X

Sign Up

or

By signing up I agree to Property Tribes Terms and Conditions


Already a PT member? Log In

Sign Up

Sign Up With Facebook, Twitter, or Google

or


By signing up, I agree to Property Tribes Terms and Conditions


Already a PT member? Log In

Log In

or


Don't have an account? Sign Up

Forgot Password

To reset your password just enter the email address you registered with and we'll send you a link to access a new password.


Already a PT member? Log In

Don't have an account? Sign Up

  • Buy-to-Let

    Several BTLs or 1 Residential plus 1 or 2 BTLs?

    Hi All,

    I'm a newbie to property tribe so please excuse me if this topic has been thrashed out already. I'd be interested to know what the tribe members would do if they were in my boat or if there's any feedback on schoolboy errors I'm may be making.

    My background:
    I'm new to the BTL world but have been a joint venture live in HMO landlord ie: been living in an HMO with friends one of which jointly owns it with me. It's been a great experience and financially rewarding but the chapter is about to close because my friend wants his equity and I can't afford to buy him out as its now worth £635k.
    I'll have a blank slate (no assets) and £260k in cash. That's the first and only step I've taken on the property path. I've now got stage fright - pondering what to do with the dosh so I'm doing a lot of reading, listening to podcasts and I've just attended a 3 day property course. There was a hard sell to get me to do the expensive full course but I decided not to - I hope I made the right choice. Since finding propertytribes I feel a bit better about saying no - there's a lot of useful info here - thank you.

    My objectives:
    I would like to work towards no longer being a desk jockey and no longer having a boss.
    I understand that running a property portfolio is hard work but at least I'll have more flexibility.

    One strategy I've been advised on is to try to get several BTLs in the right location that are below market value, renovate and rent. And to avoid buying a home in the order of £350k until my pyramid base of BTLs has been established. Got to do all this and my day job :-\

    I'm finding it hard to let go of the idea of buying a 3-4 bed and doing the same thing again (live in landlord). In my mind its a "quad-win" situation: you have a home, you're not paying rent, you have cashflow from lodgers and if you buy in the right location you have capital growth. Prod me if my logic is off the rails...

    So I'm looking at acquiring a £365k 3bed home in my area to do this. I'm considering 2 approaches:

    A) Mortgage it at 90% LTV (repayment residential mortgage) so that I free up cash to acquire a few BTLs over the next 2 years

    B) 60% LTV and slowly buy 1(maybe 2) BTLs and then if I'm managing ok as a BTL landlord I could change the LTV to 80% and use the equity release to buy another BTL.

    Option B feels more sensible to me but I'm not sure if I've overlooked something. Whilst interest rates are low I guess it makes sense to take out a large loan (assuming the cashflow can cover repayments) but there's no point putting it in the bank for 2 years while I try to find the time to buy several BTLs. Again - shout if I'm going off piste here...

    Excuse the essay but I dont know how I could have made this more succinct. Any thoughts or tips are most welcome Smile. Need to make a decision by Tues so hoping someone out there is as geeky as me on this Easter weekend!

    Thanks
    Matt (the odd breed livin-jv-landlord)
    0
    0
    I would go for Option A. That frees up more cash now to buy more BTL`s therefore you make more which is the goal . If you procrastinate house prices may go up 5% and you will lose out. Also interest rates will go up at some point so you may want to lock in now at some cheap 5 year fixes.

    If you believe in leverage as i do then 90% LTV is always going to be better than 60%. If at any point you find that being a BTL landlord does not agree with you you can then simply pay down your 90% till you reach 60% and you arrive then at Option B without too much pain

    If you go for Option B first its harder to revert to Option A when you realise you are onto a winner. More fees as well. Its your cash so....

    Keep the power
    Keep control
    .
    ---------------------------------------------------------------
    P.S. I dont recognise the phrase Easter Weekend anymore. Putting individual religious beliefs to one side for a moment a `weekend` is a man made construct. We are brought up to think broadly that we work from 9-5 Mon - Friday and have 2 days off at the weekend and that keeps the status quo and that how it should be for about 45 years of our `working life` This is a trick though. It doesnt have to be that way.

    There is absolutely no reason why we cannot as a nation or as an individual have a 4 day weekend every week and only work 3 days a week. I measure time in freedom time. Freedom time to me is when you have no employer telling you what you can or cannot do. Fortunately I now have my freedom time so this 4 day Easter Weekend happens to me every weekend. I prefer a 7 day weekend though as that gives me even more freedom time

    If you want more freedom time go with Option A
    .
    0
    0

    Jonathan Clarke. http://www.buytoletmk.com


    Hello mate,

    Where are you based? I'm in a very similar situation, I'm 31 and based in Zone 2 East London. My business net cashflows around £18k per month which I am going to start to save to get into BTL this year. And I also have around £70k cash to play with.

    I take it the 3 day property course was with Simon Zutshi?
    0
    0

    Thanks both for your thoughts. I should have mentioned that the one thing holding me back from setting up several BTLs in a short time is time itself - I have a demanding day job so it's hard to get the time and flexibility to research and travel to the sites (can't buy £100k properties where I live as prices are extortionate).

    This makes me think if I go for the 90% LTV it's going to take me 2-3 years to buy 5-6 BTLs using the little spare time that I have. All the while that large amount of cash will be rotting in a bank account (I've maxed my ISA allowance). As far as I can see the only limitation on increasing the LTV from 60-90% is you have to wait for 6 months but this won't be an issue as I'll have enough cash on the side to buy one BTL whilst I wait.

    Another thought: reducing LTV (ie 90 to 60%)normally is restricted to incremental payments of max 10% per year or there are early repayment charges (for fixed rate mortgages).

    Another option: an offset mortgage which links up with a savings account - you only pay interest on the loan amount minus the savings balance. But this is a tracker.

    This is wild thinking but it's an idea:
    take a year off work to setup 5-6 BTLs. People take gap years to travel so why not take a gap year to setup a business. One issue though - you need an income of 25k per year to be able to get BTL mortgages. So perhaps setup my own business and pay myself a salary of 25k. The question is would banks lend to me if it was my business and I was paying myself? My instincts tell me this wouldn't be a good idea.

    Id value any thoughts on the various options I've mulled over there

    Ceeme123 if you'd like to talk / brainstorm we could connect offline - not sure what the appropriate way is of connecting but if you'd like to let me know how to contact you or alternatively I can start by giving you my email address?

    Thanks
    Matt
    0
    0

    I'd go for option A.

    Firstly, you need somewhere to live and if you can get your lodgers to cover your costs, rather than paying out rent yourself, then why not do that? But bear in mind that not all resi lenders will allow lodgers, and when they do, the limit is usually two.

    Secondly, BTL lenders tend to be suspicious of borrowers who ask for BTL mortgages but don't actually own their own homes, so being a homeowner should give you a wider choice of BTL mortgages.

    Thirdly, with option B you're likely to have to remortgage at a cost of around £3K per property in order to step up from 60% LTV to 80%.

    BTW, if you want to connect with another PT member off the forum then the easiest way to do that is to message them via their profile page.
    0
    0

    [Image: 75pxLogo.jpg]

    http://www.brumhomes.co.uk / Facebook

    Local to Birmingham/Solihull? Join our Facebook private rentals group:

    http://www.facebook.com/groups/RentalBhamSol/

    Twitter: @RentalBhamSol


    Hi Lynne,

    Thank you for your reply. Sorry it took me a while to get back to you. I decided to go for an offset mortgage in the end as it provided me with a decent interest rate and flexibility to withdraw and exit for only £250.

    I appreciate you taking the time to share your thoughts.

    Kind regards,
    Matt
    0
    0