This topic contains 16 replies, has 15 voices, and was last updated by  CommonPerson 1 month ago.

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    Thinking about dipping my toe into the Buy to Let world, but a few questions still remain

    How do you organize the funding for this – buy to let mortgage with own place as security on the mortgage?

    Let through an agency, they take a fee but deal with lettings etc so take hassle out of this?

    Do you allow tenants with benefits or steer clear of them?

    Has the bubble burst with this and is there a better way to invest money?



    The fact that you are having to ask such questions makes me wonder if this is really the right investment for you?

    In a nutshell whilst superficially the return can look attractive, it can be complex a minefield with a huge potential for hassle.



    I agree with @gargary on this… although over the next few months may be good a time to buy for a 10year+ time horizon as prices are easing significantly (in the SE anyway.)

    You get a BTL mortgage, with the rental income determining affordability, and the property as security. If you get interest only you need to understand exactly what you are doing regarding paying it off (are you after increase in capital valuation). If capital repayment it can often make the economics difficult.

    An agent will take a big cut (depending, but let’s say 8% for letting and 4% for managing.) But has it’s advantages. If you are going to manage it yourself you really need to be nearby and/or have a good supply of numbers of handy people.

    Beware ‘hidden’ costs – they aren’t hidden as such but things that you could put off if you live in a property you have to fix straight away as a landlord e.g. utilities, if washing machine breaks, etc etc. So you have no choice or control over that expenditure.

    Finally, don’t forget, interest rates can pretty much only go up.



    How do you organize the funding for this – buy to let mortgage with own place as security on the mortgage?

    More usual approach is take a mortgage or further lending on your existing home to fund the deposit or purchase of a Buy to Let investment. Look into what you can raise as this may narrow down your options into what type of property and how to manage it.



    It depends where you are investing and what your yields are like as to whether it’s fundamentally viable. But there are many other factors to consider as well.

    You don’t just want to buy the cheapest possible house, you want to find a place which doesn’t suffer too badly from damp, has a good roof and windows and is reasonably cheap to heat, also with a decent boiler etc. Alternatively, find a place that you can do up to the required standards to increase its value. Basically, you want a place which is going to be as low maintenance as possible, so big gardens, for example, aren’t a good idea.

    Also, you want to consider the type of tenant you want to attract. If you’ve got your cheap yet good condition house in the middle of the worst part of town then don’t be surprised if the only enquirers you get are from scumbags who you’ll struggle getting rent off and will probably trash the place. You want to find a place where semi-respectable people will be prepared to live. So it’s all about getting a good balance of factors when you look to buying a place to rent out. Somewhere that has a workable yield yet is going to be attractive to a decent level of tenant.



    We have a rental property, which works for us, but that is based on a specific set of circumstances and I probably wouldn’t buy to let now.

    We already owned the property, had a reliable tenant lined up, don’t pay agents fees and after a number of years of very sluggish capital appreciation are starting to see above average growth in the local housing market.

    Risk around voids, capital depreciation which is a reality in parts of the country, rising interest rates and high agents fees would put me off buying another. I’ll admit I am quite risk averse when it comes to financial planning.



    Couple of random thoughts from someone who has four Buy to Let properties for more than 10 years. We manage ourselves with support from local tradesmen.

    It can be a pain when you get a call late on Sunday evening from a tenant to say the toilet’s blocked.

    Legislation is becoming more tiresome, you will need a Landlord licence (an exam) and larger properties will need HMO registration. Energy certificates also required.

    Limited tax advantages for higher rate taxpayers. Further recent changes in tax treatment also haven’t helped.

    You need some flexibility in the day job to pop down to the property and meet the plumber, electrician etc.

    We’ve been lucky but there is always the possibility of the tenant from hell.

    As someone else said interest rates can only go up and capital growth is limited.

    So is it worth it? – just about, long term yields on our modest portfolio are around 6%



    Unless you’ve got a big load of cash you need to invest and don’t know enough about other types of investment I wouldn’t bother. A reasonable yield is 5 to 6% (more is possible but would require a HMO or dealing in the more time consuming end of the market) but that’s before voids, non-payers repairs etc. That sort of return is ok if house prices are rising but not sure that will continue (they need to outstrip interest rates at least and pref other assets) and certainly doesn’t happen in the shittier parts of town.

    Getting an agent costs and doesn’t take all the hassle away, if the boiler breaks do you really want to trust the agent to get the best cost for you, shopping around yourself could safe several hundred quid.

    Depending on how close you are to retirement you should consider lumping any extra cash into a company pension and enjoy the tax rebate (assuming you don’t already).



    Has the bubble burst with this and is there a better way to invest money?

    I f*cking hope so. Greedy f###s owning multiple homes is one of the worst things in our society. I feel sorry for the youth of today being priced out the market and exploited by greedy landlords.

    One person. One House.



    @roberto Aside from your communist rantings, why do you think people owning more than one house pushes the price of houses up?



    @steve Constant lack of supply pushes prices up. One of the reasons houses are in short supply is because of buy to let. People owning 10, 20, 150, 700 houses has screwed the market.

    Such a shame. 1house per person would still allow couples to have a family home and a cottage in the countryside. But for some that’s not enough.



    Constant lack of supply pushes prices up. One of the reasons houses are in short supply is because of buy to let. People owning 10, 20, 150, 700 houses has screwed the market.

    Such a shame. 1house per person would still allow couples to have a family home and a cottage in the countryside. But for some that’s not enough.

    @roberto but the buy to let people still have to buy the property. So it is still coming onto the market (supply).

    I also think those who own 10,20,150,700 (as you put it) are few and far between. And certainly not enough to skew the market.

    Personally I think buy to let ownership is an easy bogey man to target because house prices are high and lots of people can’t afford to buy. There is a layer of economic complexity, in that they used to be able to offset mortgage interest costs against tax, which, arguably, changes their affordability structure. But this doesn’t change the supply.

    House prices are high because of

    – a lack of building new homes

    – dual income mortgages (before anyone says you ‘need that’ to buy a house – think about it, you need that to buy a house because that has pushed house prices up)

    – low borrowing costs allowing people significant leverage and thus able to pay more and more.


    Ricky m

    The government has been slowly clamping down on small investors buying a couple of btl houses and making it unattractive to do so, the govt has indicated it only wants large portfoilos of rental properties managed by reasonably professional letting agents.So for the poster its upto them as to whether they want to read into this and go against this trend.

    Of course if you have owned a btl for a good few years, then you are in a different position. But for a new investor, its questionable whether its worth the hassle.



    The problem with BTL is that the wealthy profit at the expense of the poor. BTL investors invariably have much more wealth to put into the property and thus benfit from a lower mortgage rate. Therefore as prices have risen to the point whereby ‘normal’ live-in buyers reach their limit, the BTL investor can still afford to buy. Thus the live-in buyer is stuck in their rental property whose rent also increases in line with the housing market. This makes BTL more attractive and thus the cycle continues with the general population becoming priced further and further out of the market. This is exactly what has happened here, a small island with limited housing supply. Obviously mainland UK will be different because it’s much bigger, but the principles remain. Look at who owns properties in London for example.



    @roberto I look at it this way. There are those who can afford to buy a house and those who’ll never be able to buy a house. Basically defined by those with enough spare income to save a deposit up in a realistic amount of time and those who can’t accumulate wealth.

    It’s actually a fairly narrow band of people just on the borderline for whom a modest change in house prices is going to make a difference, people who can save but maybe struggle qualifying for a big enough mortgage for example, other than that, it may just be a matter of an extra year or two saving for the deposit if prices rise, as after all if you’re putting down say 10% on a house which goes up from £220k to £250k it’s only a £3k change in deposit size. But for those who can’t save (i.e those who save so slowly that random expenses like car breakdowns, boiler repairs etc wipe it out every few years) will never be able to put a deposit down regardless of what happens to house prices.

    So if we accept that a sizable chunk of the population will always have to rent because they either can’t or simply choose not to save up then we have to accept that there needs to be a large enough rented sector to provide for these people. That means being a landlord needs to be kept viable for there to be a good enough range of properties available across price ranges and the country. As it stands now, making landlording less profitable reduces supply for a big chunk of the population and also pushes up rents because there is more demand as well as more costs to cover.



    We have rented recently (in order to make it a bit easier to move house from 100 miles away) and we are able to compare renting with owning. While owning is not ideal, renting is so utterly spectacularly awful by comparison. Problems include being moved on, contrary to opposite promises by private landlord and being fleeced for a totally spurious cleaning bill by a letting agency. While the former was more difficult to deal with, the latter was less justified – we even took photos of the rented house to show we left it in a cleaner condition than we got it! We managed to recover half this spurious “fine”, but to really gain justice would have involved time-consuming legal action. I could give so many more accounts of useless, greedy, lying, lazy, “cowboy” landlords from the 1980s to the 2000s, but I can’t be bothered just now!



    My views, for what they are worth, on your questions, in order;

    Beware the setup costs of mortgages – and secure the mortgage against the property. NEVER your main residence, unless you are happy with the risk. Also bear in mind the net return from a property on which you have a mortgage may not be great, and your gains will be made via long term capital appreciation.

    Agencies are great for finding tenants, my jury is still out on whether its worth it long term. I suspect it is worth it while I don’t have enough properties for it to be my main income.

    Steer clear. I was fairly ambivalent previously (I have a long term tenant on long term invalidity benefit on one property, but that is a particular set of circumstances). Since the advent of universal credit, there is absolutely no way I would rent out to anyone on this benefit.

    I wouldn’t say the bubble has burst, but it has been deflated somewhat. Its no longer a “get rich quick” type of scheme, and it is definately now biased in favour of large corporations rather than individuals investing for a pension (pretty much what I have done). My Landlord history – I’ve been renting one property out for many many years, and have acquired 2 more in the last year.

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