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  • Stickies & Evergreen

    Newcomer landlord seeks starting advice



    Hi guys,

    Im a first time buyer looking to invest my money into a BTL, I have £20k saved. Currently my main focus would be to buy a property that provides me a good % yield over capital growth. I have been looking at 1 bed apartments in midlands/north in most major cities.

    I am completely new to this, so if anyone could point in the right direction as what to look for and where I could invest Id highly appreciate it.

    Thanks

    Zach

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    Good morning,

    First can I ask, why do you want to invest into property?

    Richard.

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    Hi Richard

    Being 24 im still quite young and want ensure I can provide myself financial stability in years to come. I also want to be in a position where I have the freedom to decide what I choose to do with my time in future. I work in a family business where family members are still working into their 70's and I do not want to fall victim to that.

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    Hi Zach

    What a great answer, you have a solid head on your young shoulders. (I hope that does not sound patronising)

    Vanessa has provided a very good response. Just a few high level points.

    If you earn a annual wage, in excess of 25K, then this provides financial options with lenders to access funds. (As VW stated) - PLEASE DON'T STATE WHAT YOUR EARN.

    Keep things simple for now, I would also advise you look at purchasing a 2 or 3 bed property instead of a flat. The reason, your target audience will be larger and more diverse. A family will move into a 2/3 bed property before a flat. You can also maximise your investment with a house over a flat.

    20,000 is a lot of money, but don't forget to fact in purchase fees and taxes. Plus any refurbishment costs you may incur on purchase.

    The advice to purchase close to home is a good one, however not so good if you live in Chelsea. (i.e. you can't afford it)

    So I would suggest don't be shackled by anything, open your mind to investment opportunities that you can make work.

    Another question, once you have purchased the first one what is your next move. You need to know the answer to this before you buy your first property. This will make you think what property you are looking for?

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    Thanks you for the reply.

    I will start looking into 2-3 bed houses, it makes sense to target a wider market.

    Purchasing close to home would certainly be nice, however I dont see many 2-3 bedroom houses come onto the market inside of my current budget range. Because of this I think I am pushed to look further to find a BTL that is affordable.

    After I have purchased the first I would like to reinvest all profits, as well as all the money I will continue save from my job into a second property. I would also like this property to produce a positive cash flow.

    Once I feel as though I am producing enough income I would like to look into other areas of housing such as renovation and development. However I appreciate I need to learn to walk before I can run.

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    You are most welcome.

    Now you are starting a plan and strategy.

    Pre tax profits on the 2/3 bed you purchase will be cira 3k. Then your wage you can save. Don't forget to live buddy. That's why we work.

    My point, it could take a while to build up the capital. Though of course you have time.

    Ideally to find a property at a great price, add value and then refinance to draw the money for the next project. This is a basic approach and one most investors start with.

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    Thanks for the advice

    So would it make sense to find something that is in a good enough condition to let, but still requires some modernisation? Therefore if a fall in the market was to stall the possibility of refinance, the property would still provide an income?

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    Hi Zach,

    Welcome to the tribe.

    My first piece of advice, if you have not already done so, is to speak to a professional mortgage broker who specialises in BTL to understand if you, with your circumstances, can access BTL finance.  The team at Property Tribes Financial Services on 01206 654444 would be pleased to assist.

    It makes a huge difference as to whether you can use your £20K as a deposit on a £100K property, or if you have to buy a property for cash for £20K because you cannot access BTL finance.

    Secondly, I would say buy a house rather than a flat.

    10 reasons to buy a house rather than a flat .... EVERY time.

    Thirdly, I would say try and buy a property close to where you live:

    10 reasons to buy investment property within a 10 mile radius of where you live.

    Finally, I would say read the below resource from top to bottom to acquaint yourself with vital information and create a plan to help you move forwards:

    Top 10 Property Tribes resources for novice landlords and BTL investors 

    I would also highly recommend that you join a landlord association, and Property Tribes members can get a 25% discount off joining our partner association, the Residential Landlords Association.  Plus it's tax deductible! Smile  £60.00 well spent to access all the RLA's advice and support.

    ​I hope that helps for starters and good luck!

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    Hi Vanessa

    Thank you for the quick response and the information you have provided.

    I have mortgage broker in place and access to a btl mortgage providing I put down a 25% deposit.


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    So with no buying fees you can buy a property for max £80k

    But fees could easily be £5k hence only £15k deposit so max house price is then just £60k - which seems likely to provide a tiny gross rental income - plus be in a location where you may have mainly benefit tenants which many prefer to avoid.

    Unless you are planning to pay tradespeople to do any repairs/maintenance it helps if you are versatile and practical on such matters as decorating/fitting bathrooms/kitchens/flooring etc - and you get that kind of experience if you buy a fixer upper as own home - as you can then refurb at leisure - without tenant/banks etc breathing down your neck to get it done.



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    Thanks for the advice.

    I understand what you mean about smaller gross rental income, but If the numbers work then is not still a good ROI? Even if the investment is small.

    Is there a greater risk of purchasing a 2/3 bed house for 60K further north, as apposed to purchasing a 100k 2/3 bed house in an area I live and know?




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