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Hello all, thanks for some great reading on here until now.
Hopefully my situation will be interesting to some! It would be great to get some advice as we're just starting out.
We are in a very odd position, because at some point next year (2018) we'll be coming into quite a bit of cash from a couple of sources, one of them being the sale of our current business. This cash should be enough to mean that we don't have to 'work' again, but we want to replace our current income from full time work with rental income from property in the medium term, that's our key aim.
So, based in Somerset, a home with a lot of 'spare' equity in it, various other stock investments etc, but no property income.
Current plan is to start investing in a range of BTL property, some single lets and some HMOs. We don't have the cash in the bank yet, so my initial thought is to remortgage and extract perhaps, 200k from our home, and buy a property or two with cash from that and other savings to learn as much as possible over the next 6 months.
The target is to replace our current income completely within 2 years of stopping our current roles.
I'm busily writing a business plan, but am unsure whether it's sensible to start a Ltd Company initially or do things in our own name. First investments will likely range from some single occupancy homes in the South West (if we can find any yielding enough), to Student Lets in the North, in places that we know well.
I think I scared my wife a bit by showing her that we could remortgage our house, take some equity out, and use that as a deposit on a large 12 bed HMO student let in a Northern City, the profits of which after both mortgages (residential and BTL) and all costs should be enough to pay almost our whole residential mortgage... We're definitely not risk averse but our plan needs to include some stress testing...
The hardest bit is knowing where to start. We have enough cash sat in the bank right now to put down a deposit on a BTL mortgage for a smallish investment straight away, maybe we should just get on and do it! I'm the sort of person that wants everything to be completely planned out from the start (and calculated on a spreadsheet), with accountant, tax, legals etc all futureproofed, but perhaps in this situation we just need to bite the bullet and buy something... Any opinions would be great! I know I need to sit down with an accountant and discuss the financial and tax elements, but it's great to have somewhere to be able to vent about investment strategy.
Hi Glenn and welcome.I think it would be very high risk to go and buy a 12 bed HMO in a northern city.It is akin to putting a learner driver in a supercar - a crash is likely to happen!HMOs are regarded by lenders as higher risk and are generally the province of experienced hands on landlords who live close by and self-manage their properties and tenants. There are very few managing agents who take on HMOs due to the extra regulation and compliance issues.I think it would be a real challenge to take on a 12 bedder up north and it could be a baptism of fire.The best thing to do is start out with baby steps imho. Buy a good quality property in an area of high tenant demand and start learning the ups and downs of being a landlord.Don't dive in at the deep end when you are learning to swim!Start in the shallow end with your armbands on and then gradually move onto deeper water (bigger projects) as you become a better swimmer.Property can financially corrupt you very quickly if you make unwise decisions, not to mention causing emotional heartache and stress, so I think your wife is right to be cautious.As to planning and your approach, I think you are being sensible. However, the lights are never always on green and that stops some people from taking any form of action.Therefore, take baby steps and learn on the job without risking too much. This will enable your wife to gain confidence in what you are doing and feel comfortable.Hope that helps?
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
Thanks, that was quick!
Indeed, the 12 bed HMO was bit tongue-in-cheek, baby steps are definitely what we need.
We're both currently higher rate tax payers, so need to think about the ownership implications before we go and buy anything, I'm still unsure whether a Ltd Co makes much sense from the start. I've got my Rightmove and Zoopla alerts set up, so hopefully we'll find something that we deem worthy of investment in the next few months.
Great that you've found PT - it's invaluable.
Before you do anything else, talk to a mortgage adviser. It's much harder to get finance if your only income is rent.
Once the finance is sorted, go on a landlord fundamentals course run by any of the trade bodies. It will be money very well spent.
I have both single lets and a student HMO. The student HMO produces the best yield by far, but is more work.
I've been thinking about buying more student property, but I'm holding back for three reasons.
1)Falling student numbers (Brexit).
2)Increased competition from Purpose Built Student Accommodation (PBSA).
3)Possibility of business rates be levied on student landlords.
Please be very careful to check the supply/demand situation in your chosen area.
There's a lot of over supply of rental property in many areas.
To use the green light analogy
The Highway Code states that green does not mean go
It actually means proceed with caution!
Keep it local Keep it simple
HMO is not a great place to start especially 12 bed that's a hotel
go for something smaller say a 3 bed ex local auth house
try it out see if you like it
build your knowledge
seek tax advice
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.
I doubt you are in a position to remortgage your own resi if your income from your current business is going to cease in 2018 as you will duty bound to declare this fact at application
Another thought you are going to be stuck with your current lender and if as I suspect you are not on the lenders SVR then you will probably need to provide proof of income when your current fixed or discount rate comes to an end
Consider holiday lets over BTL.Holiday lets work well in somerset and they are taxed less stringently than BTL.
Reading into it I think that Glenn is selling his business and investing in property to have a more relaxed lifestyle and holiday lets would just be exchanging one full time occupation for another
There are some similarities between your intended position and mine in 2013. I had a pile of cash and no job and decided to invest in property to tide me over until I took my pensions (18 months to gonow ). I decided to invest in the North for better income 200 miles from where I was living.
However where I decided to invest was where I grew up and I had contacts there, in particular a builder friend who put me in touch with a letting agent. Local knowledge is very important. If you don't have it yourself you need to find someone you trust who does.
As I had no job I could not get a mortgage initially. So I started by buying properties for cash that needed refurbishment. This built in some capital growth so that if I had decided I did not like being a landlord I could have sold up and probably have got all my money back.
My initial plan was to buy two 2 bed terraced houses to begin with. After the first my agent put me onto a couple of good deals - a 3 bed ex-council semi being sold to pay for care costs and a commercial property (next door to the agent). Both have done very well for me.
After 6 month there was one lender, only, who would give me a mortgage - TMW, since they then considered me to be an experienced landlord I have bought several with mortgages then, and have remortgaged one of the original three. I also bought a new home with a LTB mortgage on my old one and moved back North, Since 2016 I have bought 2 properties using a company.
One option might be to use a company like Northwood. I haven't used them though I see their signs and vans fairly often,.