Releasing Equity to buy rental property ?

[mikeyw]

Guys,

Total novice to this game but have a £350K house with an £80K mortgage.

How straightforward is it to get an interest only mortgage say for £200K against the equity tied up in my current house ?

Is this the most sensible way to purchase a 2nd house for rental income ?

What sort of occupancy levels do people work on ? - I live in Harrogate where rental demand is pretty high. Is 10months per annum on average unreasonable ?

What risks are there ? - I guess as long as the value of the property increases by the amount of the annual mortgage interest total you can't really fail even if it stood unoccupied ?

Do most people on here let through agencies or do it themselves ? I guess the agency route is safest for the first time.

TIA,
Mike.

[Jonboy]

What sort of occupancy levels do people work on ? - I live in Harrogate where rental demand is pretty high. Is 10months per annum on average unreasonable ? erring on the side of caution is always a good idea, i would say 10 months is about right


Is this the most sensible way to purchase a 2nd house for rental income ? not sure what you mean here, if it's tax related then it makes no difference as long as you can show the money was used to buy a btl property as far i understand it, probably cheaper than a btl mortgage too.


What risks are there bad tenants, crap agents, interest rates, property prices, consumer confidence, need i go on?


Do most people on here let through agencies or do it themselves ? I guess the agency route is safest for the first time.
only if they are any good, lots of agent horror stories on this forum! personally i am an agent so i would say yes it's a good idea, but find a good one.


How straightforward is it to get an interest only mortgage say for £200K against the equity tied up in my current house ?
about as hard as falling out of a tree:D

hope that helps

[dhphoto]

If you use an agent they will cream most to all of your profits straight away.

In all my years of letting I have never found an agent who was anywhere near decent or able, except for the first few months, then they simply lose interest (not enough financial incentive to put themselves out).

If you let it yourself you can keep an eye on your prized investment (which the agent wont), you can maximize your investment by keeping the profits yourself and YOU are in control of the tenancy, which if you have problems is better than dealing with people who really couldn't care, especially when things get awkward and they are asked to to more for less - they simply won't.

Letting and estate agents have a dreadful reputation for a very good reason, they deserve it!

David

[Jonboy]

your dead right dhphoto, most agents are usless and don't care.

maybe i am old fashioned, but i found that this was a huge advantage to me as when landlords saw how much i do care and how hard we work they don't use anyone else!

it is not hard to do good business, but for some reason people in the property world don't get this. it is actaully easier, because while other agents are spending £1,000+ a week on advertising i don't have to. nearly all of my 400 very happy clients have come from reccomendation. i even have some small property managers who use us to rent the houses they manage for other people.

my advice is if you can't find a decent "high street" agent there are a lot of small working from home property managers who do a very good job.

[MrShed]

I think the LA/manage yourself argument is quite easy to answer. If you read through some information on letting law etc, and still feel capable of managing the property yourself then go for it. Just keep up to date with changes etc(use this forum!). If you either do not feel confident or do not have time, then get a GOOD letting agent who is a member of a professional body to manage the property for you. However, it is not really all that difficult to manage the property yourself..just try and build up a network of good, reliable workmen(builders, gasmen, sparkys etc) who you can call out at short notice in case of damage.

[Ruth Less]

However, it is not really all that difficult to manage the property yourself..

Speaking as a tenant I would rather go direct with a good landlord than use an agency but the problem is how do you find them? Letting agents have a higher profile for advertising the property and it's easy to look though the details of many properties with them. The only place I know of to find properties direct with the landlord is small ads in the local papers which I find off putting as there's very little information about the property and it would be a bit of a leap in the dark. So any tips for us tenants wanting to find you direct landlords?

[slade]

I did this 18 months ago. Using the equity in my home I bought a property - in effect a 100% mortgage. When the tennant moved out, I renovated it before letting again, and am now in the process of remorgaging with a BTL mortgage. The increase in value means I can now go for an 85% mortgage which more than covers the original mortgage top-up leaving me 5K better off after re-imbursing myself for funding the work.
So once I have the BTL running under it's own steam I can start again - and I have a 5K float, to get the rennovations done up front (if needed).
You are in effect a cash buyer, so using this technique allows you to move quickly, but the usual precaution of getting a survey is still advisable.
I don't use an agent, but I'm thinking of starting a Ltd Co. agency which my wife will run - any views?
Must post a CGT question while I think of it.
Ray

[islandgirl]

If you live close to your rental property do it yourself. It is a bit daunting but not difficult. 2 lessons we have learnt the hard way - vet tenants first (eg through Tenantverify), & don't be afraid of an empty property (better that than bad tenants). Be prepared to get the odd "bad one" - it recently cost us around £3000 in lost rent/ damage - but there are many excellent tenants out there. Good luck.

[strangey]

Mikeyw, remember if you go for it yourself, it can be hard & costly, if you make mistakes, ie bad tennant, wrong paperwork, etc etc, but remember most agents will just wash their hands of you if it all turns to rats anyway, so if you only choose/found the tennants yourself you would at least be trusting your own instincts rather than somebody elses.
Remember letting like everything looks easy when it is being done well, and you have a bit of lady luck, but beleive me if your not on your toes it can soon end in tears, The one piece of advice I would give is if you do think it is starting to turn sour or their is something you don't understand, get straight on this forum, you will find someone on here that is able to give advice or point you in the right direction.
GOOD LUCK;)

[P.Pilcher]

Some landlords (like me) manage their own properties but get good agents with their high profiles to find and screen tenants. This costs us, but I consider it to be money well spent. A tenant who wishes to rent directly from a landlord can always ask the agent concerned if they have any properties available which are managed by landlords themselves.

P.P.