Buying to Let?

[af1]

Hi,

is there still a market for buying to let, specifically at the very low end of the market?
for example on small studio or one bedroom flats?
I have seen a few at rock bottom prices that would require hardly any mortgage and looking at rental prices in the area look profitable?

does anyone do this? what are the pitfalls/advantages?

I'm seeing flats for around 30,000-40,000, deposit on these wouldn't be much.. and for the amount you would be injecting as a deposit, you would never make as much in interest in a savings account as you would from income gained from renting it out?!

any advice? is there point investing at this low end of the market, with an aim to secure a nice 'little' income? or am i best of saving for a greater deposit and starting a bit bigger?

Alan

[Tamiyoman]

I think with the mortgage markets having tightened up a LOT over the last 4 years lots of people are renting until they can muster a 40% deposit (not exactly easy these days altho lots of young starters are being loaned the deposit by parents/grandparents).

I am currently in the process of buying my grandmothers house as a buy to let (2 bed semi) , looked at the price of the house and the money I need to spend on it to rent it and it comes out at a 6.6% Yield in the area where the house is. Thats roughly twice what I get for interest in my ISA's, if you dont need the money and you dont mind a bit of hassle its worth doing BTL for the long term.

You also need to consider housing market is still low and appreciation over the long term will likely increase the value substantially (My grandmothers house was valued 40% higher 3.5 years ago).

Advantages of BTL are potential increase in capital value, regular monthly income (at least while tenanted anyway lol), ability to offset maintenance and mortgage costs against rental income lowering tax liablity.

Disadvantages of BTL, not easy to get mortgage for them unless you ahve a decent deposit or proven record of buy to let market, paying tax on income above costs, costs to yourself if you cannot find a tenant. Dealing with estate agents, some want 15% of monthly rental for merely showing someone the house/flat etc and they do very little after that, best to do it yourself, even better if you have mates who are Sparks and Plumbers as they can sort potential issues for you.

Dont furnish a flat with nice things as they only get wrecked, cheap and cheerfull/replaceable is best bet, my best mate rents out 2 houses (in a pretty shonky area and the last 2 tenants in one of the houses took all the internal doors and the Boiler  , so now he puts cheap stuff in which is replaceable and he increased the deposit to cover cost of replacing the boiler twice over, so if they do take his boiler, he replaces it and pockets £1200 too (funny he does not mind if the current tenant takes the boiler)

[gazbutS3]

we have done this before, and about to do it it again. Try to chose where you BTL carefully, near hospitals, college/universities or large firms are always a good start. I think if you have or can raise the capital to do it its a good time for the reasons already mentioned above

[af1]

im not sure if i am 100% at the stage to do it right now, but its something I'm very interested in for the future, i currently do not have a mortgage so could i be treated as a first time buyer?

Alan

[garrardrj]

Go and ask a local Agent about the rental market. If your area is anything like alot of other areas there are way too many flats/bedsits for rent. Speak to others who have got property to let. Its not the easy money easy ride you may see from the outside looking in. Alot of owners will give bad tenants good references to get them out of their properties. Too many don't pay anything but the initial deposit and first months rent.

As Tamiyoman is doing get yourself a house to rent if you have to do it.

[af1]

my brother does it, and i have a friend who works in property lets..

time to invite her for a coffee... or maybe a drink ;)
oh wait, the mrs wouldn't like that 

[Ifti]

I thought about this recently as I have a fairly decent deposit saved up to pump into a BTL. However I decided against it for now.
I have a 3 bed house with garage etc at the moment. My plan is to pump as much as I can into my current mortgage instead.
We are already planning to move in around 6 years time, when the time comes to look into secondary schools for my oldest daughter. By then I should have a very low mortgage on this place, so rather then sell it I'll remortgage and take out £100-150k to use as my deposit for my next place.
That way I get to keep this house and stick it on rent instead. Hopefully I'd be able to find a young family to move it (very close to the primary school as its just round the corner and my garden backs onto their field!) who tend to stay in one place a lot longer then a single person moving into a flat etc. Hence I'd hope for a long term tenant.

It's always good to invest in bricks and mortar, you rarely lose out, and it's great to use as a pension etc.

[andrewparker]

...I currently do not have a mortgage so could i be treated as a first time buyer?

Not if you've had a mortgage or owned a property before.

[Tamiyoman]

What with current market, FTB rates are not much better than 2nd owner rates, plus in the same vein a lot of mortgage companies like to see you have previously afforded and regularly paid a mortgage (preferably on time!) each month.

I think houses are a better option, especially 2-3 bed homes (Starter homes for young families), some good advice above also about schools, etc, depends on where property is, good rail/tram links nearby also helps for the family with 1 car (someones getting the train!) or at least secure parking at a train station nearby etc.