Strategy

[Mike]

Hi Guys, hope ur all good!

I've heard some great stories about buy-to-let, I'd like to jack the job in and be a landlord full-time (i'm getting tired of the 9-5 and the commuting)!

I'll be getting my christmas bonus (at least £2k), i've got two credit cards which have a fair bit of credit on.

So where do i begin, I need to the best way of making money fast, preferably without too much hassle.

I've read that once u get one house it's easy to keep getting more!

So guys what are the basics and what strategy should i adopt?

[Melboy]

Well, Mike my own personal opinion is that you would be entering the arena at the top of the peak or cycle in purchasing a property for BTL.

It can be hard work being a Lanlord and the financial returns are not always as gold plated as you might think.

I know of several Landlord's who have sold up properties and cashed in their capital gain and one of the main reasons for that (apart from a wedge of cash coming their way) is the lack of suitable Tenants or bad experiences.

My advice to anyone who is thinking of embarking into the BTL Market is to do your homework and do it again and again and again. You can quickly spiral into debt if you get it wrong and lose a lot of money in the process.

[Matthew]

I was waiting to see some replies before replying to this.

Personally I don't think you will get very far with £2K and the credit card credit. Most lenders require a 15% deposit, so for a £100K house/flat you're gonna need £15K. Some now require less than this, but the rates will be a lot higher.

I'm not sure where you live but £100K won't get me anywhere in the South east other than a crummy studio flat.

With what seems like the ever increasing property prices, most landlords these days are investing for the capital gain and not the monthly income. Most landlords income initially will just cover the mortgage payments and a bit more. The fact landlords are happy not to make much money from it keeps the rents down and thus it is not very profitable, other than when you sell up (if the prices continue to rise that is!)

Having said that, I have only just started out and found that the only properties which stack up are terraced properties with a lot of bedrooms which can be let as houses of multiple occupancies.

One way of building your portfolio quickly is buying a run down property, doing it up. E.g. Buy a property for £175K, do it up, generally better to do it yourself (as builders are generally too expensive) for as little as possible and then get it revalued. If it has increased in value significantly you get re-mortgage the additional amount. For example:

Buy Property £175K

85% mortage £148.75K

Re-valus property £225K

85% mortgage £191.25

Thus taking out an additional £42.5K which can be invested into another property.

The problem is, it is very hard wrok and time consuming to rennovate a property yourself. It is difficult to find a suitable property. And would you be able to add enough value. I was aided by the rising market, which has rocketed recently in the area I bought. So you need to pick your area carefully.

Not only this, you need to make sure the rental income covers the additional £42.5K mortgage you are taking on.

If you plan to do this, make sure you get a portfolio mortgage to avoid a high standard mortgage rate on the additional £42.5K mortgage.

Interested to see what poeple think your options are!

[Reg]

Mike, I think you'd be a foolish to speculate on an already sky-high market, ESPECIALLY by using credit cards to fund the deposit. Interest rates are likely to be raised again soon, as inflation is growing too quickly.

You're best off putting your spare cash in a cash ISA.

Matthew, personally for me, rental income is as just as important, if not more important than capital growth.

I don't intend to sell my two buy-to-let properties, once I have payed off the repayment mortgages I intend to live off the rent and semi-retire.

[Melboy]

Yes, I should have added that £2000 is not enough start up money and to rack up any debt on a credit card to do what you are hoping to do is heading for a disaster.