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buy outright, or mortgage?


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My mum has managed to sell her house in Spain at long last, and wants to invest the money. She has enough to buy a house in England outright, and wants to let it out so she has some income every month, so that she doesn't accidentally spend all her capital. I have never been a landlord, and although I quite like the idea and am starting to research it, I don't really know enough about it. Do you think it would be a good idea, and is the rental market making money on the whole at the moment?

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It 'could' be that the property market is facing more turbulence in the nearish future.

A train of thought could be that renting in the short term and seeing where things are as the market settles could have advantage.

For example anyone with 200K to buy in late 2007 could today buy something that would would have perhaps cost £250k+ back then, area dependant of course.

No one expects the future price to drop so dramatically but there is possibility of some fall and only very limited possibility of increase, small increase at that.

Actually my thoughts are that any money within the Euro zone will suffer drastic depreciation compared to Asian economies soon enough. Buy in Hong Kong and I'll come and help you decorate.

Bloody good these crystal balls, a bit delicate sitting down though.blink.gif

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At this moment in time with the property market unstable I would invest my Dosh in a savings bond for short term of 6 months to 1 year. Plenty of accounts paying around 3.5% to 4%

The property market is set for a drop of 5% to 10% over the next 12 months and with few properties coming to market and overvaluation by vendors and EA's and a lack of 1st time buyers, job security etc. etc. it all looks a bit lack lustre at the moment.

That's my chrystal ball analysis anyway and I do buy property on a regular basis but for the next 4 months until early 2012.... and to quote the famous phrase.........."I'm Out".


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I can't believe that anyone would make decisions/act on the responses received from an anonymous internet forum.

Its always important to get a balanced view and lets face it, even the experts have been wrong for at least the last 10 years.

Do you think it would be a good idea,......

I think its a great idea provided you buy the right property at the right price and follow all the guidelines/ warnings/ recommendations that exist. My list is at the end.

and is the rental market making money on the whole at the moment?

For some = yes.

For others = no

London & a few other areas are doing exceptionally well. But your profit depends on many factors. The main ones are,.....your agent, your mortgage, your tenant, your skills & knowledge and luck.

Here's my list:

1. Get References.....bank, employer and previous landlord.

2. Take out rent guarantee insurance.....it’s not expensive.

3. Get a home owning guarantor. Carry out reference checks on the guarantor. Give the guarantor a copy of the AST. Make sure the guarantor document is drawn up as a deed.

4. Don't let to people with pets or children......the risk of them giving you problems are big.

5. Don’t let to anyone under 18 (minors). Draw up your own limits….I prefer nobody under 25.

6. Don't let to smokers........you won't get rid of the smell.

7. Don’t do Company lets.

8. Don’t let to anyone on Housing Benefits.

8a. If you do choose to let to applicants on Housing Benefit CHECK that your mortgage & freeholder (if your property is leasehold) allows it.

9. Don't let to anyone who isn't working full time.

10. Inspect properties every 3 months.

11. Only let initially on a 6 month AST.....that way you can both part company after 6 months if you don't get on.

12. Use a reputable Lettings Agent OR one who has been recommended OR do it yourself (only if you know what to do).

13. Meet your tenants personally. Make sure you ask all the right questions and gauge whether they are right for you.

14. Protect the deposit in one of the official schemes.

14a. If you have a dispute with your tenant(s) over deductions from the deposit remember…..you can either go through the DPS adjudication process OR take the tenant to the Small Claims Court for recovery of your losses where you may have a better chance of success.

15. Issue a section 21 notice as soon as the deposit has been protected.

16. Make sure there is a detailed inventory & schedule of condition……signed by both parties.

17. Remember its a business....so avoid emotion & being overly sympathetic to your tenants.

18. Read as much as you can about renting & letting i.e. educate yourself.

19. Don’t let to anyone who doesn’t speak or understand English.

20. Don’t forget that you will need an Energy Performance Certificate (EPC)…….before you market the property.

21. Don’t forget to get an annual Gas Certificate.

22. You are responsible for ensuring anything electrical in the property is safe so consider getting the electrics checked professionally….and any appliances you provide.

23. Try to avoid having your property classified as an HMO……meeting regulations is expensive and time consuming.

24. Make sure all adults living at the property are on the AST & any other documents.

25. Minimize your income tax liability by claiming all the expenses you are entitled to…..most people don’t and therefore pay more tax than they should.

26. If one of the owners is a higher rate tax payer consider splitting the beneficial income other than 50:50 to take advantage of the lower tax payer rate.

27. Keep all capital expenditure receipts/ invoices to minimize CGT liability on disposal.

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