Thinking about a BTL on house

[HawkEye244]

Hypothetically, if you purchased a house for 130k with a BTL mortgage and you rented it at £800 per month, how much would you expect to pay per month on the mortgage and would it be worth it ?

p.s. about 10k required to spend to bring it up to spec.

 

[securespark]

Some BTL lenders will only lend a maximum of 75%.

Based on a deposit of 32,500, Virgin repayments are, depending on the mortgage chosen, between 422-486 per month.

 

[EFLImpudence]

There is also the new rule that no longer allows mortgage interest as an allowable business expense for tax purposes.

 

[HawkEye244]

I can see that leaving less than £300 a month profit after all taxes. Not to mention maintenance/overheads. Even with insurance covering shortfalls in rent it's still gut-wrenching if you don't get that rental money in.

ps. this follows on from my earlier thread. I had the idea of potentially buying his house. Don't think it's a gooer though.

 

[Doggit]

As it over the £125K starting level, you'll have an extra £6.5 to pay on top for stamp duty, and second hone tax. If you can get it for £124,995, the it'll only be stamp duty at 2% making it £2.5K extra.

Aldemore will do an 80% mortgage, so you'd need £26K for the deposit, and at 5.48% (after 2 years that is) you'd need £475 per month for the interest repayment on the 80% of 130K. How are prices rising though, because if the figures balance out, then you can reckon on the uplift in value to make the profit. Even if they start a massive housebuilding program, it's only another finanacial meltdown that will affect house prices, but as always, but the worst house in the best area, or look for one that you can add value to.

 

[freddiemercurystwin]

Nobody buys a BTL nowadays to make any serious cash every month, you do it for a long term gain.

 

[freddiemercurystwin]

I can see that leaving less than £300 a month profit after all taxes. Not to mention maintenance/overheads. Even with insurance covering shortfalls in rent it's still gut-wrenching if you don't get that rental money in.

ps. this follows on from my earlier thread. I had the idea of potentially buying his house. Don't think it's a gooer though.

What you may also not be considering is the repairs/maintenance, when it's empty for maybe two months between tenants etc etc. That kind of stuff will wipe out any short term profits.

 

[EFLImpudence]

Yes, or no rent for six months and court expenses if they stop paying and you have to evict them

 

[freddiemercurystwin]

Yep, conveniently forgetting about what may go wrong with no plan will possibly end in disaster.

 

[HawkEye244]

Yes, or no rent for six months and court expenses if they stop paying and you have to evict them

What you may also not be considering is the repairs/maintenance, when it's empty for maybe two months between tenants etc etc. That kind of stuff will wipe out any short term profits.

This is factored in hence the less than £300 per month mark, which I suppose may be even less if there is a major unforseen outgoing but the boiler is relatively new and electrics in good condition. Also gaps in rent can be recouped with the right landlord insurance.

Ultimately though I think it's one for the OAPS who can supplement their income and afford the odd bit of buggeration. I was posting to see how people felt about the BTL game these days and it appears not much has changed, in fact gotten worse. It also locks up a fair bit of money, re: the deposit. So yes, not a gooer, but I do feel I may be missing a trick with this one. Profit is profit at the end of the day even if it's small.

 

[HawkEye244]

As it over the £125K starting level, you'll have an extra £6.5 to pay on top for stamp duty, and second hone tax. If you can get it for £124,995, the it'll only be stamp duty at 2% making it £2.5K extra.

Aldemore will do an 80% mortgage, so you'd need £26K for the deposit, and at 5.48% (after 2 years that is) you'd need £475 per month for the interest repayment on the 80% of 130K. How are prices rising though, because if the figures balance out, then you can reckon on the uplift in value to make the profit. Even if they start a massive housebuilding program, it's only another finanacial meltdown that will affect house prices, but as always, but the worst house in the best area, or look for one that you can add value to.

Would you do it Doggs?

The house has had the maximum that can be done in terms of extension already so no value to add there. It's primarly cosmetic + the garden is in a terrible state and needs work.

 

[EFLImpudence]

I suppose it would be difficult to make a loss doing it, but there are a lot of costs and aggravation you may not have thought of.

Council tax when empty.
Cleaning and some redecoration at nearly every change of tenancy.
Fees to agents unless you do everything yourself. This is better anyway because agents don't care nor have to pay for their mistakes.
The new rules for income tax are a double whammy. Not only do you not get 20% of the mortgage interest as a deduction but all the rent (less other working expenses) will be taxed.
All legislation is in favour of the tenant. If you act legally and place the tenant deposit in a scheme, any dispute means it takes ages for it to be returned to the landlord. Dispute means the former tenant will not reply to the scheme.


Some tenants are brilliant, some are not. It's difficult to tell at the beginning.

 

[Ian H]

What if you owned outright a house worth £145,000. You could rent it for £625/month or sell it and bank the money.

What would you do?

 

[EFLImpudence]

That's a very good point.

 

[JohnD]

or sell it and bank the money.

What would you do?

Not bank it.

Invest it.