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Calling all London landlords! I'd appreciate your thoughts on whether post section 24, whether it's still possible to purchase with a mortgage for a property let as a whole on a AST? In particular I am interested if the numbers can add-up for lending & whether it can be profitable on a cash/flow income basis.
Any property deal can be profitable if you buy in the right place, at the right price, using the most effective mortgage product, and present a decent product.Here are my views on the London BTL market:
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**
Interesting and balanced as ever Vanessa. Are you buying if you see opportunity?
I'd say yes. I completed on a 1 bed last week near Langdon Park.
Purchased for £273k
Came with tenants paying £1295pcm
Service Charges and Ground Rent £1700
5 year fixed rate mortgage with Paragon at 3.65%
After an allowance for voids and maintenance I should be making £430 a month cashflow, which is around 6.5% ROI
That is very good news for us! We have a one bed at Langdon Park and we paid £180K in 2006! We achieve a similar rent.
Is the £273 including stamp duty?
man service charge is heavy on the property.
I will definitely still stay away from London and flats
my other problem with London is that a 1 bed flat in most places is no longer affordable for 1 FTB which is a logical target market for sale.
I did sell my place in Crystal Palace some years ago. Never had any problems finding tenants for it.
Good question. ROI should take into account all purchase costs - so perhaps the ROI is not as positive? Unless the £273 includes solicitor, reno, tax, survey etc
ROI of 6.5% is the true (gross) figure. WIll need to pay Corporation Tax on that, but it does factor in all purchase costs that you have mentioned, and runnings costs (maintenance, mortgage payments, voids)
£273k is purchase price.
Stamp Duty was just under £12k and professional fees (broker, sols, survey) were just under £2k
Service charges are £1450 (inc building ins) and ground rent is £250. slightly higher than I would like, but the rental figures are pretty good to compensate
Not worried about a target market for sale as I dont intend to sell in the medium term (10-15 years)
DCLG say 75% of FTBs nationally are couples
CML say average London FTB earns £60k and borrows 3.8 x income - but with av £100k deposit (likely BOMAD in many cases)
Interesting stats. As the ave earnings is £60 then it most be managing level income and then more likely to be in the 30ish which is more common in London. I have no idea how people get £100k in deposit, besides money from mum & dad which is also common. I know it is what the stats says.