We are thinking of purchasing another property on a buy to let basis in a commuter/residential area.

Basically we don't want to jump in feet first, so what should we be considering and what are other peoples experiences of buy to let properties and what not to do?

Apart from the obvious i.e the buy to let mortagage what other outgoings is there to consider?

I guess no-one owns a second home on here and rents it out. Oh Well :(

I think people have been put off the buy to let market because with property as expensive as it is, the rent won't cover the Mortgage. Assuming you can rent is straight away for an amount that covers the mortgage, insurance, renovations, repairs, time when the place is empty etc then it could be good. Also you have the risk of dodgy tennants trashing the palce, not paying the rent etc. It's still very hard to get people out of your hosue once they are in, even if they are messing you about and not paying rent. The housing aid office and homeless section would rather screw you over than rehouse someone so everything you do needs to be watertight, especially when trying to get people to leave..

We are thinking of purchasing another property on a buy to let basis in a commuter/residential area.

Basically we don't want to jump in feet first, so what should we be considering and what are other peoples experiences of buy to let properties and what not to do?

Apart from the obvious i.e the buy to let mortagage what other outgoings is there to consider?

that would have been a great idea 5 years ago, but at this monemt in time could arguably be the worse financial descision you ever make.

With the reason being?

With the reason being?

First off, i said arguably - there are no guaruntees about making or loosing money, its a risk that you have to decide about. To help you do this, you need to look at the economic data both nationally and globally.


U.S. are currently pushing their IRs up, the eurozone are doing the same. It is highly likely that we will follow - particularly if the pound takes much more of a spanking like it did yeaterday. Now, you might argue that you can get a fixed for 2/3 years which is fine, but this doesnt stop the problem of capital depreciation, which may be brought about by those who have monumental debts getting into financial trouble (repos and bankruptcies are on the up bigtime).

Look at the economy here in the UK. The government and Boe tell us that inflation is on target at around 2%. Personally i believe this is cobblers. For starters council tax is going up 4% this year, gas and leccy prices are going up, what 20+%, all on the back of oil prices - when these higher oil prices filter through to the consumer (increased packaging, transport, storage costs)
and prices of everyday items start to go up, there is only one way IR are going and that too is up.

This brings us full circle to the problem of endebtedness - the increase in repayments on the massive consumer debt that is holding the countrys economy up. We are heading for a recession and BTL is not the thing you want to be doing unless you can afford to take a big hit and ride out the storm.

This imo is the tip of the iceberg.

Like i say its all about opinion and sentiment. My opinion is that we are looking at a recession and a house price crash in the next 18 months

Remember, these two things.
1.regardless of what anyone tells you house prices are a matter of opinion, but debt is real.

2. regardless of what anyone tells you house prices go down as well as up (either nominally or as a result of inflation)

A bit dour i know, but you did ask :)

The key then is to try and buy below market value. Some people say there's no such thing but I ask you...if there's a street full of terraced houses that have been selling well the past year all at £100k, and all the same condition, what if you manage to get one for £80k? I'd say that was below market value

People are doing it all the time, it just means being a little more active in the market.
Find motivated sellers. Who is motivated? Anyone who needs a quick sale for a variety of reasons.

Also regarding a property crash:
Concentrate on the first time buyers market for BTL, as it's more fluid and guess what first time buyers do when they aren't buying? (ie. in a crash) They are renting, thereby increasing demand for rental properties. Second time buyers will stay put.

I still dont think that is a stupid idea. I think you will have to be careful where you buy...if you are thinking of letting to students bear in mind that there are alot of new student flats and you may not be abla to retain the rental-potential.

you really should be looking for a return of 7-10% which isn't always easy....but aim for properties where you can get this......

obviously the bigger the deposit you have the better as then this is all income.

some of the new flats in the city are just owned and not inhabited so be careful that there is a demand for properties where you are looking.

yorkshire house prices are still realtively low.

And regarding a house-price crash...traditionally sheffield properties hold there value well when the market is shakey.

there is always a risk......but there is a risk whatever u do/dont do....think of the maximum you COULD lose and then you are going in with your eyes open.
5 yrs from now people may well be saying 'buy to let...a good idea 5 yrs ago!!'

GOOD LUCK

Dizzymink, I've heard this before.
I wasn't taking any notice during the last crash, but I have heard that by and large Sheffield pretty much stood it's ground last time. That's quite interesting.

Can anyone else verify this? Facts/figures?

And regarding a house-price crash...traditionally sheffield properties hold there value well when the market is shakey.


GOOD LUCK

That really is nonsense. Maybe chelsea and kensington properties hold their value, but if you think that a hunters bar 2 bed terrace will hold a value of 125K (in real terms), then your in cloud cuckoo land. Longterm (over last 60yrs) average house prices work out at about 3.5x average salary. Currently, average house prices in sheffield are around ,i believe, £165k, which is 7.5x a salary of 22K.

Now dont get me wrong, anyone who is prepared to mortgage to the hilt in a financial unstable economy, has my respect for balls-out-ness and i wish them well, but they must have a broader picture than what the man at the halifax said, or the latest rightmove figures.

all the best Skatiechick, but heed the words of ceevee re: the huge number of flats stood empty in town - there is not a poor supply of accomodation on offer, so you aint garunteed a tenant straight off.

Concentrating on first time buyer houses is good in theory, but these ftbs already live somewhere rented, so increasing the demand for rental properties is a bit misleading as those empty 1/2 bed falts in town are ftb properties, surely. Although chances are most lender would think twice about giving a btl mortgage for a flat, these days.
https://registration.ft.com/registration/barrier?referer=&location=http%3A//news.ft.com/cms/s/7754649c-728f-11da-9ff7-0000779e2340.html

Anyway, its all about yeild have a go at some calculations http://www.bmsolutions.co.uk/products/btl/btlcalcs.asp here to see if its worth your while

Hi Skatiechik.
I own 3 BTLs (used to be 4) and here are my thoughts. We bought our properties 3/4 years ago and they are sound investments. We don't make big profits monthly and if you add up the repairs and maintenance probably less than I thought. However the capital growth has increased significantly and this is the reason we went into it - they now hold enough value to give our children good deposits for when they buy a property.
Buying today is a different story - anywhere you buy now would be extremely hard pushed to break even, never mind make a profit. If you have a significant deposit or can buy a large wreck and do it up then there is a possibility. We use an IF Advisor and he has advised us that there are better places to put money.
However I am still tempted to go for another one as I enjoy all aspects of it but only because we have a deposit to put down. If you do go for it I would suggest a place that has got 3/4 bedrooms in a student area that is not too expensive such as Walkley or lower Netheredge (just off Abbeydale Rd).
I would also like to add that I never have trouble finding good tenants - first to see usually takes it - and I have a city centre flat that is always sort after. My point being that if you furnish it nicely and keep it well maintained, you shouldn't have any bother filling it.
Good Luck.

Hi Skatiechik.
I own 3 BTLs (used to be 4) and here are my thoughts. We bought our properties 3/4 years ago and they are sound investments. We don't make big profits monthly and if you add up the repairs and maintenance probably less than I thought. However the capital growth has increased significantly and this is the reason we went into it -

This is the main reason we were thinking about doing it for - capital growth. We aren't actually interested in making a profit on the actual renting side as long as it pays its way. But two properties gaining captial growth is much better than one in my opinion. I don't need to worry about investing for the kids yet, I am looking for the quickest way to get my ideal house in the country.

Not looking to rent for students, the property we have in mind is in a commuter town (Stocksbridge) and would be ideal for a family, or a working couple as there is easy access to the motorway. The big question I think we need to do some research on though is how easy it is to rent a property in the area. I personally feel that is an up an coming area and is likely to see high growth in the next ten years. Industrial industry is on the move and where else can you get within walking distance of countryside, at an affordable rate. The downside is they plan to build a village of 400 houses across the road, now I am undecided if this will make the area more desirable hence house prices going up, or the traditional terraced steel houses down the road will look less desirable meaning house prices go down.

We would probably only be looking to mortagage half of the value of the house, by extending the mortagage on our own house to pay for the other half therefore getting a better deal on the repayments (buy to let mortagages normally being having higher repayments).

I can see that you have done your homework, it is all down to figures. Your problem is can you rent easily in Stocksbridge? Prices tend to be cheaper there but so are rents and being further out you will not attract nearly so many people I guess.
The nearest experience I have had is when we owned a flat in Wadsley Park Village. It was very popular and probably had as much interest as my city properties. However Stocksbridge is a fair bit further away from Sheffield so it would probably be tenants who worked more locally or Barnsley.
Do you know stcksbridge? Knowing an area where you intend to rent is a good thing. How about ringing estate agents/letting agents and asking if there is much call there? You could also ask which areas they might suggest to buy to let and which they would definately not recommend. I did this years ago and it was very fruitful

I can see that you have done your homework, it is all down to figures. Your problem is can you rent easily in Stocksbridge? Prices tend to be cheaper there but so are rents and being further out you will not attract nearly so many people I guess.
The nearest experience I have had is when we owned a flat in Wadsley Park Village. It was very popular and probably had as much interest as my city properties. However Stocksbridge is a fair bit further away from Sheffield so it would probably be tenants who worked more locally or Barnsley.
Do you know stcksbridge? Knowing an area where you intend to rent is a good thing. How about ringing estate agents/letting agents and asking if there is much call there? You could also ask which areas they might suggest to buy to let and which they would definately not recommend. I did this years ago and it was very fruitful


Thanks for the compliment ;) No not done my homework at all yet, those are literally just initial thoughts and with the next step being my post on here asking for people experiences of buy to let. I haven't even done any other research on the internet yet.

I have already thought about asking the estate agents and I will certainly add that to my list. For now I have just been looking on the internet/sheffield paper to guage a feel on what the renting prices are.

What is your experience on the legal side of things with contracts, deposit, etc? Have you had any problems at all with tenants? How often would you say you need to redecorate, do maintenance?

I use a regular contract that I got from a landlord site. I had to pay but I now just photocopy it. You can buy a standard contract from various places.

I usually ask for the monthly rent as deposit though I have thought I should ask for £100 more (as many agents do) as sometimes tenants try to not pay for the last month and it is a little insurance if they damage anything. I must say that I only had this once and luckily there was no damage. You need the deposit a few days at least before the tenanats move in.

I've only had a problem with one tenant and it wasn't huge.

I decorate at least one room between each tenancy so that the properties generally look good all the time. The problem is time as usually people try to move in virtually as soon as the other moves out. Today I have been to paint the bathroom even though the tenants are now in.
I find I go for weeks with no probs and then they all come at once! - like now.
Just in the last few months I've had big heating probs at 2 properties, a window problem, 2 taps replaced, a hallway tiled and some lights mended.

Hope this helps.

We have seen a large number of buy-to-let instances recently, there's some fairly cheap properties on the market in the Woodseats area.

Every client we've sourced a mortgage for on a buy-to-let basis is expecting rent to cover the mortgage, and a bit more too!

If we can ever be of service in sourcing mortgages for you, don't hesitate to get in touch with me.

Doesn't the rent have to cover the mortgage payments by 130% for a buy to let mortgage?

Every client we've sourced a mortgage for on a buy-to-let basis is expecting rent to cover the mortgage, and a bit more too!

But looking at the rates for the cheapest BTL I can't see how anyone can break even nowadays let alone make a profit! That is unless they have large deposits.

I can see that properties will be fairly cheap in Woodseats but the rents can't be that high.

Lenders are only interested in their money being safe in the property. They don't care two hoots if your money isn't. If you overspend on a property, its not always the case that it will come back.

That really is nonsense. Maybe chelsea and kensington properties hold their value, but if you think that a hunters bar 2 bed terrace will hold a value of 125K (in real terms), then your in cloud cuckoo land. Longterm (over last 60yrs) average house prices work out at about 3.5x average salary. Currently, average house prices in sheffield are around ,i believe, £165k, which is 7.5x a salary of 22K.


actually average house prices in sheffield is 141 grand, compared to a national average of 184grand.....it is less likely to crash than the rest of the country's more expensive properties.

anyway all this is academic....if you only buy what you can afford then you can get through a crash , if you stretch yourself too far, thats when you'll suffer. properties dont stay crashed, the market stabilises, its just about paying the mortgage when it does.

PS im not saying that prices wont drop.....but thats completely different to a

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Fair enough, ill stand corrected on the average price, bit my point remains. That is still 6.5x average SY salary (21.5k). I dont accept that because the ave price in sheffield is lower than the national average, the area is somehow insulated against a much broader economic picture - its all relative to prices pre-boom.

However, i actually think we might be singing from the same sheet here. I agree that if you stretch yourself too far you will get burnt - sadly it seems that many people have stretched to far 'to get on the ladder before its too late' - and it is these folks who may not be able to pay their mortgage (or credit cards?). It will become apparent to people sooner or later that the current property cash cow has BSE and is in its final throws.

Just out of interest, and im not being flippant here, when in your opinion, does a fall in prices become a crash?

Id say when we see 1% falls (in real terms) per month.