Becoming a landlord.. any experince?

[vkurup]

I wud love to be property landlord with 10+ properties that just feed each other and I play golf 7 days a week. Unfortunately, that is just a pipedream and I am still waiting for the lottery numbers to come up before I can buy the payoff the first mortgage & buy a rental property. So I am always looking at ideas from people who made it or are planning the move. I caught up with a friend over the bank hol weekend and he gave me some insight into his plans.

His current mortgage is about 60%. So he is looking to remortgage or take a collateral loan of another 50K. This along with his saving of about 50K, gives him a corpus of 100k. He is planning to buy a new home for himself for say 500K (20% deposit from the 100k). He is then going to let out his current house after remortgaging it to an interest only mortgage. So rental income will pay his interest only mortgage & his 50K collateral loan. I like his plan, but the thought of such big debt makes my pants wet. Am I being too conservative?

If anyone is a property landlord, would love to hear how you got your first rental property? Also do you think the above idea is viable?

 

[Doon frae Troon]

Is that not why we are all in this current mess.

One little blip in the property market and you will find yourself in the doggy doo.

The rental market will tighten in the next few years as the banks loosen the purse strings and a general election looms.

 

[Rooter]

Now is the time to buy, read today that house prices are forecast to increase by 30% in the next 2 years....

 

[DappaDonDave]

Personally if I could I get a house which brings in rent which then pays its own mortgage off. Then use the equity in the future to get any and do the same thing. Long term plan over 5-10 years.

But...I can't even save a bond up for a first time mortgage, so I'm stuffed.

 

[Doon frae Troon]

Now is the time to buy, read today that house prices are forecast to increase by 30% in the next 2 years....

In Newbury maybe but I can't see that happening OOP North and beyond.

 

[CliveW]

I got my first rental property by divorcing my then wife who got the matrimonial home. I bought a two bedroom flat to live in and two years later met a wonderful woman and moved in with her. I then rented the flat which only had a small repayment mortgage on it and the rent paid the mortgage and left a small monthly profit. (The property is now mortgage free) The pair of us now have a four bedroom bungalow and three bedroom farm cottage that we let and own outright.
Incidentally, I cannot understand anyone who takes out an interest only morgage as to me it is the same as renting. You pay a monthly premium and never own the property.

 

[CMAC]

I got my first rental property by divorcing my then wife who got the matrimonial home. I bought a two bedroom flat to live in and two years later met a wonderful woman and moved in with her. I then rented the flat which only had a small repayment mortgage on it and the rent paid the mortgage and left a small monthly profit. (The property is now mortgage free) The pair of us now have a four bedroom bungalow and three bedroom farm cottage that we let and own outright.
Incidentally, I cannot understand anyone who takes out an interest only morgage as to me it is the same as renting. You pay a monthly premium and never own the property.

maybe its the only way to actually buy the property as a capital/interest monthly repayments would be too high.

 

[DappaDonDave]

maybe its the only way to actually buy the property as a capital/interest monthly repayments would be too high.

You're not buying it though. As you're paying interest only, you're not paying off any of the house. It's like renting apart from you owe a stack if cash at the end if it!

 

[Foxholer]

Incidentally, I cannot understand anyone who takes out an interest only morgage as to me it is the same as renting. You pay a monthly premium and never own the property.

It, potentially, is a better way to make money out of the house in the short term - in times like now that have low interest and house prices are 'depressed'. Also more relevant to South East speculators - as there's certainly an element of that in it - than the more conservative Scots.

The early part of Repayment mortgages are almost Interest anyway, so the difference in the first couple of years is marginal.

And you do own the property. It's just that you have to know about and plan for the lump payment at end of term.

Don't take advice from me though! I'm not qualified, on so many levels, to give it!

 

[Doon frae Troon]

The interest only folk are in for a big shock when interest rates start to rise in the next couple of years.
I was paying on average 6 to 8% interest on my mortgage for 25 years.

When I first retired I was doing OK with interest on my savings now it is hardly worth while.
I am doing better out of Premium bonds than ISA's...crazy!

 

[MadAdey]

Never been a landlord myself, but the girlfriend works in an Estate Agents as a property coordinator looking after around 150 rental properties. Plenty of pros and cons in this game. From what I hear from her these are some of the pitfalls of being a landlord:

Cons:
Repair work can't be left like in your own house until a later date.
Some of that work has to be carried out immediately by law, irrespective of how much it costs.
If a tenant does not pay for 2 months then you will need to take them to court to get them evicted, so you could easily find yourself with 4 months where there is no rental income. So that means making the mortgage repayment yourself.
If a tenant leaves the house in a mess, the deposit may not cover the damage done, so you will have to pay to sort that out yourself or you will not be able to rent the house out.
Insurances can be taken out to cover all the above problems but at a cost.

Pros:
Insurances can be taken out to cover you against non paying tenants and the legal costs to get them evicted.
Insurance against someone injuring them self in the house.
Insurance against damage caused by tenants.
The house could never have a problem with it and go for years without needing any money spending on it.
You could get a long term tenant that leaves the house in better condition than you gave it to them.

I think you have to weigh up if you can afford to run 2 houses just incase it is ever empty or someone has not paid. The girlfriend says that landlords have houses repossessed down to this. I would love to get into property even though there are some pitfalls with it. But if you get lucky then you could have years of income and money making.

 

[bobmac]

I agree with Adey, it's not all a bed of roses.
I went to view a house I was going to rent and the place was a mess.
The previous tenants had done a runner owing 3 months rent, the gardens were a mess and half the furniture was missing or broken.
It was 2 weeks before it was habitable again.
Not all agents do what they are supposed to do.

 

[vkurup]

Now is the time to buy, read today that house prices are forecast to increase by 30% in the next 2 years....

In Newbury maybe but I can't see that happening OOP North and beyond.

I agree with Rooter, I think prices will rise. I am restricted to south east (Newbury is a bit North for me). However, not sure if it will jump by 30% in the next 2 year. We are already seeing some of it around here. Just up the road from me, a mate was interested in a small 3 bed which was on the market for 315K. He asked me for my opinion, and since I know the location, I asked him to go low. So he put in 295K. Two days later someone walked away with a 325K!!! It is good news for the area (and me), but I think the prices are starting to look silly again.

Incidentally, I cannot understand anyone who takes out an interest only morgage as to me it is the same as renting. You pay a monthly premium and never own the property.

(correct me if I am wrong) My understanding is that you can only offset the rent with the interest part of the mortgage rather than the full mortgage. Which means you will be liable for paying tax over the difference between rent & the interest part of your full mortgage + pay the additional capital bit too. So by going interest only, there is no capital to pay (though you still pay the tax)