investment. Liverpool isn’t that popular. Except for the Grand National. Plus some areas are pretty average to say the least!

What’s not the return you can expect for 80k…?

And you clearly don’t live in Liverpool 😂 You do realise it’s a massive tourist destination for people visiting the UK or popping over from Ireland, not to mention a major city for groups on birthdays, hen dos, city breaks, and also lots of people visiting for work. More generally speaking, pretty much any major city will be guaranteed to have airbnb guests. Although all of that’s of limited relevance really as the OP doesn’t live in Liverpool, it’s just an example.

Love how people always manage to find things to argue about on any given thread 😂

What’s not the return you can expect for 80k…?

Think people are responding to the poster upthread who suggested OP could get £1000-1800 per night for a £80k one-bedroom flat in Liverpool if she put it on Airbnb.

Liverpool is lovely and has many tourists, but not many who’d spend £1800 per night to stay in an unremarkable little flat a couple of miles outside of the city centre.

No that’s bonkers. Was that poster talking about their own airbnb in the US somewhere? I wonder if it was a typo and they meant per week. Even somewhere like Manhattan that’s about 6x the average.

It will stall in a recession though, that is why AirBnB is risky, we are also at the end of 2 decades of cheap money, this isnt an ordinary cycle and most people using AirBnbs have never seen a recession or high interest rates, their spending will stop sharply at some point

I couldn’t comment on what the OP should do; there might be better, more reliable investments, however if she’s looking at property, Airbnb might be a less risky option with higher returns than BTL. The other good thing about Airbnb is that if the income stream slows, so do the outgoings, and if some major repair were needed OP can do it on her own schedule. So in that sense, while returns might drop in a recession (although one thing that people might do is look to cheaper getaways at home rather than foreign holidays), there isn’t really too much risk if the OP is looking to buy outright rather than mortgage.

But to be honest I’m not particularly an Airbnb advocate here and I’m definitely not qualified to give financial advice, so just throwing thoughts and options out there for the OP to explore.

Lots of useful considerations on the thread for anyone thinking about investing in property.

I had one. No end of extra bills, tax etc.

I sold it to family for a loss. But thank god for the peace of mind.

And with climate change ramping up..... hurricanes, flooding. Nah.

Airbnb might be a less risky option

Airbnb is a 24/7 work week unless you pay someone to do it for you.

Someone 100% reliable.
Cleaners, "manager". Booking and coordinating dates, make sure the cleaners come in, if not you do it yourself. no thanks

I have friends who are "super hosts" on there. Their whole (private) life is impacted.