[Closed] Buy to let

Prepared to be flamed by the Soviet of STW Hand Wringers.

I have, but it's inexplicably taking me longer to fix up ready to rent than I was expecting.

Nothing to do with it being right opposite my regular pub, and I'm kind of hoping that the Mrs might say "You know what, why don't we live in that one and rent this one out?"

My parents do (long story, they're not the investor/developer/Sara Beeny types). Bought a small 1 bed house in a village near a big multinational companies offices/factory and seem to have hit it lucky letting it to a series of senior managers to use Monday-Friday. Only effort they've had to put in is a lick of paint between tenants and the occasional cooker/fridge needing to be replaced.

Based on that and some other peoples horror stories. I'd pick your market carefully, they could probably have bought a family house in a rough area and made more of a return on the money, but on the other hand they've only had 1 bad* tenant in 20 years. HMO's probably sit right at the other end of the spectrum, big returns, loads of hassle.

*and all he did was flood the place by accident after leaving a valve open on the boiler.

Sure, I have some. What sort of pitfalls would you like? Non-payment of rent? Flooding? Fire? Cannabis farm? Long gaps between tenants? Boilers breaking down at inopportune moments? Smelly people with poor hygiene and messy pets they hid from you before moving in? Expectations of pristine paintwork and flooring to move in to yet trashed two years later being fair wear and tear? I've had them all. You need to look at it as a job, and have the long view in mind.

New regs on the way in where you have to check everyone's immigration status. New regs on energy efficiency on the way in. Registration in certain areas.

Just put a sink in your garage and fill it with illegal immigrants paying you 600 a week each

Do a thorough search (get the solicitors to do it) to make sure that any existing tenant isn't on a protected (pre 1989) tenancy. Or an assured tenancy.

There is a reason why they sell for low money 😉

What midlifecrashes says - do you want to become a landlord, or are you just looking for more returns than a savings account? Having someone else manage it will save you time (especially if you have a tenant who can't work out the most basic things themselves) but probably wipe out any profit. In many nicer areas rents are actually pretty low relative to house prices which can make numbers less likely to add up. Not sure you can count on capital appreciation much any more.

Make very sure you know (or learn) what's required around handling deposits, gas/electrical safety, what to do when if you have a problem tenant (section 21 notices), etc. Look into what agents will charge you for finding and vetting tenants if you're going down that route.

IMO it's a ripe target for more taxation in the future, as well as the costlier regulations.

I'm happy to stand up and count as a hand wringer...
Stick your money somewhere else and let someone who needs a home for security and somewhere to bring up their family buy it instead. For those of us who'd like to buy a place to live, BTL is an unmitigated disaster, pushing prices totally out of reach...

More rationally, you don't honestly think BTL is going to work out well when the inevitable house price crash comes - which may have already begun in London when you look at the discounts on asking prices that are coming through. You'll not get the capital gain you're expecting, and this is ignoring that interest rates will go up at some point which will increase your cost of borrowing significantly...
Don't forget rents are decreasing at the moment as well...
I wouldn't buy an ex-rental either - much less likely to be in a good state than somewhere that someone's had as their own home so it'll be hard to get rid of when you decide to.

Thanks for your comments/information, any more would be appreciated

Thanks

We bought one this year did a lot of research re rental market and resale market before buying. We bought locally to our home as we will manage it. Marketed it through openrent which saved a fortune over estate agent costs. I have had to do a few bits and pieces over the last six months but it's not been a major issue. I would also say our rental is in better knick than my home and will be easy to flog, rents are on the up here and the value of the property has risen. May go into more details later but on a crap phone as mrs is karaokeing on computer at the moment

Stick your money somewhere else and let someone who needs a home for security and somewhere to bring up their family buy it instead. For those of us who'd like to buy a place to live, BTL is an unmitigated disaster, pushing prices totally out of reach...

How does an investor simply paying the asking price for a property push up prices? I guess this may depend on the area, but surely in most areas if you can afford a house you would buy one the same way as an investor would. Probably not in London, though...

Thinking of this well sort of, looking at buying a 3 bed flat for son to live in at uni and rent out other rooms to cover mortgage payments.

It's not the money fountain you might expect, if you have to pay a mortgage that's frequently more than the rental income. Be careful of building maintenance management fees if you buy a flat in a block. It can be good if you pick the right area, get good tenants, manage it yourself.

I know some people who bankrupted themselves buying off-plan in Manchester, living miles away and couldn't get rents that covered their outgoings.

Conversely, it's possible to get about 3% return, excluding property price changes, if done right. regard it as a part-time job, not just an investment.

>> Bruneep, I looked at the same a few years ago, but concluded that the rental income from students over 2 years (1 year in hall, 3 year course) would not cover the loan costs and agency fees for buying & selling.

[quote=Moses ]
>> Bruneep, I looked at the same a few years ago, but concluded that the rental income from students over 2 years (1 year in hall, 3 year course) would not cover the loan costs and agency fees for buying & selling.

Yes did think this

We are looking at it longer term as once he's finished uni he will use as a flat to live in and a place for us to stay in at Edinburgh when visiting (possibly)

I have some and they've been a fabulous investment. Current yields c 4% but avg capital increases c 10%.
Common denominator among friends who've done well with them is they have researched the market
extensively and bought locally. Take the long term view but watch out for tax changes - landlords will be
a soft target in future. Hth email in profile.

I've a few, like others have said think long term. Mine are a vehicle towards the dream house one day where I can release the capital required to buy a project, switch mortgages to interest only to find the project, then switch back to repayment to pay off in time for retirement. Huge excel spreadsheet to make sure I'm on track. I've got friends who have in excess of a 100 properties each and all advertised, managed themselves etc..... They have very different tactics to me, mainly to reduce tax. They're all interest only-ers. But I also have a job and property is there job.... A busy one, filled with millions of pounds of debt against their names and sleepless nights, the cash flow looks nice though.

Investors don't put prices up. If you're a cash buyer, no chain etc that generally commands at least 10% discounts and is a huge bargaining tool in my experience. The the price that a house sells for is effectively bought down.

Im involved with a cooperative that rents out 6 flats, in that time we have had 1 major fire, flat burnt out,

numerous people not paying rent,for various reasons, 2 died, sadly.

people not paying rent when we refused to do a small job for them they should have paid for,

tennants loosing security keys requireing new keys for all tennants 60 of them at a huge cost to the rest of us,

Tennants leaving taps runing and flooding their and flats below,

residents not paying electric bills and bailiffs being called out byt eh electric co to force entry and cut off power, then problems for new tennants getting reconnected,

Deliberate damage to heaters so they could use that as an excuse for not paying rent, then when fixed they leave, still not paying arrears,

new carpets, repairs and repainting every re let,

BTL looks great on paper, you only need a few months void property to run up bills, council tax still has to be paid along with insurance etc.

Let someone who wants to buy the place buy it as stated above, not inflate the price of the house and lower the quality of life for the neighbours if you get the wrong tennants.

How does an investor simply paying the asking price for a property push up prices?

This:

I've got friends who have in excess of a 100 properties each

1. If a property is bought BTL it reduces the supply available for sale - this guy's friends owning 99 more properties than they need means 99 families/couples can't buy those houses to live in as there's fewer for sale. This leads to an artificial shortage of supply, which pushes up prices...

2. For me to buy a house to live in I have to put down a deposit and take out a repayment mortgage, the amount being limited by my salary. BTL can be done interest-only and is paid off by the rent, not by any earnings the landlord has. This makes it massively harder for the private owner to put up as much as the landlord can. Too much money chasing too few goods = inflation.
How else does anyone think house prices are so far above the 4x salary historical norm?

Mind you, BTL will be screwed when interest rates go up and the inevitable crash comes...although, of course, interest rates will never go up from emergency level/historical lows and the housing market will never crash...

BTL is a mug's game - too many false assumptions about interest rates and house prices. The economy's hardly in a predictably safe place is it?

A pension's a way better bet: if I stick £1000 into my pension, I get another £250 in addition straight away as tax relief - and that's before any investment returns. I'd like to see a BTL portfolio which is outperforming a 25% guaranteed increase...

My brother had the Gas Explosion Fetishist. He kept imagining gas leaks... Had my brother round loads of times, no gas leak. Bro caves and sends in the gas engineers, no gas leaks. Tenant insists on bringing in his own gas engineers and tries to charge bro. Gas engineer finds damage to pipes that mysteriously wasn't there when the previous engineer examined the flat. Fixed that. A month passes- GAS LEAKS! Same runaround, this time it's obvious that the pipes have been intentionally damaged. Led to a race to see if he'd be sectioned, arrested, evicted or exploded first.

A pension's a way better bet: if I stick £1000 into my pension, I get another £250 in addition straight away as tax relief - and that's before any investment returns. I'd like to see a BTL portfolio which is outperforming a 25% guaranteed increase...

I have to disagree in the long term.
If my wife & I buy a flat together, and she snuffs it, I still have most of that flat left after any death duties. (Which these days aren't much unless you have over £1m each.)
But if she puts her money into a pension, then it disappears upon her death. If it's a shared spousal pension, the monthly payout is smaller.

Similarly, we could pass much of the value of a BTL to our children.
Also, if a 40-year old has a BTL, the income starts immediately, not after a 20-year wait.

Yes all the above....

diversify yr investments some property some shares some cash. Over
the long term you can id the winner and be glad you spread the risk.

Over the last 10 years ftse has not moved although some ftse stocks
have avged 8% pa. London property has c doubled plus the rent.

I dont think buying btl now at these levels will bring much capital
appreciation.

+1 moses, a quick £250.....then what.

Rates as they are, all sound advice is pay off your mortgage before investing. I'm quite keen on the idea of others paying off my mortgages thankyou very much.[s]

landlords will be
a soft target in future.

Done it for the last decade, both England and Scotland.

A couple of years ago we got dodgy tenant, and the £5-7k of direct costs has wiped out profits, plus stress.
I am looking to get out, despite the 11.4% return i am supposed to make, partly due to iffy tenant, partly due to massive increased legal hassles, responsibilities and liabilities. Round here I have found one agent who actually complies with legal stuff, and I even "educated" a housing officer when we were inspected.

My tenant pack is 64 pages long, most of which is how the tenant has the right to do me over if they chose (as our iffy one did, with law on their side). Tenant not paid rent for a few months, I go to evict and court puts it on hold as they have other debts. So tenant gets to stay for three more months, rent free.

Avoid.

OP yes have done in the past and likley to do so in the future. Very profitable for us at the time and frankly should have kept them. The pitfalls are seeing it as a short term / get rich investment rather than a medium / long term one, over extending yourself by borrowng too much, buying badly eg overpaying or buying in an area with limited rental demand. Having a management agent gives you leave of mind but costs 20%+ of your rent

sold a BTL in September for a pretty good price. Money is invested elsewhere and am watching house prices vs rental incomes to see whether to jump in again - perhaps an overseas property which we can use as well.

not sure if anyone has mentioned it or not yet but if buying a flat watch out for management and maintenance charges which can eat into rental income quite substantially.

we found managing agents to be absolutely useless - waste of money. I'd recommend using an agent to find tenants but doing the research, checks and final rental agreement negotiation yourself. Managing the property is time consuming but to get a decent result and standard for both you and tenant I found it better to do this myself.

I'd recommend using an agent to find tenants but doing the research, checks and final rental agreement negotiation yourself. Managing the property is time consuming but to get a decent result and standard for both you and tenant I found it better to do this myself.

Now having done ours i wouldn't use an agent to find tennants. Web based systems such as openrent list you on zoopla and rightmove and that seems to be what people use (i queried this with people i work wih who rent) rather than trawling around estate agents, the tennants also avoid the ea's fees

We rent our old house out because we struggled to sell it. I wish some BTL devil would come along and buy it off us but here we are. So I'm a landlord now and it's awful. Plenty of stress, maintenance costs. Finding tenants is scary although we've had some pretty good ones. They sneaked a dog in though although now we've discussed it we've let them keep it. We've lost money so far after 18 months.

Things to beware of. Cowboy letting agents. The gas and electric checks. Try and get the tenants to agree to a very regular visit by you or your agent. What the tenants may not think is a problem, could be a huge one. Be very, very clear with the tenants what is and isn't acceptable like decorating and flooring replacements. Have a very good handyman around.

Have a very good handyman around.

you called

Thanks fella, got a couple already.

I sort of ended up a landlord by accident. Bought a building that my wife had rented a shop in for 10 years for £19k. It was just before the big jump in prices. Forward a couple of years and I had three shops/one maisonette renovated and rented. Bought another 2 houses and a flat the following few years and then the credit crunch happened.
Never had any serious problems and manage/repair everything myself.
Make a fair return for the hassle.
My best tips for anyone is to buy a place that will sell easily when you need out, I know many people with 20+ flats in run down areas and can't get out! seemed a good idea buying cheap property but they are stuck with them now.
Choose tenants well!!!!! Better to have an empty house than a nightmare tenant, credit/tenant checks are easily done and you will hear "I've never missed any payments" before you mention checks and then the story changes afterwards!

My mate has 10 properties. Just under 1 million owing and pays around 4k a month in mortgages.
According to him he does not make much profit and more often than not they run at a loss taxation wise.
His advice is never buy the property. He always gets an interest only mortgage. The bank owns the houses.
The way he makes money is to keep them for a few years and then sell. When the property is sold he pockets the increase in value.
Seeing as he works for the Halifax I assume he is doing it right.

I've got a couple but thinking of getting out this year. One has been good, steady income and no bad tenants. The other has been... challenging. A couple of tricky tenants, not such a good mortgage deal and regular "extra" costs charged by the management company that you have no choice about has all added up to mean it's not quite broken even in eight years. It's also in need of a proper refurb now so I'll do that and sell up.

My main advice is that agents are a total waste of time. I used them at first but got fed up with the cost, usually a month's rent (+VAT) for a simple introduction & set up the tenancy, or 10% per month (+VAT) every month for basic management. Which is just running the rent through their account. They will also charge the tenant a few hundred in "admin" to set up the tenancy. Instead, the last few times I've advertised on gumtree (free), lined up the viewings on one evening and without fail it's gone to the first or second person to view. Join the RLA and they have a template tenancy agreement you can use. So for the sake of fielding a few emails & phone calls and a couple of hours one evening I saved myself c. £1k each time. Madness.

A further benefit is that you get get to meet the tenant before you agree to them living in your property. That would have avoided some of the issues I've had. They also get to meet you, and (hopefully) see that you're a normal human being and not some terrible slum landlord.

Other advice is just to remember that people don't look after things the same way you would. You'll need to redecorate every couple of years. Carpets get shabby quite quickly and kitchens / bathrooms will be filthy. I've not needed to test it but the rules on what you can withhold from their deposit are VERY heavily weighted in favour of the tenant.

1. If a property is bought BTL it reduces the supply available for sale - this guy's friends owning 99 more properties than they need means 99 families/couples can't buy those houses to live in as there's fewer for sale. This leads to an artificial shortage of supply, which pushes up prices...

2. For me to buy a house to live in I have to put down a deposit and take out a repayment mortgage, the amount being limited by my salary. BTL can be done interest-only and is paid off by the rent, not by any earnings the landlord has. This makes it massively harder for the private owner to put up as much as the landlord can. Too much money chasing too few goods = inflation.
How else does anyone think house prices are so far above the 4x salary historical norm?

1) Nonsense. These houses were on the open market at some point or other. Anyone could have bought them.
2) Also nonsense. A residential mortgage requires (I think) a deposit of 5% minimum. A buy to let mortgage requires a deposit of at least 20%. BTL mortgages also require some proof of earnings - in my experience. Ergo the buy to let investor has to put up more money than the residential purchaser - doesn't that level the playing field a bit?

I'd also guess that people who own a great many BTL properties are a lot more cutthroat when it comes to negotiating house pricers than private buyers. They'll be a lot happier to come in very low and walk away if it's not accepted.

My mate has 10 properties. Just under 1 million owing and pays around 4k a month in mortgages.
According to him he does not make much profit and more often than not they run at a loss taxation wise.
His advice is never buy the property. He always gets an interest only mortgage. The bank owns the houses.
The way he makes money is to keep them for a few years and then sell. When the property is sold he pockets the increase in value.
Seeing as he works for the Halifax I assume he is doing it right.

This seems like a sound approach. It also perfectly illustrates why BTL looks appealing in a rising property market, but should be treated far more cautiously in a stagnant market, as the money comes from a rise in value rather than the rent.

I'd also guess that people who own a great many BTL properties are a lot more cutthroat when it comes to negotiating house pricers than private buyers. They'll be a lot happier to come in very low and walk away if it's not accepted

There's some good podcasts available for further research, I listen to:

Property week
The property podcast
Moneybox/moneybox live for general advice

Also read Landlordzone, actually the above comments on here are very good.

I recently ran through some numbers for a mate who was looking to borrow c80% to finance a BTL house purchase, the numbers just did not work, I reckon c 50% needed for a decent return. Also, the people I know who've done well have bought outright, buying say 1 or 2 for cash.

We made 1.5x in 5 years. Had we kept them we would have made closer to 8x in 30, ie properties we bought for £120k each now worth £1m. Its long term game, like a retirement plan.

Another thing to add, some tenants like to cook, err, "aromatic" food, and the smell works its way into EVERYTHING in the property. Not a problem during the tenancy but it may well put off new tenants. I've ended up redecorating just get rid of cooking smells.

Once again thanks for the information, makes interesting reading. We are only looking in our local area and thinking about using an agent to do most of the work. The one we have spoken to so far is asking for 10% on the monthly rental and £250 finders fee, does that sound reasonable??

Thanks

I've managed 2 houses in E London for last 3 years that owned by a friend living abroad.

BTLs only better than a pension if you get house price inflation. so far so good but be warned. the tax benefits of pensions are pretty impressive.

Try to avoid paying a managing agent - that 10% wipes out half your income profit and they wont do a very good job.

Treat all tenants as customers (not serfs) and don't go for the last penny of rent etc. happy tenants = less hassle, damage and voids.

I went 6 months this year without a phone call but the last 3 months was new windows in one house, new bath taps, replacement shower screen, change of locks, party wall agreement for neighbour's loft and a few other odds and ends.

And obviously, be patient.

[url= http://blog.northwooduk.com/2014/12/ready-or-not-here-it-comes-hmrc-vs-landlords/?cmsys=1342882381&cmref=82072771363176850607 ]http://blog.northwooduk.com/2014/12/ready-or-not-here-it-comes-hmrc-vs-landlords/?cmsys=1342882381&cmref=82072771363176850607[/url]

But if she puts her money into a pension, then it disappears upon her death

Only some types eg an Annuity. If I die, my wife gets 100% of my current pension fund.

MrSmith, see that article you linked to there. As I landlord I applaud this approach by HMRC. Landlords who don't pay the correct taxes are also the landlords who don't adhere to the licensing laws and numerous other crimes which give the rest of us a bad name. Hopefully this will shake some of the bad ones out and make things better for tenants and landlords alike. Having to pay the correct taxes is nothing to be scared of in terms of making your choice to become a landlord or not.

we did, but not so much as a BTL but a "we're moving out and can't sell it so we'd better let it" kind of thing

good tenants are great. bad tenants are terrible. You MUST specify NO PETS and you MUST be prepared to enforce it. Otherwise you could end up with a house that stinks of urine & faeces, where the carpets need tearing out & burning, and the whole place needs redecorating. Not to mention the damage that dogs can do to interior doors.

Today we have just sold a BTL property. We bought close to us so that we could keep an eye on it and manage it ourselves. We are selling to release the capital for other projects. We have had good tenants and a pet dog in the property but we are dog people ourselves and met the dog before signing the lease. We also had some extra conditions added in to the lease around pet damage and had an additional pet deposit.

Overall it has provided a good return but I am not going to miss being a landlord.

BTL will be interesting when the eventual house price crash comes which it will at some point (if it's not already started in London - yields are on the floor and even vested interest estate agents are forecasting a stagnant market/price drops).

If prices drop and yields are so low that there's no 'business' model then it's highly likely you'll see a load of BTLs being sold in a panic - which will change the balance of supply and demand and you'll see more drops and away we go...

All those people who have used a BTL as a pension will be selling at some point in order to realise the cash they're going to live off:

a) they're assuming house prices will continue to rise until that point
b) they're assuming they won't be selling in the middle of a bust
c) they're assuming government can continue to boost the market - if governments were that in control of the market, why did they let the 2008 bust happen?

When 'investments' like BTL become fashionable amongst the general public and gain an aura of 'you can't lose', it's usually the time the wise get out...

On that note it's worth noting that the Duke of Westminster publicly pulled out of prime London earlier in the year calling the peak, and that couple in Ashford who own 1000 BTL properties are trying to sell their portfolio...

This ^^ is all poorly informed bollocks.

When 'investments' like BTL become fashionable amongst the general public and gain an aura of 'you can't lose', it's usually the time the wise get out...

The general public became fully aware of BTL in about 2004 (or earlier). So it's been too late by that mantra for a long time. In actual fact there are lots of niches where BTL still works well. As has always been the case.
It pays to study and understand your local market.

All those people who have used a BTL as a pension will be selling at some point in order to realise the cash they're going to live off:
a) they're assuming house prices will continue to rise until that point
b) they're assuming they won't be selling in the middle of a bust
c) they're assuming government can continue to boost the market - if governments were that in control of the market, why did they let the 2008 bust happen?

Or not, as in reality keeping the BTL to live off the income is the reason you have it as a pension, only a few idiots buy BTLs expecting a value increase over a rental income. If you sell the BTL you need a good stable returning investment vehicle to create an income, errr that would be the BTL you just sold. I know lots of V old pensioner landlords whose kids are helping mum and dad manage their props to provide them with a decent retirement income.
So not many btl's will get put on the market, not many btl owners will be affected by any nebulous price drop, and the last statement about the govt controlling the market, but not controlling the market is as ludicrous as it is self contradictory.

BTL will be interesting when the eventual house price crash comes which it will at some point (if it's not already started in London - yields are on the floor and even vested interest estate agents are forecasting a stagnant market/price drops).
If prices drop and yields are so low that there's no 'business' model then it's highly likely you'll see a load of BTLs being sold in a panic - which will change the balance of supply and demand and you'll see more drops and away we go...

Aside from not knowing what makes you think you can predict the market, the effect of any price drop in purchase values may not have the effect you think.
For starters if BTLers get out then its likely lots of residential buyers will step in, which could drive a price boom. Secondly most BTLers are in it for the long term and actual house value is irrelevant if they bought before any price fluctuation they will not sell just because of declining asset value.
Rents tend to be much more stable than house prices, they lag behind house price increases, and generally hold when there are falls.

[quote="jcnm"]The one we have spoken to so far is asking for 10% on the monthly rental and £250 finders fee, does that sound reasonable??
No, it's not. The 10% is par for the course but I've not heard of anyone wanting a "finders fee" on top. Both will be +VAT as well. Work out what 10% + £250 + VAT is across a year.

See my earlier post about finding tenants yourself, it'll cost you nothing but a little bit of time.

We find our tenants via Gumtree. Never had a problem (touch wood) and we get to choose who stays in our property.

dbcooper - theres only one record - and although your right in your statements , that record wont change.

trail rat, I'm not used to this, thanks.

Have you ever lived next to a house that's rented out? - it's awful. It's usually badly maintained and the garden is poorly looked after. You may get a decent tenant every so often but it's normally noisy sharers or a problem family. Over the last 10 years both houses either side of me have alternated between no problem owner occupiers & big problem tenants. Don't do it - don't risk inflicting nuisance neighbours on somebody.

Having seen what my sister-in-law did to the last two properties she lived in, I'd be very wary about who I was renting to...
Both basically needed gutting, and totally refurbishing inside.

However, the house next to me is rented to a slightly odd single bloke who has a cleaner and a gardener, the place is immaculate.

I guess the tenants can make/break the whole thing.

+1 dbcooper

Teef - do you need a hand lifting that huge, broad brush? It must be mighty heavy! 😉

Demographic behaviour is more likely governed by the quality of the area than the residents owner/tenant status. That said, I agree,people do look after what belongs to them a little better.

teef - Member

Have you ever lived next to a house that's rented out? - it's awful. It's usually badly maintained and the garden is poorly looked after. You may get a decent tenant every so often but it's normally noisy sharers or a problem family. Over the last 10 years both houses either side of me have alternated between no problem owner occupiers & big problem tenants. Don't do it - don't risk inflicting nuisance neighbours on somebody

I'm renting, I'm a well paid IT bloke with a wife and child, our house is immaculate.

There's a million reasons people rent, it's not always just for bad reasons.

We're renting in goring for £1200 a month, believe be with a £2500 deposit we're looking after the place very very well..

Demographic behaviour is more likely governed by the quality of the area than the residents

I don't live a run down area - minimum house prices round here are £450k for a 2 bed terrace.

I'm renting, I'm a well paid IT bloke with a wife and child, our house is immaculate

As per posting:

You may get a decent tenant every so often