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  • Buy-to-Let

    £180K to invest in BTL - What are my options?



    Here is my situation. I currently live with my parents in London - and I was initially thinking of getting a BTL in London with a deposit of 180k. The value of the properties I was looking at were around £330,000. I could then generate a rent of around £1,200 a month GROSS. I was initially looking at London as its closeby and I will probably live in London (without my parents) later in life.

    I then started looking at areas like Liverpool and Manchester, where the rental yield is high and I realised I could buy a 90k property outright say in Liverpool with a 9% yield and then use the remainder to put a deposit on a BTL in London.

    Third option is looking at a property tracking fund and investing 90k in that and the remainder in a London BTL.

    Should I invest all in one London Property (as I may well live in London by myself in the future)? Or one in London and buy a property outright in Liverpool  (if not Liverpool then where?)

    What are the thoughts about the property tracking fund idea?

    I would really really appreciate any advice as I really am completely new to this.

    Many thanks

    D

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    Hi Joseph,

    My name is Richard. I am an investor living and working in Liverpool.

    With the capital you have suggested you could build a significant portfolio very quickly,

    Generating a good cashflow and reducing the risk of all your capital in one property. (Basic example, if you have one property and it is void, you are paying the lenders!)

    You can also adopt a number of strategies to increase your portfolio and capital.

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    Thanks Richard for your response! Very much appreciated. 

    So specifically what would you suggest? Buying a property outright in Liverpool and getting a mortgage for BTL in London?


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    Hi Joseph

    I am not familiar with the property market in London. Though I think the yields are low, the properties are expensive but the capital growth is good. I am sure someone will put me on the right path if I am wrong.

    I would suggest, initially you concentrate on one area and learn the "ropes". With the capital you have you can buy cash, at a great price, refurbish, LET and then refinance after 6 months of ownership. This was the first strategy I used back in 2011. In an ideal world you withdraw all of your capital and have a full 100% ROI.

    You could have a number of these on the go at any one time. Though of course you need to a have team in place.

    There are other approaches but I wont bog you down for now.

    If you have a significant portfolio in place and either none or more realistically only a small % "left behind" you can then change your focus to London. (As an example)

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    Although the London market is treading water a little at the moment, I would look at buying something at the price point you suggested £330k it's a buyers market so you should be able to get good deals currently, putting down 25% deposit £82.50k as IMHO London still offers you the best capital appreciation opportunity albeit with lower yield.

    Buy something up North, Manchester, Warrington or Liverpool upto £100k putting down 25% deposit £25k.

    After Stamp Duty, Fees and any llight refurb, maybe doing a loft coversion or rear extension on Northern property to add value as Richard suggested. This then gives you options leaving you a pot £50 - £70k which in a year or so could grow into another London deposit or 2 deposits up North depending how the market weathers Brexit.

    From my own experience always have a buffer fund which you keep £20k - £30k and if you buy a leasehold flat make sure when doing your due diligence your fully aware of Ground Rent & Services Charges as you have to stand these as the Landlord not the tenant in most cases.

    I echo again what Richard said that with that capital, you are in a great position to build a significant portfolio.

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    Thanks so much for both your advice! I also forgot to mention I am a first time buyer so I think stampduty relief up to 300k. So I could do the £82.50K deposit on London property first and then buying something up north with a 25K deposit.

    Why would you recommend me to only put a 25% deposit down on a 100K property and not buy it outright? As I would still have a 50K-70K pot in the bank as you noted ...

    Also you mentioned a few places North, Manchester, Warrington or Liverpool - which would you suggest? I am slightly worried that the Liverpool market is getting saturated? (Again I am a complete novice so could be wrong on any of these things!

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    Adding value by building an extension or loft conversion does not always work.   Often the build costs far out weigh the value added, unless of course you are a builder and you do it yourself.

    Adding value is a thing of the past in Manchester

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    You could purchase outright and then look to remortgage later as Richard suggested, it depends on what works for you, if your goal is create an initial portfolio of 4/5 properties in the next few years, personally I would rather have the money in the bank to use for the next deal or two rather than having to remortgage an unencumbered property.

    Having lived in a village just outside Warrington until recently, I've seen strong growth, development and investment during past 10 years and it's future continues to look bright https://www.omegaopportunity.com/development/ as well as yield I think you may get more capital appreciation here rather than neighbouring Manchester and Liverpool, but that's just my opinion.

    Spend some time researching then visiting areas, doing your own Due Diligence, speak to other investors, landlords, estate agents and lettings agents in your target areas.

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    Thanks V much! So what would you think of investing in a property fund VS an initial portfolio of 4/5 properties - as this is all new to me?

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    Hi Joseph and a warm welcome to the tribe.

    My first bit of advice is to be more circumspect about revealing how much money you have!  I fear that broadcasting this information will mean that you get a lot of approaches of people willing to "help" you spend your money.  While £180K is a significant amount of money, it will disappear very quickly if you get the wrong/bad advice or get involved with the wrong person who will put their interests ahead of yours.

    Secondly, why are you still living at home?  My first thought was to use the money to buy your own residence and then take in lodgers to start learning about tenant selection and management.  You can achieve up to £7500 per annum tax free from renting out rooms in your own home.

    You can use the lodger income to build up your cash pot or pay down any mortgage you have.

    Once you have an unencumbered property (one owned outright), then the world will be your oyster!  

    The power of owning a property with no mortgage on it 

    I would also warn you against investing in places you have no knowledge of and cannot visit easily.  It means relying on third parties.  There is a huge amount of saturation and exposure in Manchester and Liverpool and you need to know the areas really well not to get stung.

    Start close to home and buy your own home.  In future, you could take out a BTL mortgage on that property, and then use residual equity to buy another residence or seed more of a BTL portfolio.

    Two and three bed terraces are the work horses of the PRS - buy in a good street, with good transport links, and near good schools and you will be hard-pushed to go wrong imho.

    Promises of high yields come with much higher risks, and all that glitters is not gold.

    Why higher value properties are better 

    It is very easy to become overwhelmed with which strategy to adopt and where to invest, and that makes you vulnerable to suggestion and marketing hype.

    Keep it low risk and simple, and take baby steps otherwise that money will be gone.  Theoretical yields are just that - theory.  Reality might be an empty property and/or poor quality tenants that cause you financial loss and a lot of hassle.

    Forgive me for speaking frankly and I hope you take my input in the spirit intended - to keep you and your money safe.

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    Thanks very much Vanessa for your advice, much appreciated! All very useful! I am happy to live at my parents at the moment - and even at the back of the garden in a reasonable large shed.

    So this would be for investment purposes with the potential to move into the London property in 7-10 years.  So i'm weighing up either putting a large 60% deposit on a London property or putting a lower one of 25% deposit on London property and then looking elsewhere where the yields are higher and property prices lower/putting it into a property portfolio fund.

    It looks like you are suggesting the latter option? or am I wrong?

    Thanks

    David

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