How would you invest my money ??

**mojo_scotland** · 26-03-2012 10:39 AM

Hi all,

Remember im in Scotland - things are a lot less expensive....

i have approx 20k (will increase over the next few weeks as i continue to search for property). I have two options im in a dilemma over...

option 1. New or nearly new build , 2 bed. 90k with 22.5k deposit. give to letting agent, hopefully little maintainence and hassles. 1 property working for me, small yield per month of £125-150 profit.

Option 2. buy TWO 2-bed ex-local authority properties around 55k , put down 27.5k between the 2 of them. Need light renovation, may need maintainence now and again, hopefully pass onto local authority to get guaranteed income from their scheme but MAY have less desirable tenants. Failing that give to letting agent but may find it harder to get a tenant.

Its more money down but i have 2 properties working for me, higher monthly yield too of approx £200 per property = £400 per month in all. but i anticipate a 'harder life' with these this option, although i dont think i will mind that if my investment is working for me.

so....option 1 or option 2 ? Can see the pro's and con's of both but as a first time investor im needing some expert advice.

i did read an article in a Sunday paper about a millionaire who only ever bought sub 60k properties and advised , if bought with caution, that its a great route to go down....

Any opinions much appreciated

Thanks

Craig

**QuestForFreedom** · 26-03-2012 12:27 PM

Craig,

Welcome - what is your strategy? Why do you want to buy a property in the first place? Are you looking for an extra bit income or hoping for long term capital growth?

**mojo_scotland** · 26-03-2012 15:05 PM

Thanks for replying, basically it's a long term plan. Hopefully Remortgage in a few years, use some equity to put towards another one etc etc and build a small portfolio to use as my pension one day.

Not too bothered about monthly income, yet if it's possible to get monthly income with decent capital growth I'd have to consider that.

Option 2 would allow good monthly income and also two properties worth of capital growth , albeit small amounts, over the next few years would be more beneficial than one would it not?

Thanks

**mojo_scotland** · 27-03-2012 20:43 PM

Anyone got any further opinions? Your help would be appreciated.

**Dan_Manchester** · 27-03-2012 20:55 PM

Welcome to the forum, have you spoken to any finance companies regarding your ideas?

Beware that most lenders will not lend on the 2 property approach that you mentioned above

**mojo_scotland** · 27-03-2012 21:34 PM

Originally Posted by Dan_Manchester

Welcome to the forum, have you spoken to any finance companies regarding your ideas?

Beware that most lenders will not lend on the 2 property approach that you mentioned above

I don't understand your comments, I'll just be buying 2x buy to lets. Buy one and hopefully soon after find another one to buy. Both on standard btl mortgages...

**catdog1121** · 27-03-2012 23:19 PM

Thats not a huge amount to invest, Im not sure what your income is but have a look at buy to let mortgages cause a lot of them require a minimum income.

Also 25% deposit is the bare minimum 22.5k would only just get you the 25% deposit based on the 90k, dont forget you will also have application fees, valuation fees, loan fees, admistration fees, legal fees, search fees, these can come to several thousands of pounds. Some of the best deals now require a 40% deposit.

Just seems like you are stretching yourself quite a bit. Personally im not a fan of cheap houses for low rent because if you have to for example refit a bathroom, it usually costs about the same on a 3 bed semi as it does on a 1 bed flat, difference is as a percentage of the rental income it will take you a lot more time to pay for the refurb on a one bed flat than a 3 bed semi. Like I say thats just my opinion. Are you sure you have done your sums correct, make sure you buy in an area that has a large rental demand and will also be easy to sell. The problem with new build estates I find is usually half the estate ends up being rented properties so lots of competition.

If you really want to get into buy to let make sure you have totally understood what you are getting into, research the area, you say I can save a bit more over the next couple of weeks, what is your hurry, it can take me over a year to find the right house, the market at the moment is going nowhere fast so bide your time, look at previous properties sold in the area. yeilds of about 5% are normal, for a cheap property as ive said because the costs of repairs compared to rental income you should aim for nearer 8%.

Personally I would put as much as you can into a high rate ISA account, you could find it will return as much income after tax and will be a damn sight less trouble. Property is not as easy as newbies think if you have have plenty of money its a good way to make more money but if you are stretching yourself you could come unstuck. Think what if you lost your job and then someone trashed the place, could you afford the repairs, would you have enough spare cash, could you get another job quickly. Please dont take this as a pissing on your bonfire, if it is truely something you want to do just make sure you really know what you are letting yourself in for.

**Investing North** · 03-04-2012 07:14 AM

Hi

I would spread the risk and buy 2 cheapies rather than the expensive single property. Get a good broker who can secure the mortgages for you and advise wha critetia you need to meet. If you have 1 properties and 1 becomes empty the other should support both mortgages. If you just have 1 and it's empty then you're paying the mortgage. Try to buy with discount as well so you can refinance quicker.

**Losos** · 07-04-2012 15:38 PM

Originally Posted by mojo_scotland

Any opinions much appreciated
Thanks
Craig

Craig, I am a potential BtL investor 'tho a long way from Scotland, I have been researching houses for 'sale' and 'to let' and in the area I'm looking buying is no problem, but the number of properties available for rent is rising every month. Voids are the landlords biggest nightmare as it effects the ROI immediately, you might be able to save by doing a lot of the leg work yourself but you can't compensate for having the property empty unless (As suggested above) you have a reserve of cash sitting doing 'nowt.

**midlandslandlord** · 07-04-2012 19:55 PM

How well does your model work when the Euro goes boink and interest rates go to say 8%?

Or in any turbulence caused by the independence referendum or afterwards - eg what happens if RBS redomiciles?

One problem with newbuilds is that they can be samey, and that the 'newbuild premium' has changed significantly. OTOH you get a few years of little maintenance.

ML