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  • Buy-to-Let

    Purchase with cash or BTL mortgage?




    Good morning tribe, first time posting so be gentle.

    I have relocated to SW Scotland, from SE England and sort of semi retiring. Bought our home up here mortgage free, selling home down south and will be left with 300k, savings of 200k. Property is cheap up here but rent is pretty low although the yield works out higher than the south. I've dabbled in the past with btl and still have a flat managed by an agent down south.

    The advise I would like is would it be best to purchase a few properties cash so there are no monthly payments or use  my cash as deposits for btl mortgages? Especially with new tax implications.

    I know it wont be a totally passive income and would like to keep my hand in with maintenance etc. Been in the building game all my life with my own business so not daunted by hard work.

    Hope this makes sense and look forward to reading  your expert advice.

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    Hi David, and a warm welcome to the tribe.  Smile

    The true way to wealth is to leverage - leverage other people's money, time, experience, knowledge, contacts etc.

    If you only purchase for cash, let's say you target £100K properties, then you will be able to buy - simply speaking - 3 properties.

    However, if you leverage using BTL mortgage finance to 50% LTV - which is a safe/low risk place to be - then - roughly speaking - you will be able to buy 6 properties.  So your money is working much harder for you - 6 properties earning a net income and hopefully enjoying some capital growth over time, rather than 3.

    If you use your building skills to renovate properties before renting out, you will lock in even more equity.

    Some additional reading for you:

    Owning BTL property outright the way to go? 

    Buy outright or mortgage

    Rather than saving, create the "Royal Bank of You" through property investment

    Hope that helps bring clarity to your decision and good luck!

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    Thank you for the advice Vanessa, lots to think about and hopefully make the right decisions. May well be posting for more advice in the near future!

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    As always, a conversation with a reputable mortgage broker will help bring clarification to what you can achieve with your particular set of individual circumstances.

    ​The team at Property Tribes Financial Services on 01206 654444 are here to support the PT community in growing sustainable portfolios, and would be delighted to assist you in moving forwards.

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    Depending on your age and the lender you choose, it may limit the amount of years you can borrow money for.

    People on this forum are far too focussed on yield! How much £ in your pocket at the end of each month is the figure I work out!

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    Morning David

    I saw your post, mentions you retiring have you considered interest only BTL to give you better rental return. Only a thought maybe ask a mortgage advisor for some figures.

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    WhenI semi retired I found it easier to have a few properties, with nearly all the income coming to me, rather than more properties and more hassle, and a lot of the rental income going on mortgages.

    Vanessa is right about leverage etc, but if you are looking for a quiet life, with a sort of, passive income., then my way worked for me.

    incidentally, I am now selling up and getting4-5% on the stock market, and gradually reducing my capital.

    No repairs, no voids no nasty tenants who lie, cheat, and steal my carpets, curtains, light shades and bulbs!

    yes it has recently happened to me.

    yes

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    A lot depends on your attitude, aspirations and strategy. If you aim to become a property millionaire through vanilla BTL then leverage is the way to go, although it is generally advised to keep your home unencumbered.

    If you merely want to get a good return on your investment there are many options available without borrowing. In addition, you are not bound by lender's requirements if you are a little imaginative in your approach.

    My first investment, after a little unconventional tinkering, will produce a double figure net yield and around 50% forced appreciation. It will be mortgageable when complete, but at commercial rates from limited lenders, which is a compromise I'm prepared to accept.

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    HI,

    I have a similar questions to the first post. I am currently building up a BTL portfolio with 4 flats in Aberdeen and looking at other cities in Scotland. I have my own business which is my primary focus and see BTL property as a way to invest money made outwith property rather than spending all my time on it. The 4 flats are all owned outright and looking at adding a flat at a time when I have enough money to buy outright. I think I am able to drive a better price buying outright especially in Aberdeen which is an oversupplied market so ability to deliver instantly without funding definitely helps get below market deals through. I understand the view that leverage increases gains but my position is I am not that confident in capital value increases in the short term. With additional Stamp Duty, tax changes, Brexit etc I can see prices falling over the short to mid term (up to 5 years out).

    If i leverage I am increasing my exposure and capital losses if prices do go down and i can always add debt in later if I feel there is an opportune time to expand, or if a great deal comes along that I think is too good to miss. Avoiding debt also saves time and hassle associated with securing mortgage etc. I am also not confident that prices will necessarily drop hence I am buying when I can so hedging my bet if you like. The flats are typically yielding 7% net and costing around £100/£150k. Interested to hear the thoughts on this strategy, having read the posts regarding leverage I can see the benefits and think I need to add debt into my long term strategy but keeping it out in the short term until we see the impact of the likes of brexit may be prudent?


    Thanks,

    Will

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    Hi Will,

    Did you self manage all those flats in Aberdeen?

    T

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