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  • New Members

    Starting out - buy own home or BTL property?

    Afternoon all,

    Hope everyone is doing well.

    I'm new to this forum and just had a few questions as I analyse my investment strategy. There is a ton of info here on PT that I am slowly getting through so thank you for that.

    I've never owned a property before so I am eligible for first time buyer deals as well as 5% deposit options. I also pick up a decent income from work, around £2500 a month net with very little outgoings. Thus far, I have saved about £20,000 in cash and I have a decent credit rating with around £20,000 available on credit cards (money transfer available too), as well as pre-approved for loans around the £20,000 mark too. I have pretty much zero debt, maybe a couple of hundred pounds on CC's which I pay off in full every month so never pay any interest.

    I was just wondering if I could take advantage of my situation to help me on this 'property' journey. I've read posts on forums where they talk about flipping properties, as well as the BTL strategy where I can look to buy BMW with the hope that I can 'release' my cash by remortgaging later if I add enough value and the market moves in my favour.

    What would you guys suggest if you were in my shoes? Or if you had to start from scratch, so to speak?

    I look forward to any suggestions or advice and I will gladly take any constructive feedback on board.

    Thanks in advance.

    Regards,
    Rem

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    Hi Rem and welcome.

    The first thing to do is get yourself your own home imho.  Go and have a look in our first time buyer tribe for lots of helpful information.

    Your own home gives you security and improves your ability to secure BTL finance in the future as you have a fixed address and track record of paying a mortgage.

    Once you have your own home, you can rent out rooms to up to 2 lodgers and:

    1.  Benefit from the £7,500 Rent a Room tax free allowance.

    2.  Start honing your tenant referencing and management skills.

    I would strongly advise against trying more high risk strategies such as buy to sell without having any form of experience.  The market is very uncertain at the moment, which makes the risks of this even higher, as margins are slimmer.

    It is also important to understand that, comparing BTL to BTS is like comparing an apple to an orange:

    Buy to let vs. Buy to sell - trying to compare an apple to an orange.

    BTW - do not think for one minute of using first time buyer schemes like to "Help to Buy" in a BTL format!

    I would get your own home, rent out a couple of rooms, use the rental income to start saving, become a property "sponge", work out what you want to achieve in property investment, make a plan, and then start when you have sufficient deposit funds.  Build a small portfolio of standard single occupancy BTL before trying anything more high risk.

    There is a huge amount of helpful information curated here and well worth reading all the links I have provided:

    Top 10 Property Tribes resources for novice landlords and BTL investors

    Hope that helps and good luck!

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    I would advise against buying your own home first (a liability) and I would advise buying a property that makes you money each month, and then if you wanted your own home you can use the investment property to buy your own home (by way of a second charge or releasing equity). 

    It sounds like you want assets, not liabilities.  Student HMO's or a holiday rental (listed on websites such as Booking.com etc).  Create a business plan to make sure all the numbers add up.

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    I get your point about your own home being a liability (it is) but disagree with the rest. Buying your own home it is a good way of starting your property portfolio and learn what it is all about especially if you rent out a room or have lodgers.

    Properties are no longer for amateurs and the margin is not as good as in the past, this is not a get rich quick game anymore.

    Also what I have noticed is that a few have a BTL and then Later want to buy their own home however as they have already a property they now has to pay stamp duty on a more expensive home.


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    Your own home is a great way to start as, without being a home owner, it is far harder to get BTL finance as most lenders prefer to lend to a home owner.

    I understand your point about "liability", but if you rent out rooms to lodgers, it changes from a liability to an asset as you should be able to at least cover the mortgage with lodger rental payments.  At our home in Guildford, we rent out two rooms, which brings in £1250.00 per month.  This is almost double the monthly mortgage payment.  In fact, in 15 years, as we have had lodgers for all that time, we have never actually used our own money to pay the mortgage, yet we have lived in a 4 bed house in a great location!

    Furthermore, buy your own home with your "investment" hat on.  Perhaps in a few years time, you could get "consent to let" from your lender or redeem your resi mortgage for a BTL mortgage, and turn it into a BTL, while you move to a new residence. 

    This works even better if you have added value to the property while you lived there, and also has some CGT advantages.  This is exactly how Nick and I got started.  I changed the mortgage on my flat in London to a BTL, released some equity, and used that equity to buy another residence, and start our portfolio.

    So buying your own home should be considered the first property in your portfolio, and bought with an investment hat on with the purpose to serve you to move forwards.

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    I'm firmly in the "Buy your own home" camp - with the caveat that you should buy a bigger house than you, yourself, need and rent out the spare rooms, potentially tax free - making your home potentially free to you. Not a bad start to an investment journey, since your zero-cost home is effectively paying you its market value rent or more, all the time reducing the outstanding debt on the property.

    This will allow you to keep saving £2500 a month toward your first stand-alone investment unit, once you have developed your own plan.

    This is my own plan - it's pretty big, and it's not 100% accurate, but it is close enough and keeps me focused. Failing on paper is cheaper than doing it with real money, so a plan lets you analyse deals, play down scenarios and play "what if?" games.

    Tip - build your own spreadsheets and analysers so that you understand the data and anlysis: know your numbers.

    Good Luck!

    Neil

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    Listen the the experienced and buy your own home first. This will give you an idea of how to own a property and every thing that goes with it. Bills, maintenance, having to deal with the various problems as they arise.

    Learn to walk before you run.

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    Good to hear you're looking to buy your first property. I'd have to agree with everyone and say that you should buy your own home first.

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

    I'd like to briefly balance out the majority of comments with an opposing view.

    If you're young, not committed to living long-term in the area you would be buying in, and the area you're in is not a great place to invest, then definitely consider purchasing a buy-to-let Smile

    I appreciate that the latter of my criteria above is hard to gauge - but isn't that what being an investor is largely about? Working out the best place to put your money as far as can be reasonably judged, and putting it there to achieve the best result long-term?

    Of course, if you're happy to move to where you think the best place to invest is, then great! But that may be the other side of the country haha. If you purchase a buy-to-let in a great area, then you have great returns and the freedom of living where you want to live Smile if you re-invest those returns carefully, then your investments will eventually pay your rent/pay for a home of your own.

    Of course you need to weigh up whether all that outweighs missing out on FTB deals. For me, the FTB deals were not going to be the better option long-term, but everyone's situation is different!

    Good luck!

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    I would buy whichever one  brings you peace of mind and makes you money

    The balance between those two priorities is very personal to you 

    Some say your own home is a liability . I don`t see it that way though

    Your own home can yes be a liability but it can be  a great asset in both financial and emotional terms

    It depends what you do with it .

    Add value , borrow against it , take in lodgers for a while , or just enjoy it

    I see mine as 100% an  asset

    Because it enabled me to add value build a BTL portfolio from its equity and enjoy it

    Its given me back about 25  times what I put into it therefore it is clearly an asset

    And you get a feeling of permanence rather than temporary -  which is nice after a long day


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


    You've had good responses here but as Jonathan says, the decision you make is very personal to you. 

    The consensus here is to buy your home first and while the points made are valid, I don't think buying a BTL first is a bad move IF you can secure a BTL mortgage (big IF!)

    My first TWO properties were BTL's whilst I lived with parents. My third purchase was my residential in central London. I wouldn't have been able to afford the deposit on my central London property without the two BTL's. I don't think I would have been where I am today if my first purchase was to live in. Just my 2 pence!

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