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Ok so I’ve wanted to get into BTL for years. Every time I get any money together I end up having to use it for something else. I finally have £20k deposit to put down. I’ve spent many, many hours researching this although less so over the past few months.
Now I am finally ready to get going and having started researching again I see lots of negativity around newbie’s entering BTL. This is to be a long term investment using any profit I make using interest only mortgages to go back towards another deposit and so on for around 10 years and then changing to repayment mortgages and having a nice little nest egg for retirement (I’m 36).
I guess my initial question (and there will be more!) is this… As a Newbie should I get into BTL with my £20k or is it now just too difficult to make money?
Its a too vague question to answer - you can invest £20k in a lemon and get bad rental, in a bad area and with low rental demand. Then it can be a bad idea.
You could invest £20k in a nice area and get a good return on investment. You need to do the maths, ensuring that the deal stacks up for you.
Out of your £20k you will have other fees - such as any renovation costs to bring the property up to rental standards.In addition to legal fees, valuation fees, mortgage fees when purchasing the property.Then being required to cover any void periods when the property is vacant.
The "negativity" mainly revolves around new Taxation rules these mainly only effect Higher Rate Taxpayers (or landlords in which the rental can knock them up a tax bracket). If this sounds like it could be you? then id certainly advise a chat with an accountant before entering into Buy to Let to discuss new rules regarding removing "Mortgage Interest Relief". They may suggest incorporating a Limited Company to buy rental properties for example.
I certainly would not say Buy to Let is a bad investment today, I would say as I have done all along. Is that you need to spend some quality time with a spreadsheet and look at worse case ensuring you are in a position and are happy.Don't rush into anything and find the right property for you - when you do would be happy to assist you in obtaining a mortgage.
Looking for the Best BTL Mortgage? Call the Specialist Team at Bespoke Finance. The above is not financial advice, its me rambling - just passing time on a coffee break.
Hi Adam as a newbie I appreciate your comments. you've mentioned having a quality spreadsheet. Are you able to suggest how to create one to ensure the number stack up?
You are asking the wrong question
The first one should be
What sort of tenant demographic could you risk letting to!?
Once you have determined that then you can start looking for suitable property.
The deposit is very small.
Half of that could be used up with one eviction!
Thanks Paul, while your reply makes sense, I was wondering if there was somewhere I could obtain a sample template of a spreadsheet to start getting used to the kind of coatings I will need to consider when considering a property.
Hi Ben,We had a similar thread recently >>> here. With £20K, I fear you will be restricted with what you can achieve.If you are just purchasing one property at a lower LTV, and you are in it for the long term, then it could still work for you.It really depends on location, the type of tenants that location attracts etc.See - Top 10 Property Tribes resources for novice landlords and BTL investors
Thanks for the replies.
If you are just purchasing one property at a lower LTV, and you are in it for the long term, then it could still work for you.
This sounds like me. There are a few locations I'm looking at where I can get a property with around 7% yield. I'm not looking to make a living out of it but long term slowly build up to 4 or 5 and then pay them off.
I think you have a problem with the amount of capital you have available
But lets say you can find a property which will give you a chance what are the pit falls
Get them both right and you are on to a winner
Take advice on Taxation and get a good mortgage broker.
Learn Change and Adapt ?????
My first piece of advice is that yield in a property investment is not the be all and end all, whether it be 7% or 17%.
Full time Landlord in WestYorkshire, mentor and property education to new and inexperienced PRS investors. 25+ years of working knowledge. Accredited NLA member & RLA member https://www.landlordgeoff.co.uk [color=#800080]
Hi Geoff,An interesting comment!I would like to hear more about your views on this. Perhaps you could start a new thread called "Yield is not everything" and expand your thoughts a bit?
I might add that "potential yield" is more so not the be all and end all.