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  • New Members

    Newbie ex-pat - best way to invest £100,000?

    Hello Tribes,

    Total newbie here and I would really appreciate any thoughts or direction.

    I've been working overseas for the previous 10 years although I do visit family back in the UK regular. I have a property here in Yorkshire fully paid and Im now looking to invest some money potentially into a buy to let or three with a goal to create a supplemental income of between 500 to 1000 pounds per month and potentially also hope for some capital growth over a period of time.

    I did rent out my one property before but that was a long time ago and things have changed a lot.

    I have up to 100,000 GBP to invest potentially and I was looking to find either low cost flats or low cost housing to achieve the yield.

    I notice margins are now super tight after all the expenses and if using gearing on mortgages. I even though about potentially acquiring a couple flats in the north with cash purchase and without mortgages to provide a healthier cash on cash return without gearing up on the loans.

    Any thoughts or ideas would be appreciated about the best way to achieve the supplemental income goal with the investment pot? Is it possible and is it doable without the hassle of managing the lets full time on this budget?

    Also Im not going to be hands on much as I will only visit the UK every so often although I do have some family contacts (tradesman/estate agent) in the family to help therefore is this still a good idea or are other investments like a stocks and shares fund be a suitable alternative? I was also looking at an online REIT fund.

    Any direction appreciated?

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    ManInTheMoon

    Hi John and welcome.

    Because you are a "remote" landlord, I believe the risks are that much greater.

    As an ex-pat, you are only likely to be able to get 50% LTV mortgages, so that will restrict how far your £100K will stretch.

    If I were in your shoes, I would look for two good quality houses that are already tenanted with families. You can look around the 200K mark if using 50% LTV.

    If you purchase a tenanted property, you have income from day one of ownership and there is no guess work.

    See - Benefits of buying a tenanted property 

    You should have these properties fully managed and perhaps even consider putting them on a guaranteed rent service like Northwood's.

    The yields may not be as high as you would like, but I think it is risky for someone in your position to be chasing high yields from afar.

    Hope that helps for starters, and these discussions might further assist your thinking:

    Best income strategy - £100K deposit?

    How would you invest £100K savings?

    £100k - multiple BTL properties or 1 BTL?

    I am looking to invest in property with £100K

    Ideas for £100k property investment in 2018

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    I would look at houses rather than flats. A couple of good 100k houses in the North should provide the sort of income you are looking for. The problem would be finding them, and finding someone to manage them. Perhaps Northwood (the PT partner) would be a  place to start.

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    Thank you Vanessa and Peter this is great info and makes perfect sense.

    I have already located one property and submitted an offer. It is vacant though after begin let recently. I was reading on the local council website that full council tax is due after being unoccupied for 1 month even if the property is unfurnished, does this apply to landlords needing to pay too?

    I suppose this depends on the council although council tax on an unfurnished property 'to let' seems to be a new ruling since I last rented my house? It also seems a bit unfair, do I have this correct?

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    ManInTheMoon


    Some councils charge from the first day it is vacant.

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    Yeah the council tax on empty properties changed years ago, and I agree its totally unfair that the owner is charged the full rate. Even single persons get a 25% discount, landlords are just an easy target for everyone. It does force your hand a bit more to make sure the property isn't empty for long though, thats about the only positive from it.

    If I were you I'd check up on the latest landlord rules and regs, and download the latest 'How To Rent' government booklet.

    If you plan on using an agent, make sure you check them out properly as there's a lot of useless ones out there.

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    Having done this overseas for a while my advice would be that for the returns you are looking for HMO / SA may come up in conversation but would not be ideal to manage from overseas so the buy to let single occupancy option is going to be much easier for you. There are lenders who will lend up to 75% LTV for expats but you will find the pool is far smaller than for UK residents.

    Many people invest in property for cash flow and use this cash flow to invest in stock and bond funds (e.g. low cost index trackers) so you may want to consider that as an option to invest in both asset classes in a low effort way.

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    OK, so Im buying my first buy to let and I thought I would share the calculations here based on a newbie buyer of one or two houses. Any pointers or feedback appreciated.

    Asking price of property: 119,000 (nearby similar properties with refurb selling for 150,000)

    Accepted Offer 115,000

    Cost of fees to purchase including mortgage arrangement fees/conveyancing/valuations/etc: 2,300

    Stamp Duty: 3,450

    Estimated cost of minor repairs/decoration to bring to letting standard: 2,500

    Total cost to buy property: 123,500

    ------------------------------------------------

    Income

    Rent potential: 625/mo although for purpose of calculation 550/mo

    Potential annual rental income: 6,600 (at 550/mo)

    ------------------------------------------------

    Annual Costs

    Building Insurance: 180

    Tenant Finders fee (x1 per year): 300

    Landlords insurance: 300

    Appliance + Small Maintenance: 400

    Gas certificate: 130

    Management fees @ 12%: 792

    1 Month Void: 550

    Total annual running costs: 2652

    Mortgage interest only payments: 2,340 (195/m)

    Total costs: 4992

    Total net profit before taxes: (6600 - 4992 =  1608/year or 134/mo)

    ------------------------------------------------

    Increase ROI

    Now if I have a family member act as agent and reduce agent fees (-552): (6600 - 4440 =  2160/year or 180/mo)

    Now if I increase to full rental value of 625/month (+900): (7500 - 4440 =  3060/year or 255/mo)

    Now if I increase capital investment and pay down upto 50% of the loan (-720): (7500 - 3720 =  3780/year or 315/mo)

    Now I repeat this x 3 times with 3 houses for rental income (10,980/year or 945/month) before taxes

    Total investment for 3 properties now 210,000 (@50% LTV)

    Rental return 10,980/year

    Rental Yield: 5.23%

    Estimated Equity Growth Over 10 Years (@ 5%/year): increase of 60,000 per property x 3 = 180,000

    Return over 10 years (Equity Growth + Rental Income): 289,900 

    ROI over 10 years: 138%

    ---------------------------------------------

    Please if you could spare 5 minutes with a calculator please do tear this to bits and let me know about where im going wrong, I would really appreciate it.

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    ManInTheMoon


    Anyone? am i on the right track even..?

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    ManInTheMoon

    Looking at your figures (which I might add do look thorough and worst case scenario) it doesn't look like you'll be making much each month, especially if you factor in a few interest rate rises which I don't think many would disagree will happen during your 10 year plan.

    Is it enough money to make it worth it? Seems like you're banking on capital growth. What happens if it doesn't happen?

    I'm all for getting involved in property but to make a few hundred quid each month off each one?

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    Hi Adam,

    Thanks for your reply I really appreciate it. You raise very good points and I've had similar thoughts to be honest. However as you did also say these are worst case scenarios and Im hoping to duplicate it a few times at least over the next couple of years and maybe save on a few of these costs potentially by renting to a trusted cousin etc which would then mitigate need for landlords insurance and agents fees. I also have family who can replace the agent for a year or two.

    I also may pay down the loan over the next year or two to 50% LTV to increase the monthly income.

    There are other reasons too - diversification is one thing, the stock markets dont always go up and another reason is semi passive income even if it is minimal to begin with. When looking at other investment choices and passive income streams there is always a risk and property is something ive wanted to do for decades but I didn't have the capital available until recently and all the ducks seem to have lined up.

    Its just another asset that could potentially diversify my pension investments. The stock markets could potentially go to zero - with property at least you should have the building standing if the **** did hit the fan :-)

    But you are right, I do need to try to increase the monthly profit and I think I can do that once I pay down the loans, hire a family member who wants to manage the property at family rates and duplicate it. The goal is 1000 gbp/month net profit so 4-5 houses might do that.

    If in the unlikely event equity doesn't increase over 10 years then at least I will have a small passive income from rent and some equity remaining  - compared to a worst case scenario stock investment that can go to zero - at least with property you are left with bricks.

    I don't think this will be the case though, equity will increase as will inflation as history proves is generally the case.

    What do you think Adam?

    Im a newbie so any views from experienced landlords are appreciated.

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    ManInTheMoon