First-time property buyer looking to let

[jhong]

Hello,

I am British and have been living overseas for several years. My wife and I are looking to buy our first home -- however, where I currently live, the property sector is terribly overheated and set to crash significantly.

As such we are looking to invest in the UK. Most likely London.

Our main purpose is as a long-term investment -- and also potentially as security should we return to the UK in the medium term.

Since we will not be living there, we will be looking to let the property.

As we are new to this, please excuse the naive questions.

- Am I correct in understanding that as a first-time buyer I will not be able to take out a buy-to-let mortgage?


- How much of the process can be done from afar? I can likely use 2-4 weeks to research and visit agents and properties (I understand that this will be tight, but we are looking to invest, not somewhere to live), but after that I would like to avoid expensive long-haul trips back to the UK. Assuming we find somewhere reasonably furnished, is this do-able? I can have family "pop in" for formalities if necessary, but they wouldn't be on-hand for months on end to help.

- We have a stable income with a large multinational firm, but overseas (contract signed overseas) -- I can handle remitting the cash to the UK, but are there any potential complications (other than credit rating) I should be aware of in this regard?

- I will obviously need to use a letting agent. I would obviously need to case out the options during the abovementioned trip -- is there anything in particular I should be looking for.

[jeffrey]

One point: aim for a freehold house, to avoid the frequent problems arising from sub-letting of flats (usually leasehold).

[fletchj]

hello,



- am i correct in understanding that as a first-time buyer i will not be able to take out a buy-to-let mortgage?

no - being a first time buyer does not exclude you from a buy to let mortage. However, being abroad and not having a uk address, bank accounts, employer etc. Is going to make life difficult.


- how much of the process can be done from afar? I can likely use 2-4 weeks to research and visit agents and properties (i understand that this will be tight, but we are looking to invest, not somewhere to live), but after that i would like to avoid expensive long-haul trips back to the uk. Assuming we find somewhere reasonably furnished, is this do-able? I can have family "pop in" for formalities if necessary, but they wouldn't be on-hand for months on end to help.

it could be done but this is pretty high risk - it is very uncommon to buy properties furnished. Buying a property and then getting it ready for rental can be pretty labour intensive even if you keep it simple. If you do go down this road, rent out unfurnished. Bear in mind that at a minimum you are likely to have to decorate, carpet, curtain and clean. You could possibly avoid this by buying a new build but that presents a whole new set of issues as you won't be there to pick up on any snagging problems. Overall that's going to be expensive if you have to pay someone else to deal with it. The buying process itself could be done remotely - sending docs for signing back and forth etc. You would probably want to be around at completion if only to check that what you bought is what you got.

- we have a stable income with a large multinational firm, but overseas (contract signed overseas) -- i can handle remitting the cash to the uk, but are there any potential complications (other than credit rating) i should be aware of in this regard?

similarly to point 1 there is no legal reason why this should be a legal problem however there are likely to be a number of practical problems. See also comment below

- i will obviously need to use a letting agent. I would obviously need to case out the options during the abovementioned trip -- is there anything in particular i should be looking for.
a whole bunch of things - i suggest a trawl of this forum to get an overall view of agents and what to look out for.

overall it is now quite hard to open accounts and mortages etc. If you are resident abroad - partly because of money laundering regs etc.

if you do want to do this i strongly suggest that you find a specialist mortgage broker because almost all direct applications will fail - the main reason being that you don't fit the standard profiles so will be put in the 'too hard so reject' pile. I would guess that the expat specialists in the isle of mann or channel isles may offer something but expect to pay over the odds.

You will definitely need a big deposit - probably around 40-50% as you are a high risk from the mortage providers point of view.

Overall as you will need to pay someone to do everything budget on losing money year on year.you might be able to break even if interest rates stay as low as they are and if you choose your rental property with extreme cleverness, but i doubt it. Given that, you are depending on a significant capital gain to make this worthwhile - read any number of opinions on whether that is likely across the interweb and take your pick.

Also bear in mind that what makes a good rental property and what you want to live in may be 2 different things.

From your rent received (budget on 10 months pa rented to allow for voids) you will have to pay:
- the mortage
- the agents (20-25% of rent) for full service
- maintenance, repairs and tenant changovers (cleaning decorating etc.)
- if a flat - ground rent, service charge etc.
- bits of council tax, utilities etc. Between tenants
- uk and possibly local tax on net income.
- possible occasional return to uk to deal with larger issues.
- exposure to exchange rate risk.

Personally i wouldn't touch it with a barge pole in your position.

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