shamsingh04 Posted June 18, 2007 Report Share Posted June 18, 2007 Hi All (Simon/Matthew) I have decided to go ahead with the 3 storey house and only have four people renting a room including myself. The house is 5 mins from train station 10 min walk to city centre area is populated with students and yong profs close to bars pubs etc. If the house was 3 streets away it would be worth double. But the area behind has allways had a reputation of being rough. The house is priced at £220000 I will be putting down a £60000 deposit. Should be able to get Between £60-£70 per room per week. Let me know what you think Thanks Sham Link to comment Share on other sites More sharing options...
J4L Posted June 18, 2007 Report Share Posted June 18, 2007 Hi Sham, apologies for hijacking your post because you addressed it to Simon / Matthew, I think going on the interest rates at the moment you probably will have covered the mortgage with just these 3 tenants and should comfortably be able to live rent free for a while. Can I ask how many more rooms there are?? Personally I wouldn't be putting all my eggs in one basket and would be splitting my 60k deposit over a few properties rather than just keeping them under one roof (excuse the pun) Link to comment Share on other sites More sharing options...
Matthew Posted June 18, 2007 Report Share Posted June 18, 2007 Sounds good, but as J4L says if it were me I would invest as little as possible on this one and then get more buy-to-lets. Not sure of your circumstances on wages etc, but some lenders take the rental income of the 3 rooms into consideration, you may be able to put down a very small deposit 5% maybe (11K) and then could even buy another 2 similar properties on 10% loan to value = 22K on each, total deposits = 55K, you'll then need another 10K or so in total for the three for solicitors/stamp duty. But choose the right properties and you could be not only rent free, but making a descent income. In the last year I have bought my first two properties, one for 178K another for 195K and should make between 15 to 18K per year from those in total (after mortgage and maint etc, but before tax). Depending on your area, you may be able to beat that. Gumtree is the best site for advertising, try spareroom and easyroomate will be good for the one you will be living in. Gumtree free and gets loadsa hits, advice, repost it at least a few times a day to keep it at the top. The other internet sites may charge up to 10pound per week. Advertise in local paper(s), probably 20 pounds a time. Remember every week that goes by you are losing 70 pound per room, so bear that in mind when advertising and don't delay, it may feel annoying, but it worth it. Remember, if you fix for 3 years say, and you are getting good returns, it doesn't matter what interest rates or house prices are doing. If you choose well, it should never make sense to sell. Let me know if you want any advice, also don't ignore HMO's, just as they need to be licenced, they can be very profitable and 600 pounds for the license every 5 years is not much if it is making you a lot of money. Ciao! Link to comment Share on other sites More sharing options...
lauralivesartnouveau Posted June 18, 2007 Report Share Posted June 18, 2007 Hi Your braver than me I couldent live with my tenants I used to have a lodger before I was married around 13 years ago and it just did not work for me If I were you I would move out after setting up and leave them to it. Oliver Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted June 18, 2007 Report Share Posted June 18, 2007 Evening All My Thoughts ............ If i had 60K burning a hole in my pocket i would first get me calculator and a pencil and a piece of paper out ... With the knowledge that now we can get get 90% LTV fairly easily on BTL mort and 95% on a residential (home mort) This means ,as Mat and Gareth point out, that you could use your "deposit" to control a far larger asset value if you used BTL then 60k as deposit means you can "buy" a prop or several props to the value of £600k if you use it as residential then in theory you could borrow upto 1.2 million. !!! Now if you were to do this - consider JUST the equity growth on the prop(s) at lets say 5% (it has been running far higher than this - as you will be aware!) On 220k this will give you 11K On 600k this will give you 30K (your money "back" in 2 years - to do it again- hopefully) As Mat points out there are other "fees" to consider so prob 50k with 10K for sol stamp duty etc So 500K giving 25k @5% growth. Current proposal is 220k which i assume you will have on a residential, not BTL mort, at around 5% int so paying approx 8k on 160k - £666 per month(interest only) So at the end of the year you have 11K Eq growth rental profit (3x65x52)-(12x666)=10140-8000=2140 total £13140 Now consider "the other way" rental profit is going to very much depend on what "other props you buy!" i agreeded a purchase of a prop on friday just gone for 220k -2 flts ,2bed & 3Bed in one blding-rents will be 650 and 800 for flts (tot 1450pcm) giving a net profit after mort of (1450rx12)-(885mx12)=6780 If you had 2 of these props then 440k spent to return 13560 rp + 22K eq growth=35560 so would you rather 13k or nearly 3 times that 35K in just 1 year ? Good news is we havent spent all the deposit here only 10% of 220+220ie 44K okay fees will take it to around 50 K Now use the remaining 10k @ 5% dep on res mort to buy a prop at 200k a 4 let maybe (dont know where you live or prices !)(excess amount covered by ccards!) Now 1 room for you and let 3 gives Eq grth @5% 10k (money back !!) rent profit (65x3x52)-(791 x12)= 10140-9492=648 (mort 5%of 190k /12)(and you living there for free) So total with 2 btl plus home Eq 32k rent 13560+648=14208 SO 46208 after first year as opposed to the 13140 you are considering Question is " which would you prefer ?" If someone offered me a 33K bonus every year for doing things slightly differently i would have to consider it very carefully!! The other option to be explored is to investigate a 1.2 million prop with 60k(5%) deposit (put sol fee and stamp duty on cc card- see my other posts!) buy yourself an old vicarage or nursing home or nice large prop, live there and fill it with lodgers ! Eq growth @ 5% = £60k per year, rent ----depends on lodgers and rent Note ; unless you have a very well paid job you will almost certainly have to do this one with a self cert mortgage ! GOOD NEWS With a 60k starting fund you are in a much more powerful starting position than i was and probably most people on here ! so yes the above can be done and with that sort of money and pretty quickly - then just keep doing it i started with 20 k debt then got 20 k on a credit card at 0% for 6 months and within 6 years my portfolio had gone from zero to 5.5 million today! do i possess any secret powers .........Nope! just apply the above over and over.....ON THE RIGHT PROPERTIES and you will learn as you earn................... Apologies for long winded round the trees post - i is knackered tonight !!! Let us know what you decide to do ... Simon Ps same as Oliver ..i wouldn't be living there !! maybe 10 years ago but not now..........! Link to comment Share on other sites More sharing options...
lauralivesartnouveau Posted June 20, 2007 Report Share Posted June 20, 2007 Evening All My Thoughts ............ If i had 60K burning a hole in my pocket i would first get me calculator and a pencil and a piece of paper out ... With the knowledge that now we can get get 90% LTV fairly easily on BTL mort and 95% on a residential (home mort) This means ,as Mat and Gareth point out, that you could use your "deposit" to control a far larger asset value if you used BTL then 60k as deposit means you can "buy" a prop or several props to the value of £600k if you use it as residential then in theory you could borrow upto 1.2 million. !!! Now if you were to do this - consider JUST the equity growth on the prop(s) at lets say 5% (it has been running far higher than this - as you will be aware!) On 220k this will give you 11K On 600k this will give you 30K (your money "back" in 2 years - to do it again- hopefully) As Mat points out there are other "fees" to consider so prob 50k with 10K for sol stamp duty etc So 500K giving 25k @5% growth. Current proposal is 220k which i assume you will have on a residential, not BTL mort, at around 5% int so paying approx 8k on 160k - £666 per month(interest only) So at the end of the year you have 11K Eq growth rental profit (3x65x52)-(12x666)=10140-8000=2140 total £13140 Now consider "the other way" rental profit is going to very much depend on what "other props you buy!" i agreeded a purchase of a prop on friday just gone for 220k -2 flts ,2bed & 3Bed in one blding-rents will be 650 and 800 for flts (tot 1450pcm) giving a net profit after mort of (1450rx12)-(885mx12)=6780 If you had 2 of these props then 440k spent to return 13560 rp + 22K eq growth=35560 so would you rather 13k or nearly 3 times that 35K in just 1 year ? Good news is we havent spent all the deposit here only 10% of 220+220ie 44K okay fees will take it to around 50 K Now use the remaining 10k @ 5% dep on res mort to buy a prop at 200k a 4 let maybe (dont know where you live or prices !)(excess amount covered by ccards!) Now 1 room for you and let 3 gives Eq grth @5% 10k (money back !!) rent profit (65x3x52)-(791 x12)= 10140-9492=648 (mort 5%of 190k /12)(and you living there for free) So total with 2 btl plus home Eq 32k rent 13560+648=14208 SO 46208 after first year as opposed to the 13140 you are considering Question is " which would you prefer ?" If someone offered me a 33K bonus every year for doing things slightly differently i would have to consider it very carefully!! The other option to be explored is to investigate a 1.2 million prop with 60k(5%) deposit (put sol fee and stamp duty on cc card- see my other posts!) buy yourself an old vicarage or nursing home or nice large prop, live there and fill it with lodgers ! Eq growth @ 5% = £60k per year, rent ----depends on lodgers and rent Note ; unless you have a very well paid job you will almost certainly have to do this one with a self cert mortgage ! GOOD NEWS With a 60k starting fund you are in a much more powerful starting position than i was and probably most people on here ! so yes the above can be done and with that sort of money and pretty quickly - then just keep doing it i started with 20 k debt then got 20 k on a credit card at 0% for 6 months and within 6 years my portfolio had gone from zero to 5.5 million today! do i possess any secret powers .........Nope! just apply the above over and over.....ON THE RIGHT PROPERTIES and you will learn as you earn................... Apologies for long winded round the trees post - i is knackered tonight !!! Let us know what you decide to do ... Simon Ps same as Oliver ..i wouldn't be living there !! maybe 10 years ago but not now..........! Hi Simon Its worth noting that a loan of over a million will cost over £5k per month to service. Oliver Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted June 20, 2007 Report Share Posted June 20, 2007 Agreed !! would only work on a large prop with "lots" of lodgers!! Simon Link to comment Share on other sites More sharing options...
shamsingh04 Posted June 22, 2007 Author Report Share Posted June 22, 2007 Hi All Thank you again for the excellent advice Lots to take in but have now decided not to sell my own house but to let it out. Curently have 60k left on my mortgage will take out 10% for the deposit on the new one. One of you said that living with your tenants is a no no I agree but it will only be short term 1yr maybe in that time i will convert the basement and add an extra shower. Also get it to HMO standard. Three of my friends are going travelling in 12mths so they will be my lodgers to start. It worked out well for me because my friends all went off to uni i didnt i bought a house and have been living and renting to my friends for sixyrs. They came out with tons of dept and cant afford to buy and I came out as a qualified Gas man with a house at 18. Next year i will buy a house with my girlfriend. Again thank you let me know what you think Cheers Sham Link to comment Share on other sites More sharing options...
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