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Thread: Buy to let starting point?!

  1. #1

    Buy to let starting point?!

    I am not sure if this is the right area, but you guys seem like you know what you are talking about, so I will try here first!

    I am currently working in Africa as UK registered paramedic for a UK company, in that respect my earnings are tax free. In past 18 months I have saved and brought my first property.

    It is one I live in and will be renting out 2 of the rooms shortly, as I am away with work most of the time it makes sense. I live in the south east and brought the property for 320k, 15% deposit, mortgage of 272k as a sole first time buyer. (scary I know! but it is brighton) I expect to make 1k per month through letting the rooms, but can make the repayments on the mortgage with or without letting the rooms. It is so I can get a feel for letting and tenants etc as well as providing income.

    I know that in the UK I will never earn the amount I am earning now as a paramedic, so I intend to have a side buy-to-let profile going on eventually and then return to work for the NHS. I intend to save for the next year again to build up enough (20%) deposit for my first-buy-to-let property, probably around the 200k mark for a 2 bed flat as these are in demand renting wise in the city.

  2. #2
    I don't really understand the whole buy to let process?

    Do people generally save up the deposit for a buy to let property or do they remortgage their current residential house? I suppose what I am getting at is how people have one property, then get another and another etc without selling the first as I cant imagine rent in one year will equal enough deposit for the next property while simultaneously paying the monthly mortgage repayments on the first?

    If any of you have any advice, or books that I should read so I can gain some advice with how this process works it would be appreciated. I am a real novice and don't know anyone who has done this before, people I have asked for advice have been very protective about how they have made their portfolio or money and so I don't want to end up making rookie mistakes if it can be avoided.

    Many Thanks in advance.I don't really understand the whole buy to let process?

    Do people generally save up the deposit for a buy to let property or do they remortgage their current residential house? I suppose what I am getting at is how people have one property, then get another and another etc without selling the first as I cant imagine rent in one year will equal enough deposit for the next property while simultaneously paying the monthly mortgage repayments on the first?

    If any of you have any advice, or books that I should read so I can gain some advice with how this process works it would be appreciated. I am a real novice and don't know anyone who has done this before, people I have asked for advice have been very protective about how they have made their portfolio or money and so I don't want to end up making rookie mistakes if it can be avoided.

    Many Thanks in advance.

  3. #3
    Could i suggest that you visit www.taxcafe.co.uk - they produce 2/3 books
    which could be helpful with regards to your eventual income tax affairs. Be careful
    about getting secondhand advice from "someone down the pub" because everyone's
    situation is different. Finally, when doing your sums expect an occupancy rate of
    60% because there will be times when the property will be empty and not earning.

  4. #4
    My wife and I set up a small BTL portfolio a couple of years ago, based largely on funds from downsizing our own home but also a small mortgage. We manage the properties ourselves rather than via an agent (thus avoiding their fees), but you'd need to use an agent while you're abroad.

    There's a lot one could say, but the best advice would be to join the Residential Landlords Association (RLA) - or the National LA. The RLA costs just 80 pa, which gives you free access to their phone helpline (excellent!) and all the documents you would need, plus a very good journal and tons of background info. There also various websites and discussion groups like LandlordZone. Beware of various 'consultants' who, though experienced, will charge you lots to learn how to do things their way. I could go on much longer ...! Good luck.

  5. #5
    Firstly, your income form a UK company and I assume being paid from the UK is only tax free as long as you do not spend more than 90 days a tax year in the UK. If you spend between 90 to 120 days you come under the significant ties questions, one of which is "do you have accommodation readily available for you to stay in the UK", which in your case is yes. So, firstly assuming you do not meet the first condition, it may e better to rent the whole property. If you fall foul of these rules you will be liable for UK tax on your whole income for that tax year.

    All income from rentals will be subject to UK tax regardless of your tax status because it is income received in the UK from a UK asset. You can of course offset mortgage interest and repair costs as well as the cost of compete re-decoration upon your return assuming you kick out the tennants and live there yourself. These details will be entered on your tax return which must be filed as you are, I assume, paid from the UK. So, rental income is going to take a very long time to provide the next BTL deposit!

    The BTL market is pretty much sown up, you will make around 200-250/month gross profit based on 25% deposit and current mortgage/rental rates regardless of size/value of property. Hence a proliferation of gurus, consultants, trainers etc offering the secret to property success. It's property for God's sake and you've already bought one!!

    The trick in property, for which you can pay so called consultant training, er Simon Zutshi style for instance (500 one day - special offers available - 1400 weekend or 14,000 for a year mentor-ship - can you believe?), is to buy property in stress (at or near repossession/auction) or in need of refurbishment and therefore below full market value. Do it up, revalue and remortgage and there's your next deposit - assuming no property crash. There are now restrictions imposed by mortgage companies that mean you have to keep the original BTL mortgage for a minimum period, typically 6 months.

    In your case you will better off to rent your complete existing property and save your earnings for the deposit for your next/first BTL. BTL mortgages rely on rental income and not your affordability to pay the mortgage. They do however require a 25% deposit - maybe 20% if you're lucky. But do make sure your tax situation is rock solid or that deposit may be taken in the form of a tax demand!!!!

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