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Thread: Looking to get a buy to let house?

  1. #1

    Looking to get a buy to let house?

    I've always had a tied house with jobs I've had and have never got on the property ladder, we've been talking about getting a buy to let but have no real idea about how to go about it, I know I'll need to go to my bank but is there anyone else that can be as or more helpful? Is there any point in getting Pointers from a property agent first? Is there companies that deal primarily with buy to let mortgages?
    Thanks.

  2. #2
    My pennies worth:
    B2L is not capital gains tax free unlike your own home so decide if you want to live in what you buy, eventually. Bigger homes tend to have a lower percentage yield unless they are HMO's (houses of multiple occupancy like students, license required, fire regs etc beware). Lower yields often result in higher capital growth if you can manage the cash flow.
    Canvass at least three letting agents for advice on easiest to let type and area.
    Flats/ apartments and some homes have management fees from rip off management companies. Avoid them and go for freehold only as it makes a big dent in the return. Bear in mind an unlet month costs more than a few tens £ / month on the rent for an average 2 - 3 year let and tenants only have to give you one months notice by law so it's a bugger if they give notice on 20th December ! (Landlords have to give two and then it takes another 6 months through the courts to get possession).
    Down south I have one agent on full management at 7% plus fees for credit checks etc and one at 9% all in, both are plus VAT. (VAT is not recoverable even tho' I'm a VAT registered business). Be wary of paying less and having a bad service and getting sued !
    Osbourne gave us a hard time recently (what a shame he was sacked and relegated to the back benches and out of his tied house with less than 48 hours notice - couldn't have happened to a nicer bloke) and you will need to research his new tax implications on mortgage costs of which I am privileged to be unaffected by. Just bear in mind his extra 3% stamp duty over say ten years is 0.3% / year which you should expect to be a small dent in the growth %.
    There is never a good time to take the leap, except in hindsight, but go for it and in the long term it will be ok. Interest rates certainly look likely to stay low so good luck.

  3. #3
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    I can recommend a broker to talk to if you want some advice. I would look at what area you wish to buy in and the rental rates against the purchase price. Decide if you're going to manage it yourself or pay an agent.

    Returns are important. I get the same rental for my properties, but there is a large difference in the value of each of the properties. This will have a bearing if you want it to be cash neutral on a monthly basis - and you need to account for those management and upkeep fees - and the risk of it not being let. Also understand that a B2L mortgage will probably require a 25% deposit - and you will pay more in terms of interest.
    Nooooooooooooobody expects the Spanish Inquisition!! Our main weapon is.........

  4. #4
    My 2 pennies worth. Your Buy to Let may well be capital gains tax free or certainly you're likely to qualify for considerable relief? It depends on many things and the fact that you're required to live in tied accommodation with your job will almost certainly mean that you qualify whilst it is the only home that you own! A quick call to HMRC will confirm this!
    Recommendations of Brokers are much better than going to your local bank too! They often have access to much better deals which can save you thousands over the years!

    Additionally, you will only get tax relief on the interest part of the mortgage and will be liable for tax on any capital that the rent pays off so don't over pay. IE, The Mortgage is £800 a month of which £650 is interest. If the rent brings in £800 then you will be liable for tax on £150 x 12 =£1800 (minus any bills such as insurance and repairs).
    Last edited by baguio; 25-07-2016 at 17:42.

  5. #5
    Thanks, it's fried my brain a wee bit!!! The deal is, we don't own a house, would this exclude us from a btl?
    We want to get a btl as we live in a tied house, I'm a keeper, we want the house as somewhere to live after we retire in 20/25 years and not as an investment to sell in future.
    Is a broker a better idea than going to the bank? Would a broker be more expensive?
    A really big thanks for the advice.

  6. #6
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    Quote Originally Posted by Dawnrazor View Post
    Thanks, it's fried my brain a wee bit!!! The deal is, we don't own a house, would this exclude us from a btl?
    We want to get a btl as we live in a tied house, I'm a keeper, we want the house as somewhere to live after we retire in 20/25 years and not as an investment to sell in future.
    Is a broker a better idea than going to the bank? Would a broker be more expensive?
    A really big thanks for the advice.
    No exclusion from BTL at all - it is your ability to service the loan that is the criteria, not where or how you currently live. We sold our main residence and lived in rented for what turned out to be almost two years while we found and sorted the next property. Understand the point on investment vs somewhere to live in future. While it is not a pure investment, you do still need to maintain an element of emotional detachment to the property - and ensure it pays its own way while you're not living in it - although the last bit is by no means mandatory. I think we were just flagging that you do need to consider how self sufficient the mortgage is.

    Some brokers do not charge fees and will frequently have access to far better deals from a wider portfolio than. A bank who may only sell their own product. Use the advice as a sounding board if nothing else. I can only applaud your foresight, but just go in with your eyes wide open. Happy to give as much assistance as I can - if you want it.
    Nooooooooooooobody expects the Spanish Inquisition!! Our main weapon is.........

  7. #7
    Quote Originally Posted by baguio View Post

    Additionally, you will only get tax relief on the interest part of the mortgage and will be liable for tax on any capital that the rent pays off so don't over pay. IE, The Mortgage is £800 a month of which £650 is interest. If the rent brings in £800 then you will be liable for tax on £150 x 12 =£1800 (minus any bills such as insurance and repairs).
    Tax relief is gone on the interest as far as I'm am aware.....

    anyhow, anyone can buy a house to let, doesn't matter if you don't actually have your own house. As long as you can afford the deposit then you can buy. You will have to show that you can cover the mortgage as well. The broker will be able to advise. Regarding tax relief as you have a tithe house I don't know what tax implication or benefits are however it is a sound idea to have somewhere to move to when you retire. The first couple of years are a pain in the ass money wise but it gets better over time as, hopefully rental and wages increase.
    if you get a house then there are positives and negatives to using an agent.

    positives, they deal with all the cack.
    negitives, they want their share of the income.

    things to note. Percentage is negoitable and also consider insurance if the tenets do not pay. Reads the agency's t's and C's very carefully. If it's not in writing it's not covered, no matter what they say.

    depending on where you buy either get a two bedroom or a three bedroom. 1 person in a 1 room house or beds it will, when they get a boyfriend/girlfriend usually move to a bigger place for space. If they rent a 2 bed then they are more likely to stay. A 3 bed is likely to attract a family. 4 bedrooms and above start to move into more specialist areas with less tenants so can be harder to rent out. Depending on where it is.

    and of course a lot depends on things like location, business in the area, speak to the estate agents in the area to find out what the market is like and what do people want to rent.
    I can speak in-depth and with great knowledge about most subjects until some bugger who actually knows what he is speaking about opens his gob .

  8. #8
    As your location sounds as if it is in a great part of the countryside an option maybe a house purchase for holiday let, same rules as BTL purchase apply but different and less onerous tenancy problems + higher rental. We manage occupation of ours all year round now.
    TonyC

  9. #9
    Be aware that if you have own things like gas cookers and gas fires that are in the property, you will have to get them serviced every year at £50 ish an item. I made that mistake when the items were worth next to nothing. I should have sold them to the tenant for £1 instead and then they would have been his problem!

  10. #10
    I will be watching this thread closely, I am in the same boat as the OP , tied house to the job and I too plan to retire in 25 years or so.

    A buy to let is exactly what the wife and I have been discussing.

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