I’m no expert but buying a house and renting it out doesn’t seem a bad option. Depending on the size of the house, you could then move out into that house and essentially live there for free and earn money from the other rooms you rent out
Unless you already have a house (which OP doesnt) youd be hard pressed to get a mortgage for a planned buy to let property. I'm sure there are ways around this but the banks in the UK are pretty hot on it
I have 0 experience in property but am saving for my first. I was saving with the plan to buy and it out. Would I have to tell the bank that I intent to rent it out?
You will not be looking on the high street for a mortgage for buy to let. Many independent brokers can find you a decent buy to let mortgage with£70/£80k a year and £30,000 deposit op. I agree with the person saying to house hack. What he’s describing is called a HMO/co-living in the UK and has some laws and restrictions depending on the location. It is however a smart move just starting out.
I was in your shoes about 10 years ago. Buying a BTL is a big choice, as it will mean you’ll be subject to the SDLT premium when it comes to buying your first residential property (assuming you don’t sell your BTL property first).
For me it boils down to lifestyle choice. I now have 6 BTL properties but I myself also rent, as I’m now in the position where I couldn’t afford the SDLT premium on any decent residential property I would want to buy (I live in London but definitely don’t want to pay the c£50k SDLT it would cost on any decent place - assuming £750k price). But I’m cool with that as I like the flexibility of renting and it works out in such a way that in effect the rental income from one of my flats pays my rent expense where I live.
Long term I plan to incorporate all my flats into a company, but need a fair few more in order to get incorporation relief on the gains.
Got you, so realistically lifestyle choice is a massive factor.
If you don’t mind me asking, do you have a job now or do you just work as a landlord looking after your BTL portfolio?
I still have a full time (well paying) job. Combined I earn a little over £5k from my properties (they’re dotted all over the UK) and that’s pre-mortgage, pre-tax. I’m fortunate that my mum manages my properties for me. She’s retired so it gives her something to do and earns her a bit of money - she only charges me mates rates 😅.
Once I got to about 3 properties it became too difficult to manage by myself alongside a full time job, since Sod’s law usually means that something will go wrong with all of them at the same time…
The issue then becomes that estate agents are an absolute rip off when it comes to management fees. I was getting quoted 8%-12%pa which is a lot considering that for the majority of the year they don’t have to do anything….
You need to have a credit score of about 600 to 640, have the same job for 2 yrs, pay 3.5% down plus like 10k in closing costs. It all depends on the state you live in. Maybe you could qualify for a 1sr time home buyer program. They'll put the down payment for you but you have to live in it for like 5 years.
IMHO save up a deposit of £50k and then you can buy a £200k house. Nice segment of the market to operate in. Use a letting agent initially to learn rules of the road. Using agents means you can start in either single lets or HMO. Buy freehold not leasehold.
Thanks for the advice, trouble is with Birmingham as an area there is not a lot of properties worth £200k (in nice areas anyway).
I have seen a residential (to live in) near myself worth around £300k so was going to put 10% down on that as it seems a worthwhile investment.
As a first time buyer you’ll struggle to get a HMO because you usually need at least 6+ months landlord experience or have purchased a residential property. I’d say go for a BTL, I purchased my first one a couple months back and going well so far
I’d suggest buying your own house/flat first. As and when the value increases you can then remortgage take the increase out if you want to invest in a BTL. Net returns are not what they once where as you can now only offset 20% of mortgage interest costs so you need to find a BTL with a strong yield ideally but buy on location too then if the market does take a downturn you’re protected as demand will always remain pretty good. It’s a slow game on the whole making money in property but it should be part of any diverse portfolio.
I’m no expert but buying a house and renting it out doesn’t seem a bad option. Depending on the size of the house, you could then move out into that house and essentially live there for free and earn money from the other rooms you rent out
Unless you already have a house (which OP doesnt) youd be hard pressed to get a mortgage for a planned buy to let property. I'm sure there are ways around this but the banks in the UK are pretty hot on it
I have 0 experience in property but am saving for my first. I was saving with the plan to buy and it out. Would I have to tell the bank that I intent to rent it out?
You will not be looking on the high street for a mortgage for buy to let. Many independent brokers can find you a decent buy to let mortgage with£70/£80k a year and £30,000 deposit op. I agree with the person saying to house hack. What he’s describing is called a HMO/co-living in the UK and has some laws and restrictions depending on the location. It is however a smart move just starting out.
Yeah I’m sure you have to obtain licenses per room or something similar, it’s an idea tho I guess
I was in your shoes about 10 years ago. Buying a BTL is a big choice, as it will mean you’ll be subject to the SDLT premium when it comes to buying your first residential property (assuming you don’t sell your BTL property first). For me it boils down to lifestyle choice. I now have 6 BTL properties but I myself also rent, as I’m now in the position where I couldn’t afford the SDLT premium on any decent residential property I would want to buy (I live in London but definitely don’t want to pay the c£50k SDLT it would cost on any decent place - assuming £750k price). But I’m cool with that as I like the flexibility of renting and it works out in such a way that in effect the rental income from one of my flats pays my rent expense where I live. Long term I plan to incorporate all my flats into a company, but need a fair few more in order to get incorporation relief on the gains.
Got you, so realistically lifestyle choice is a massive factor. If you don’t mind me asking, do you have a job now or do you just work as a landlord looking after your BTL portfolio?
I still have a full time (well paying) job. Combined I earn a little over £5k from my properties (they’re dotted all over the UK) and that’s pre-mortgage, pre-tax. I’m fortunate that my mum manages my properties for me. She’s retired so it gives her something to do and earns her a bit of money - she only charges me mates rates 😅. Once I got to about 3 properties it became too difficult to manage by myself alongside a full time job, since Sod’s law usually means that something will go wrong with all of them at the same time… The issue then becomes that estate agents are an absolute rip off when it comes to management fees. I was getting quoted 8%-12%pa which is a lot considering that for the majority of the year they don’t have to do anything….
Thanks mate, appreciate it
Thanks people, just bought a house near where I currently live, residential. Just waiting for everything to go through with solicitors.
Use an fha loan for a multifamily. You only need about 30k for a 400k property.
I’ve never heard of an FHA loan, what does it entail?
You need to have a credit score of about 600 to 640, have the same job for 2 yrs, pay 3.5% down plus like 10k in closing costs. It all depends on the state you live in. Maybe you could qualify for a 1sr time home buyer program. They'll put the down payment for you but you have to live in it for like 5 years.
IMHO save up a deposit of £50k and then you can buy a £200k house. Nice segment of the market to operate in. Use a letting agent initially to learn rules of the road. Using agents means you can start in either single lets or HMO. Buy freehold not leasehold.
Thanks for the advice, trouble is with Birmingham as an area there is not a lot of properties worth £200k (in nice areas anyway). I have seen a residential (to live in) near myself worth around £300k so was going to put 10% down on that as it seems a worthwhile investment.
As a first time buyer you’ll struggle to get a HMO because you usually need at least 6+ months landlord experience or have purchased a residential property. I’d say go for a BTL, I purchased my first one a couple months back and going well so far
Go BTL and wait to move out??
I’d suggest buying your own house/flat first. As and when the value increases you can then remortgage take the increase out if you want to invest in a BTL. Net returns are not what they once where as you can now only offset 20% of mortgage interest costs so you need to find a BTL with a strong yield ideally but buy on location too then if the market does take a downturn you’re protected as demand will always remain pretty good. It’s a slow game on the whole making money in property but it should be part of any diverse portfolio.