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  • New Members

    Newbie searching for long-term strategy ...

    Hi Everyone, I'm Tom

    I'm about to start my property journey, It's a little unorthodox and thought i'd share it here and figure out what my long term strategy might be.

    Well I'm 29, still living at home. I saved up about 90k. and had the original intention of saving a bit more and buying a house outright and renting out a room. My income fluctuates alot, and i'm not able to get a mortgage.

    This year, income hasn't been ideal.

    My dad suggested i'd buy a property with him using his money. (similar amount of money).

    We're based in Rural Herefordshire. A poor investment area in my opinion if you compare house prices to rental values.

    I was looking over towards Gloucester where they are  a little better.

    We decided to just put an offer in of 160k on a 3 bedroom terrace with rental values conservatively of 750,

    I wanted to go down a multi let route and him a single let route, we're likely going down the single let route as our first property.

    We're both first time landlords, I'm just trying to gather as much information as possible to make as few mistakes as i can as well as find a strategy that would work for me to maximise my returns with this amount of money.

    Any recommendations of what bank accounts you use to maximise the returns as well?

    Edit: Still living at home whilst i rent this out sharing the rent. I'm okay sacrificing some independence for a while whilst i use this money to kick start these properties before i think about getting myself somewhere.

    Any tips or just welcomes would be awesome! 

    Cheers

    Tom

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    Hi Tom,
    I'm sure you'll get lots of opinions, but here's mine. 

    1) £750 on a £160k property is a dreadful rate of return, by the time you take off your running costs and presumably you'll use a management agent you'll be down to around 3.5% or less. 

    2) I would speak to a couple of independent mortgage brokers they will be able to get you a mortgage, putting all your money in one property is not a good use of it. Splitting it into say 2/3 deposits and getting property around £70-100k and renting those out as single let's at about £575-625 pm is a better return.  HMO is probably not the best idea for someone first time, a lot of regulation and time.

    3) Talk to letting agents, find out what they have a constant demand for and how much rent you can get for such a property, and if you are buying in an area you don't know a lot about, ask them where is good and bad and then spend as much time as you can walking not driving around that area at different times of the day and night.

    4) Marcus by Goldman Sachs group pays a reasonable rate of interest on an instant access account.

    5) Remember the property you buy should be what rents, not what you like - although you can have your own view!

    6) Read the various property books and don't pay for any get rich courses, ever wonder why someone who claims to know how to make millions on no money down deals etc is standing in some Hotel room flogging you magic beans, if they have such a perfect system?? 

    7) It is possible to do well, but a little caution and a lot of reading, walking and asking questions to letting agents will save you losing money.



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    "1) £750 on a £160k property is a dreadful rate of return, by the time you take off your running costs and presumably you'll use a management agent you'll be down to around 3.5% or less."

    Its 5.6% gross yield which is fairly typical for BTL. If the property was in the south east, i'd say it was a very good yield.

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    Yes gross is a number, net is reality, and 3.5% or less is poor.
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    I could potentially put it up to 800 or  a bit more but 750 was conservative.

    A 100k property that would give 625, just isn't too realistic from what I've noticed. I'll have another look at rental values and potential properties but unless its with some heavy reduction or off market sourcing, i'll struggle.

    Most properties that are 100k are 2 bed apartments in my area  which don't give said rental income and there would likely be ground rent and service charges.

    If you could steer me with some advice to help me find such potential returns, i'd be grateful.

    I cant get a mortgage because I play poker professionally by trade, by income isn't recognised and fluctuates, i did speak with a mortgage advisor saying i could get a 15k/ job for a month and quit as soon as the mortgage came in.
    I've mainly been using rightmove to look at rental figures in the area. but i can ask in lettings agents for sure.

    I'll check out this marcus account

    I've just finished rich dad poor dad today actually. and learning what i can.

    ​thanks for your input! 

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    In your area that rental may not be possible but it certainly is elsewhere in England, I suggest you look around Derby, Sheffield or Nottingham. As for the mortgage you can try for a self certified mortgage, so I suggest you join the RLA and also look at a specialist buy to let mortgage broker, as it is possible but you need a better broker.
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    down the line i would look elsewhere for higher returns, but i'm mainly looking local to start with as its just easier to look around properties and we can learn more about the area easier.

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    Hi Tom,

    I liked your first plan of buying your own home and renting out a room. Smile

    Perhaps your Dad could add to the pot for you?

    Why not buy somewhere that needs a bit of a refurbishment or where you can develop - such as loft conversion or extension - , so you can add value?

    In about a year or so's time, turn your residence into a BTL by taking out a 75% LTV BTL mortgage, rent it out, release a big chunk of equity, and then move back home or use that money to purchase another residence if your income has improved. Smile

    See this thread >>> Using residence as stepping stone to BTL 

    Good luck!

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    Hi Vanessa, unfortunately even though my dad is a tradesman, he's now retired and doesn't want a project and he doesn't want to pay others. so we were looking for something ready to go, i'd personally prefer to go down the BRRR route.

    so based on that my current plan was to buy cash, rent out, use the rental income proof to mortgage and buy another place with the remaining funds. 

    Its difficult as with our difference in ages, we have different goals. i'm planning to build for long term, where his is more it being his retirement pot.

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    Hi GovPanessar

    Liverpool is a vibrant area to live in, which has many investment opportunities and potential healthy returns. Sounds like you have a solid plan and know what you want to do. Take peoples advice but always remember to do what’s best for you.

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    Transparency notice: OneandOnlyPro is a commercial partner of Property Tribes.


    I have to say I would not buy a property with the yield your using  unless it was good for development

    My own bench mark is 8% yield anything less and its not worth me getting off my bottom to be honest



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    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.