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  • Entrepreneurs

    Advice please - 27 year old newbie



    Hi I have been reading through the threads for some time now and then decided to sign up recently. However I feel that I have a bit of a dilemma and I am starting to feel a it disheartened due to new govt laws and all the changes such as s24!

    I am 27yo and I have a flat which is mortgage free which I funded through my inheritance. I have a lodger who pays £400pm, I am currently working for minium wage as a support worker which I don't enjoy for many reasons anymore one being the pay!

    I have always been interested in become a LL and having a portfolio of properties as well as owning my own small hotel or running my own letting business, however does not seem possible now due to all of the changes and from some of the threads I have read on here.

    I really want to leave my job but right now it feels I may be stuck here forever! as s24 seems to only favour the wealthy!

    So what I am asking is what would YOU do if you were me. I appreciate many of you have so much experience and I would appreciate some guidance. Thanks

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    Hi Stacy

    I don't know if I have any useful insight or advice for you, but it's just to say that I am in the same position. I'm in my early 30's, brought my 1st investment property just under 2 years ago just before S24 came started (in Reading). I researched heavily, tried to find out all the facts I could, and decided to set up a limited company so manage the S24 situation.

    2 years down the line I really am not sure if it's all been worth it, there were lots of extra charges I hadn't budgeted for, I was hit with the higher stamp duty because I couldn't complete in time (probably in part ironically BECAUSE I took the limited company route), and had no clue e.g. that with a lot of ltd company mortgages, I ended up having to pay for the lender's solicitor, my solicitor, and a 3rd solicitor to give independent advice on personal guarantees.

    But.. from the perspective of education it's been a great experience to go through all the challenges of property (working with solicitors, trying to do the accounts, learning company admin HMRC, interviewing tenants, working with trades people etc). Great in terms of learning (tonnes of new challenges), but always complete fun though.

    Ask me in 10 years time and I'd probably tell you if it's all been worth the trouble. The optimistic part of me thinks even though there has been so much change and challenge, the fundamentals are strong so even though the game has changed a lot, over a long period everything will move in the right direction. But there are a lot of unknowns, and i think if I decided to sell up today I'd probably be lucky to get back what I put in (probably less with the arrangement fees and all the surprise costs that pop up when its time to refinance).

    Good luck!

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    >  I ended up having to pay for the lender's solicitor, my solicitor, and a 3rd solicitor to give independent advice on personal guarantees

    Just to add that if you use a solicitor on the lenders panel, then they can do dual representation. I was in your position a few years ago and had to pay 2 lots of sols, but then my broker said no reason why the lenders sol couldn't act for me. so that saved me 1 set of sols fees.

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    Thanks for the advice it is refreshing to know I'm not the only one in this situation. I will have a in depth look into the Ltd company route. Thanks again and good luck

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    Also spend some time modelling 2 scenarios


    1 - Where will you be financially in 5/10/20 yrs by leaving things unchanged?

    2 - Ditto if you leverage the asset/flat to become a portfolio LL?

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    You need to have a good long chat with a specialist mortgage broker.

    They will give you an idea of what is achievable.

    With such a low wage I doubt  you will be able to raise any mortgage

    You may be asset rich but your income is too little to enable you to leverage any of the asset value.

    Could you return to parents and live for while taking on another lodger at your home which you would visit once per month?

    Could you sell the inheritance property and buy a 3 or 4 bed house somewhere with the potential  of a loft  extension. 

    That could be 4 lodgers etc

    Regard the inheritance  property as your piggy bank.

    It doesn't matter if you convert it from what it is to a 4 bed property  somewhere else.

    You need to think lodgers as that is the only way you stand a chance of building up large deposits.

    You will have to game the system to build up deposit funds once you have a 3 or 4 bed property.

    But even that will be insufficient

    You need to achieve  a salary of at least £25000 gross per year.

    You will struggle to ever achieve that in your current profession.

    But a mortgage broker might be able to come with ways you could use your property inheritance to enlargen your property empire



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    Thank you for the advice I agree I will never make that In the caring industry. Moving back home ia not a option as my mother has passed away however I am taking all the advice on board and will seek advice from a broker thanks again

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    You have recognised the limitations of your current employment  circumstances.

    That is NOT to devalue the value that you bring with your current employment situation.

    What you do is extremely  socially valuable.

    Unfortunately  such skills have yet to be recognised  by society by a commensurate  increase in average wage levels in the social caring sector.

    However one thing you have to your advantage is that  your skill sets are effectively  transferable to any part of the UK.

    Care workers are always in much demand!

    So do not be so concerned at the moment as to what your wage levels might be.

    Ascertain whether it would be possible to sell your flat and convert it to a 3/4/5 bed property.

    In any area where that may be possible you should be able to ascertain lodger room demand and rent achievable by checking spareroom.co. uk

    You should try for the highest yielding property as far as lodger rent is concerned

    Don't concern yourself with exceeding the RFR A.

    Nobody will ever find out as you need to game the system if you ever hope to expand into other property.

    You may come up against the new HMO regulations due to start this October bearing in mind that councils may have more stringent requirements than national regulations.

    You will need to check with each council area.

    Personally if I was you and I was able to buy a 5 bed property I would NOT license it.

    No way would the council find out.

    But I doubt you could afford a 5 bed property

    The most you will be able to achieve and that would be pushing  it is a 4 bed property.

    That will keep you below the 5 occupier HMO threshold.

    Any property you buy which invariably  will need to be a house; consider the possibilities  of forced appreciation using lodger monies to build loft extensions and rear extensions or to the side if a semi or EOT.

    Consider that there will be allowed in certain areas and types of property the ability to build 2 storeys up.

    Yes it will take a lot of capital to carry out these improvements.

    But with 3 lodgers and their rent of about £1500pcm which you don't tell anyone about you will be able after abut 3 years to have a fair amount so that you might be able to carry out improvements which could bring in even more income.

    Adding rooms will always give you the ability to earn more income.

    Up to you if you wish to allow HMRC to rob you of tax.

    They will never find out what lodgers you have or how much you are receiving in lodger income.

    You will never make it if you declare all your lodger income.

    What you do in the privacy of your own home is up to you.

    Essentially you use your inheritance flat to forcibly appreciate  it into a house where more lodger income could be achieved.

    It is highly unlikely that you would ever be able to take advantage of the new 2 Storey PD rights.

    So sticking with a house is probably the best thing.

    Try to find a house near a train stn

    I don't know what your flat is currently worth.

    But just to see what is possible get an EA valuation and then see in various parts of the country  what you could achieve.

    Wales seems to have a lot  of value in it.

    Houses seem to predominate in Wales

    There has never been the demand for flats.

    Even if you could only convert what I guess is a 2 bed flat into a 2 bed house that is better than nothing.

    This as there may be the potential  for a loft extension at some point in the future.

    In the meantime ensure all your credit files are correct.

    Use a credit card or two for normal spending so as to maximise your proven management of credit facilities.

    Always try to use a credit card for the spending that you would normally do on a debit card or with cash one day after the credit card statement date.

    That way you will have up to 56 days before you pay the bill

    As an example  I have just been grocery shopping at my local Aldi.

    Cost me £180

    I won't be parting with £180 from my savings account for the next 56 days at zero cost to me.

    I tend to do my shopping the day after each credit card statement date!

    Get another credit card with the statement date abut 18 days after the other one and you can keep bills away for 56 days at a time.

    Of course you must always ensure the credit card statement balance  are paid off in full by the minimum date.

    Doing all this will be seen as efficient  management by you of domestic credit resources.

    This will be of great advantage to you if and when you are ever in the position  of applying for a mortgage of any type.

    Sometimes such credit cards will assist you with cash flow difficulties  but gives you time to earn more money to pay the credit card bill.

    You might want to consider a different sort of job more slanted towards your property aspirations.

    You could probably work for a LA and then do some part- time caring work for an agency.

     You may have to consider working multiple jobs to build up your development  cashpile.

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    Yes this makes perfect sense. I am currently applying for new jobs within LA. I will get my flat valued so I have a insight as to what I'm working with. I live in Manchester and would prefer to stay here.

    A house that will allow me to maximise the amount of lodgers I have is the way forward and has been part of my plan as soon as I move from here.

    But as you mentioned the only way for me to earn 25k+ is to possibly work two jobs.

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    Ah!!  OK you are a Manchester lass.

    Well you probably know your area very well

    I'm sure you could find  a 3 bed house within commuting distance of central Manchester.

    Try and  find one near a stn with parking frontage as you could rent the parking spaces

    I have no idea how much a 3 bed Manchester house would be.

    But it must  make sense to move further out where prices for such houses would be affordable.

    Try and buy near  transport links as that attracts lodgers few of who will own cars.

    I have absolutely no appreciation of what the public transport  system is like in Manchester and it's surrounds

    But many lodgers will be considering a commute of no more than 45 mins.

    That gets you about 15 miles away from the town centre and I am comparing this with London so I might be a bit out on my geography.

     But always try to find a house that could be improved up and sideways.

    A loft extension for a 3 bed house is probably the maximum you can achieve.

    I'm sure you could achieve more than  £400 per lodger.

    Find out how much a loft extension might cost

    Just 2 lodgers bringing in £10000 per year will give you £30000 in 3 years.

    With 3 lodgers you could be bringing  in £30000per year.

    From that you can see how potentially  you could buy for cash investment properties.

    I'm sure you could have a loft extension built for that.

    You need to find a property where the L is able to be used for an en-suite bedroom

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    Yes I'll be back on rightmove tonight to have a look and thanks for the tips I'll bare it all in mind.

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