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  • Buy-to-Let

    Hello - ideas for getting started with £50K?

    Hi all,

    I am philip and i have join the PT for about a month now and i find this site very informative and extremely useful.

    I came from essex and my home town is Brentwood where i was bought up.  

    I am a construction personnel working in hong kong for the past 20 years and would like to quit my job and come back to uk.  I am very interested in becoming a landlord,  i am very interested in some BTL properties in liverpool,  Manchester and Newcastle as i have found that these places have a few uni and a lot of jobs around. 

    I wanted to start with one property and gain some experience and steadily built up my portfolio.  Do you think that is the best starting point? Any advice how i would start with £50K budget?

    think of Three things first

    1 Take Tax advice first

    2 Buy in an area you know well  and learn with a property close to home first

    otherwise you will have to depend on a very good agent finding and running the property

    3 Talk to a good Mortgage Broker


    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 Philip and welcome.

    With £50K funds, you are probably looking at a BTL property within the region of £150K, provided that you can access finance with your ex-pat status.

    The very first thing to do would be to speak to a reputable mortgage broker to find out if you quality for BTL finance and the team at Property Tribes Financial Services would be pleased to assist you.  They can be contacted on 01206 654444.

    This will determine if you can leverage your £50K or if you have to act as a cash buyer with £50K.

    Understanding your access to finance is paramount to determining what you can achieve in reality.

    ​I hope that helps for starters?


    1. Buy a property lower than the market price

    2. Buy a property that can increase in value (e.g. refurbishing and many other ways)

    3. Refurbish the house and rent it out to tenants

    4. Refinance property and get your refurb investment out + extra added value

    Anybody thinks this is a good strategy as a starter?



    That's good in theory. In practice you will find step 1 is much more difficult to do than  property courses might make you think. If houses in good condition are worth £100k, and you buy one needing £35k of work for £70k, you are actually paying more than market value (given current condition).

    If you do find one for say £70k and you can get it in good condition for £15k, you will find your "step 4" to also be almost impossible:  very few valuers (and therefore lenders) will agree that you can add £30k or more of value by spending £15k.  You are likely to see them valuing it at purchase price plus refurb costs, i.e. £85k  (despite there being comparables in the same street selling at 95-100k).


    Good points Rassie. Let me explain my current situation and correct me if I'm wrong.

    I'm in the process of buying a property for £54.5K. Potential value is £70K after refurb and monthly rental income is £475.

    My refurb investment is no more than £6K (as I know someone who can do a lot of things for free).

    So total costs would be:

    54.5K property + 6K refurb + £1.410 legal fees, broker, survey =  £61.910

    Now let's say I can refinance it with 75% LTV of the new value. This would mean the following:

    1. I bought a property for £54.5K by putting in £13.625 deposit (25%) and taking out a 75% loan-to-value mortgage with Lender A for £40,875.
    2. Later (after refurb) I get the property revalued at £70K, allowing me to take out a mortgage for 75% of the new value from Lender B – which works out to a loan of £52.500.
    3. I pay the original £40,875 (£52.500 - £40,875) back to Lender A and get £11.625 back in the bank to use again

    £11.625 - (6K refurb + £1.410) = £4.215 net profit


    This is pretty much exactly what I did with my first two properties except the houses cost a bit more and so did the refurbs but the principle is the same. I bought them on repayment mortgages with three year fixed rates and used the rent to cover the costs of the repayments.

    After three years the values had gone up, the mortgage had gone down and I needed to remortgage because the fixed rates had expired in any case.

    That allowed me to remortgage onto interest only and extract my original investment plus the repayments whilst still having 30% equity. This meant I had income-generating properties and some equity with zero investment. 

    The discipline of needing to stay under the 40% tax threshold encouraged me to put a lot more of my salary into my pension too allowing me to retire a few years early. However, this is not all as rose-tinted as it sounds.

    I saved a lot of money by managing the properties myself but that can be stressful and eat into your personal time.

    Also there can be a lot of unexpected costs, especially with cheap, older properties; like boilers needing to be replaced, or roofing work, or damp courses, or rewiring,  or tenants who don't pay their rent, and there's a lot of tax, so in reality I am not expecting to see any real personal financial benefit until I sell up and cash in.


    So, including SDLT your figures look as follows:

    54.5K property + 6K refurb + SDLT £1,635 + £1,410 legal fees, broker, survey =  £63,545

    A few points:

    6k refurb sounds more like a cosmetic upgrade/redecoration/maybe new kitchen and bathroom at most. This will not (in the short term, i.e. immediately after refurb - say within the first 6 months) add value beyond what it costs in the eyes of a lender's valuer/surveyor.

    But my point is: you will struggle to get it valued at more than £62-63k (maybe 65k max if the work is very good).  This is in our experience particularly the case in low value areas (i.e. where done-up houses are worth 60/70/80k).

    So, you may pull out £48,750 (75% of 65k).  Be aware that a quick refinance from your original mortgage (i.e. the £40,875) may be frowned upon by the lender - a mortgage is meant to be a long-ish term product and not a short term loan.  For that bridging would really be the right product - but it's very expensive and the extra fees and interest will eat up all your "profit" (so, many people do what you suggest).

    Is the current mortgage on a fixed or tracker rate?  If so, there may be break fees (ERCs, or early repayment charges) payable to the original lender.  This could be 3-5% of the amount you repay - check your mortgage conditions.  You need to account for this (i.e. deduct from the cash in your bank after the refinance).

    Assuming there are no ERCs, your figures may be:

    £48,750 - £40,875 = £7,875.  Deduct £6K refurb + SDLT £1,635 + £1,410 legal fees, broker, survey leaves you £1,170 short. i.e. no "profit", but you will have the £7,875 back in your bank to start saving for a new deposit.

    Still, you'd make a profit of around £1,900 per year on the rent and this is a return on cash left in (around £15k) of around 8.5%.  Not bad. You are more likely to get a proper market valuation based on comparables if you wait to remortgage for a couple of years (but this slows your portfolio growth).


    The £6K refurb is indeed a cosmetic upgrade (new kitchen, new bathroom, new floors, new boiler etc.)

    The mortgage will be on a variable rate. I'm not in a rush to remortgage as I have other funds to invest with. This is purely to start owning 1 BTL and having landlord experience in order to do HMOs or SAs in the future.

    Thank you for the tips and making me aware that £65K will be more difficult to get for revaluation. You are a star!