View Full Version : Thinking of becoming a landlord. Advice please
27-12-2011, 19:08 PM
Hi friends and thanks for taking the time to look at my thread. I live in south Devon and just down the road is a 1 bed flat for sale for £125,000. I am 44 years old and am very lucky as i could buy the flat with no mortgage. I very much would want to use a letting agent to deal with all the letting issues. My question is a simple on....Is it worth it?? I like the idea of a monthly rental income and becoming a landlord. Also i know absolutely nothing about anything to do with buying to let so any advice or web site recommendations would be greatly appreciated. I appreciate this is a bit of a weird question but any help is really appreciated.
I got stung in Torquay buying a 2nd hand 2 bed new build that was way over priced for the area. I was offered £125,000 for it this year, when I had paid £185,000 in 2005. Take care!
27-12-2011, 19:31 PM
I am very sorry to hear about your bad experience in torquay. I am looking for this purchase to provide income for the next 20 years or so and would not plan to sell it before then.
27-12-2011, 19:37 PM
Quite honestly you would probably do better to invest that amount of money in a three year bond with, for example, the AA which is paying around 5% at the moment. There's every likelihood that you'll be able to buy that flat, or a very similar one for a little under £100,000 in a few years time. Property is way over-priced and needs to fall in value by up to around 35-40% to bring it back to the historical value with regard to the property value cycle (the House Price Index which is average house price divided by average earnings fluctuates between 3.5 and 8 (roughly) - it's still 6 and in a downward direction and will be years before it begins to head up)
Factor in the expenses, regulations, the very possible defaulting tenants and staying away from BTL except for the very experienced is a no-brainer.
Everyone who isn't into BTL, imagines that landlords make shed-loads of money, become amazingly rich in double-quick time and are rolling in money. They don't in most instances as it can be a hard slog. Very, very rewarding when it all goes right from the point of view of the satisfaction of building a portfolio, but there are headaches all along the road.
Having said all that, if you treat it as a long term investment it is likely to beat any pension scheme very many times over.
Hope that helps.
27-12-2011, 19:41 PM
Thank you very much. Thats great advice and indeed food for thought.I think i may invest the money for now.
27-12-2011, 19:43 PM
Buying without mortgage is a good step in the right direction. Letting through an agent is also wise for a first timer - choose your agent cafefully though as there are no minimum qualifications or experience required to become an agent - you could set yourself up as one tomorrow, and if they get it wrong, you are the one taking the hit! If you do your homework, and perhaps join a Landlord Association however, it is nothing you cannot handle yourself from start to finish.
I have a 1 bed flat which I bought with redundancy money outright in 2000 and have successfully let ever since. This will be my pension pot! So far I have done well, with only 1 bad tenant (left 2 month's rent arrears and damaged the property), in all that time.
Remember too, that HMRC will want their cut of your "profits", so you need to do an annual self-assessment, and when you sell, they will also want a slice of your selling profit as CGT!
Whilst you are planning to use an agent, it is still wise to also research all the do's and don'ts and various obligations of becoming a LL. For instance, if you need to evict a tenant, the agent can help you with the paperwork, but they cannot represent you legally or attend court on your behalf!
I would recommend you read this link from another site which give a lot of info for newbie landlords:
Once you have read through this post and reviewed the info, if you have any specific questions, come back and ask again. Good Luck!
PS, just a thought - Is the flat Leasehold? If so, check lease carefully before you go any further, as some only allow owner occupancy and prohibit letting!
27-12-2011, 20:34 PM
Is it worth it?? Depends on how much rental income you can achieve. What is the monthly rent?
27-12-2011, 20:52 PM
have to disagree with you on a point or two - but they are my personal views only and, of course, others will almost certainly agree with you.
I've always gone for the biggest mortgage or bank loan possible with the idea being that you end up with a property which has cost you very little, all being paid for by the tenants. It frees up money for other investments, property or otherwise. The only caveat being that there should be reserve to allow for interest rate increases, void periods, unexpected repairs, etc.,etc.
Also I would never ordinarily buy a flat, even a freehold one, as I wouldn't want to be beholden to a third party - freeholder or association of freeholders. I have flats in my portfolio but ones which I've converted from single dwellings.
I'd also advise switching one's principle residence in order to benefit from future CGT letting relief - currently up to £40,000 of relief if one has occupied a property for some time and then let it - as well as relief on the final three years of letting. On this point professional advice should be taken in order not to fall foul of Her Maj's C&E or whatever they call themselves now!
27-12-2011, 21:42 PM
Points taken, but OP is already interested in a flat, and as I live in the South West too, inlfated property prices probably mean that a flat is all that would be within his (and my) price range.
I agree leasehold can have drawnbacks, but it has worked well for us. Freeholder owns several flats int he block which he lets himself, so it is in his interest to keep costs down as he is paying 4 parts of any bills, insurance policy, external maintenance etc anyway! He is also on site a lot of the time, when we live a good 30 minutes drive away, and has helped our tenant with several problems in the property, preventing the need for us to rush over there. Works both ways
I bought outright as I already had a mortgage on my own property, and wasn't in a position to take a 2nd loan. Financial advice in 2000 was to put the capital in a 2nd property rather than clear my existing mortgage (which I have since managed to pay off anyway). OP may benefit from taking a mortgage, as after all the cost will be offset against profit for tax so could work in their favour, but only they know their own financial position. You mention your portfolio, but unless OP intends to build on their first BTL investment, they may be happy to keep one property and prefer not to borrow.
Re the CGT issue, OP is looking to keep their property for 20'odd years (as am I), so rules may all have changed and changed again by then!
27-12-2011, 23:54 PM
"so rules may all have changed and changed again by then!"
but I fearnot for the benefit of the investor.
If he buys OP should consider purchase via SSIP
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