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  • Buy-to-Let

    Advice please

    Hi All,

     

    I am in the process of getting my house remortgaged at a 60% LTV which will provide 90k.

     

    I have savings of 100k.

     

    I have been looking at properties in my city and was looking to use the method of buying BMV, renovating and then obtaining a BTL mortgage on the property to purchase the next property.

     

    However, the past 6 properties (out of 14 I have seen) which I was interested in the agency have said,

     

    “there has been a lot of interest in the property, therefore provide your best offer by end of so and so day and the person with the highest bid will obtain the house”

     

    When I have placed an offer the estate agents have told me they have had offers above the asking price and the past 6 offers I have put in for houses have not been successful.

     

    Therefore I am not sure if this method is going to work for me. Has anyone faced issues like this in their city?

     

    I am not sure whether to keep looking for BMV properties or try a different method where I know a very good area which is close to the main hospital, 2 primary schools and 1 secondary school which has a demand for rental properties. The issue though is when a house goes up for sale they sell within 1-2 weeks.

     

    The terraced houses range from 170-180k. As a rough calculation if I brought a house for 180k, deposit of 63k that would give me a LTV of 65%. The rent for the area on average is £700 pcm which gives a rental yield of 4.67%.

     

    With my 190k, putting down a 63k deposit I could purchase 3 additional rental properties. (I have not factored in any fees etc as this is just a very rough calculation for now). I would stagger the purchases of the properties as I would like to see the effects S24 and PRA has on the housing market in my city.

     

    If I was to do this, how would I purchase additional houses in the future as all my money would be in those houses. It would be a waiting game where the house prices would need to rise and I would need to remorgage I think.

     

    Any advice, is this a sensible approach, am I missing something….

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    If I was you I would hold back and do nothing

    we are at the start of S24 and PRA

    You may well see prices fall in the coming years and agents will be contacting you to do a deal

    so keep your connections watch the market

    register on Right Move and Zoopla for what your looking for

    when you start to see alerts showing reduced prices that's the time to purchase

    Take Tax advise on your structure and purchase on yield only

    Best of luck DL


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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    Hi San,

    I think you have a very good grasp of your situation.

    It has become far harder to grow a portfolio in the current market conditions and with the stricter lending criteria and lower LTVs.

    Which city are you thinking of investing in?

    Are you looking at flats or houses?

    With regards to putting in offers, it is a numbers game.  The more offers you put in, the more chance you have of getting a deal.  Be sure to state your case that you are a cash buyer, not in a chain etc.

    These threads may assist you:

    Top 10 Property Tribes resources to learn how to find property deals 

    Growing a property portfolio - resources 

    Hope that helps for starters?

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    I agree with dislexic_landlord.

    You are in a great position and don't need to rush in to buy property that is selling for more then it's worth. You haven't mentioned where you are looking to purchase. Could you perhaps look further afield and either self manage or have a letting agency (bricks and mortar or online) manage it?

    Over the next year or so you might see this cool off as BTL investors pull out of the market or simmer down there portfolio's.

    The way I see it, with all of these new rules and eventuall interest rates increases (not by much mind), house purchases will simmer as people aren't still able to afford a deposit and renting will still be in high demand. This tied with inflation on the increase could assist with driving up rent costs whilst house prices stagnate. This is by know means a crystal ball promise.

    What I can't understand is why the government are wanting to punish landlords for buying tired properties, making them habitable and renting them out to those who want there own space but can't afford there own home currently.

    My own opinion is that this will soon create a shortage in rental properties and provide Landlords with more rental yields from a competitive rental market. I don't see how the government believes this will fix anything.

    Hope this helps and good luck with your investments.

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    If there is a lot of demand hoses will not sell "BMV". If you want to buy cheaply you need to go for properties for which there is little competition. If you know a builder you can trust maybe go for a property needing a refurb.

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    All the properties I have been looking at all need a refurb. It is those houses which seem to have a lot of demand and why the estate agents are then saying people need to place their best offer in by this day etc

    The area I am looking at is Coventry as I have lived here all my life and know the areas of the city very well. There are surrounding areas but I do not know those areas very well. I have spoken to some estate agents in the other areas who tell me about property they have for sale and state its a good area but I cant be sure.

    Also, as for waiting to purchase a house I have been looking at the housing market in Coventry for the past 5-6 years but not brought. For some reason I thought that house prices would come down but it has not happened here. Comparing the prices at what they are now to 5-6 years ago I wish I purchased properties back then.  Now with PRA and S24, there is more reason for house prices to come down but I agree with above comments it will take a number of years to see the effects.

    Just a side question, my wife would be a first time buyer, I could give her the money  for a deposit and we could look at purchasing a new home and rent out the house we live in at the moment. Would this be a better option? I am trying to work out if we can use her first time buyer status to our advantage in anyway.

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    I also am in same situation, me too from coventry, I too have given offers on more than 8-9 properties and most of them above asking price but still the letting agents say there are better offers , so yes lot of competition for a good property , I too am hoping because of S24 and PRA  the market may cool down, but yes currently any good property in Coventry goes in just couple of days.


    I have noticed one more thing , some agencies might invite you to take mortgage from their mortgage advisers who charge 500-800 for an application , if you say you have everything in place and do not want their service they seems to be less interested in you .



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    I would suggest you hang fire.

    Do the maths and you'll see that what looks like a strong yield may prove to be less attractive when you factor everything in.

    I don't know your situation but being married, its possible your wife is already on your mortgage / house title? therefore she is not a first time buyer.

    BTL in Coventry is subject to the same as every other city.

    Properties coming on the market are AT the market value or will find it quickly if they are "BMV" by the fact that bids before a time and date are required and have gone above asking price.

    Ask yourself, can I make money at a level I am comfortable with and match my own appetite for risk and not do better elsewhere if I try BTL?

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    I would add a comment about BMV too.  I don't think anything with an agent is ever BMV.  If it really is and it's on any sort of property portal, someone else will come along and pay more.  The only real BMV properties are those that never reach the open market.  ie my father just purchased the house behind his for about a 20% discount but he was friendly with the owners and had waited 30 years to do so.  I have bought things which have turned out to have been bargains but never BMV at the time.

    What is more likely is below the average price for the type of property because it needs money spent on top.  Sometimes the refurb money on top will actually make it expensive.  I used to fall into that trap all the time when I was starting out.


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    I have put one of mine on the market today. Estate agents advice is to list at a particular price with a view to achieving 6 - 7% less. This is a guy who I've known for many years and knows the local market, and reckons this is the best way to achieve a sale because buyers like to feel that they have negotiated a discount.

    So if and when sold at his to be achieved price it isn't BMV it's RMP - Realistic Market Price - anything over is a bonus.

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