BigDingus 5:37 Thu Apr 27
Buying a House - Advice Please
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Have been renting since the missus cleaned me out a while back but have come into some money (250k) - which will buy me a bang average house round where I live. So
a) Is a good time to buy right now ?
b) Should I just buy something outright or put the majority down and then get a small mortgage in order to get something better (bearing in mind I'm 55 and don't earn loads
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Replies - Newest Posts First ( Show In Chronological Order)
Spandex Sidney
3:56 Fri Apr 28
Re: Buying a House - Advice Please
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Here's some simple numbers:
Rental income - £13,200
Mortgage (£190,000 (inc. booking fee) @ 1.99%) = £3781
Agent fees (min 10% + VAT) = £1584
Insurance = £500
= £7335 Gross
- £1467 Income Tax (assuming you are a basic rate tax payer and not pushed into the higher rate)
= £5868 Net
However this doesn't account for voids/damage and evictions (and these DO happen to you!)/repairs, etc. Personally I would be counting a good £1500 a year MINIMUM for those things but it's your numbers.
I'd expect to see around £4000 net from that a year (well actually half that as a higher rate tax payer) over a 10 year period, or about 5.4% on your £74,000.
That's not enough for me, even if I was a basic rate tax payer for all the aggro if nothing else.
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Heath Hammer
3:49 Fri Apr 28
Re: Buying a House - Advice Please
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cheers mate....and trust me, not something i would do blindly expecting to make overnight profits.
Appreciate your words of warning and tbh it is the single biggest factor that stops me doing it.
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Spandex Sidney
3:45 Fri Apr 28
Re: Buying a House - Advice Please
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HH
Seriously mate, good luck with it. I just think people go into it blindly, I've been doing it for the best part of 20 years and I just can't see it's worth it anymore, to me anyway. To be fair one bad tenant will put you off for life when you are paying two mortgages and two council taxes for 10 months to evict them and make repairs and get it let again.
If you need to diversify, I'd look at the peer to peer stuff. Funding Circle it's pretty easy to clear 10% no bother and in an ISA that's like 18% a year for a higher rate tax payer
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Heath Hammer
3:43 Fri Apr 28
Re: Buying a House - Advice Please
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rate was 1.99% on 75 LTV... think the fee was 1%...my model assumes I add it to the balance
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Heath Hammer
3:41 Fri Apr 28
Re: Buying a House - Advice Please
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Spandex - understand you can get more, but its also a balance of risk and return... that was my point...
it should be considered like any other investment based on the risk and the alternatives. - for me, I already have quite a bit of exposure to stocks so to diversify looks attractive.
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Spandex Sidney
3:41 Fri Apr 28
Re: Buying a House - Advice Please
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HH, what is the mortgage (including booking fee)?
Will this income make you a HRT?
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Spandex Sidney
3:38 Fri Apr 28
Re: Buying a House - Advice Please
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Gav is right, his leveraged return is about £3000 a year (lowest BTL mortgage I could find for that was about £2500 a year for two years)
A tenant (or 'associate') with a lump hammer can cost you that in about 2 minutes, trust me.
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Heath Hammer
3:38 Fri Apr 28
Re: Buying a House - Advice Please
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using my real life example:
value: 250K
rent 1100pcm / 13.2K per annum
Depost £62.5K.... + 12.5K estimate forcosts
Gross yield - 5.3%
Net yield - 2.25%
income return on invst - 7.5%
(my net numbers take into account mtg repayments, expenses, sceanrios for rental voids and reserve fund for expenses.)
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Spandex Sidney
3:34 Fri Apr 28
Re: Buying a House - Advice Please
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HH
You can easily get that and more from peer to peer lending, including fees and bad debt. Plus you can stick that in an ISA and pay no tax on it whatsoever
Plus what's your figures on that? Just out of interest?
Remember you are already down £10000 (of YOUR money) in stamp duty. Plus a BTL booking fee is normally about a grand and fees are probably another grand so your £74,000 has already shrunk to £62,000 before you have earned a penny?
You must be getting between £13-14k a year rent, be a basic rate tax payer (and the rent doesn't push you into the higher rate) and feel very optimistic about repairs/damage/evictions/voids and be letting it yourself? Ask any professional landlord, it's financial suicide to not cost 20% for that shit.
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Gavros
3:26 Fri Apr 28
Re: Buying a House - Advice Please
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he''s talking about leveraged return, but that should have repayments of the loan in the net figure.
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Westside
3:21 Fri Apr 28
Re: Buying a House - Advice Please
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Heath, if the flat is going to cost £250k and net income is £5.5k, return is 2.2%
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Heath Hammer
3:09 Fri Apr 28
Re: Buying a House - Advice Please
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Spandex - one thing to consider however is what is the alternative - and its not all about capital gain.
I am looking at this at the moment. £250K flat, going to cost me about £74K down to make investment.
My NET income will be about £5.5K - so 7.5%...
compare that with the FTSE100 which pays dividends of about 3.5% at the moment and its looks pretty attractive.
My wife is a non-earner so more limited tax impact, but any investment needs to be looked at versus the alternatives.
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Spandex Sidney
3:01 Fri Apr 28
Re: Buying a House - Advice Please
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LH, you are right and the peak of a decline is the time you should be buying!
Green Street, I think the government have done something rather drastic. Most landlords will be higher rate tax payers and tory voters no doubt. Those paying 40% tax are being absolutely crucified by the new tax arrangements and with the council tax change, well I think people well underestimate how that will affect them.
I don't think there needs to be a cap, I think it just needs to be made much less attractive which it is. Think about it, who in their right mind will pay £10,000 in stamp duty for a £250k property? With fees and taxation you need prices to rise by at least about 7% just to have broken even.
You then need to ensure that your gross profit will cover all your losses and voids and repairs and income tax and agents fees, you would need somewhere around 50-60% gross profit a year surely to break even? 20% gone in extra tax, 10% to agents (at least) and I always budgeted 20% just for voids BEFORE these changes, there's 50% of your rental income gone there.
If you are getting £10,000 in rent and paying more than £5000 for the mortgage you are doing it for nothing plus you are giving your time to it for free. It would only be worth it for spectacular capital growth and that's not there anymore, especially as you need to hand over 28% of any sale profit to HMRC.
Putting up with tenant aggro for the next 20 years ain't worth it to me anymore. If you want to make money on property buy the best house you can for the lowest price you can, live in it and sell it in 15 years when you've made some money. Problem is, where do you live then??
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J.Riddle
2:13 Fri Apr 28
Re: Buying a House - Advice Please
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UK residential property seems to rely and is inflated exclusively on foreign investment. Much of central London and further have been bought by foreigners either relocating or buy to leave. Battersea power station is a classic example where the development was marketed and sold to those from Singapore, Hong Kong and Malaysia where mortgage multiples times earnings are much higher than here.
Arabs,Russians,Indians and Chinese along with wealthy Italians,French and other Europeans have bought in more central established areas. Islamic banks do not levy interest which also provides an advantage.
It is not ideal and seems to be openly encouraged by government who are holding out the begging bowl. They have increased taxes, but still not as much as other countries and it will continue, residential and commercial property investment meanwhile go much in hand.
It's the only thing that's been propping up the property market for many a year. When properties change hands the money filters out down through the chain to the rest of the UK with some exceptions.
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GreenStreetPlayer
2:09 Fri Apr 28
Re: Buying a House - Advice Please
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LH too true. BTL is the problem. When people own 10, 20 or 30 properties or more its going to result in a shortage.
There has to be a cap on how many properties people can own if this sector is going to sort itself out.
But will any govt have the balls to do anything, no. All their so called schemes have done is help drive up the price with people buying at the top end.
It needs something "drastic" to change this current locked in pattern where first time buyers are competing with BTL people and the latter are winning.
FTBs should be properly helped onto the ladder which is important for us all.
We are just creating more of a nation of have and have nots.
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Lewisham_Hammer
1:58 Fri Apr 28
Re: Buying a House - Advice Please
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Spandex Sidney 1:23 Fri Apr 28
Good points mate and I do agree to an extent, but feel some people are holding out for some huge decline in housing prices which in my view wont change as people believe.
In terms of people being able to afford them, there will always be someone with more money than others to buy a property even at the peak of decline.
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REALGSA
1:51 Fri Apr 28
Re: Buying a House - Advice Please
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What are you looking for.
I can help you mate.
Houses or Flats?
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Spandex Sidney
1:23 Fri Apr 28
Re: Buying a House - Advice Please
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Lewisham_Hammer 1:07 Fri Apr 28
Re: Buying a House - Advice Please
Love the way people think that somehow house prices are going to significantly drop? They never will.
Housing is in such demand you will be bidding against a queue of people. Jesus even renting is now a bidding war with open days etc and I saw a new phone app the other day where renters bid against each other, that is going to be the beginning of the end!
Prices will drop when there is more property to be sold than people who can AFFORD to buy them. I don't forsee a crash but I think prices could stagnate for a while. I bought my first house in 1993 in Rainham for £58,500 and sold it in 1997 for £58,500.
I think it will be a while before BTL is worth it anymore. Funding Circle (thanks Hermit) you can pretty much guarantee yourself 10% a year and you can even shove it in an ISA now an pay no fucking tax on it.
In a way I'm pleased to see the government making BTL much less attractive, as Green Street says for most of humanity property was about having a home. I invested because it was worth it for many years, great yields, capital growth and a soft tax regime but now I've decided to look elsewhere because these benefits are long gone. If interest rates start to rise then we really could see a glut of forced landlord selling.
Plus NEVER underestimate the aggravation. Once you have two or three properties it basically becomes a job in itself or you get agents who take 10/15% of your money (can you afford to do that with a £4000 tax bill to come every year on an unprofitable property?) and basically will be looking to fleece you and your tenant for as much as possible at every opportunity.
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Lewisham_Hammer
1:07 Fri Apr 28
Re: Buying a House - Advice Please
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Love the way people think that somehow house prices are going to significantly drop? They never will.
Housing is in such demand you will be bidding against a queue of people. Jesus even renting is now a bidding war with open days etc and I saw a new phone app the other day where renters bid against each other, that is going to be the beginning of the end!
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Cony Tottee
12:44 Fri Apr 28
Re: Buying a House - Advice Please
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Invest it all on pork bellies and orange juice.
What could go wrong?
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GreenStreetPlayer
12:39 Fri Apr 28
Re: Buying a House - Advice Please
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Homes are for living in, not making money out of.
This country is obsessed with house prices and wealth through housing. It's pure greed and have spoiled it for a generation.
The word investment should not be used in the same sentence as property.
Find a nice house and enjoy it without getting into debt.
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