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40k to invest, who to talk to what to do with it??..


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hi everyone

 

i have been saving up, and now have £40,000 to invest into a property to aim off getting me back £500 a month PROFIT on a BTL

im not sure if this is relistic or not, doing my calculations, i dont seem far off lol

 

is there anyone on here, respected and trusted who i can talk to regarding this. im from the south east, so im assuming i be heading up north with this

 

any ideas or suggestions would be fantasic

 

thanks guys

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Hello Danny,

 

Hope you are well. This seems like a possible option for you there are places in the Manchester area where you will be able to achieve that profit.

 

Are you looking to incorporate this property into a limited company out of curiosity? 

 

Feel free to contact me if you would like any more information.

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Hi Danny,

Based on a 40k lump sum you'd have to achieve a 15% ROI to be achieving £500 pcm

To achieve a 15% ROI you'll need to be looking at student & HMO properties where the yields are much higher

Example deal where a 15% ROI could be achieved (I'm looking at investing in this deal myself at the minute)

4 bedroom student terraced house in northern city

£140,000 asking price

£17,160 gross rents

75% LTV mortgage with a 4.5% interest rate

12% of rents on letting agents fees (10% + VAT)

10% of rents as a repairs contingency fund

Based on no voids as the £17,160 above represents 11 months of the year tenanted

£2,170 pa on bills (inc all bills, wifi etc - no council tax for students)

£300 insurance pa

Total investment of £38,000 (deposit, legals, mortgage arrangement etc)

Net profit of £6,189.80

Monthly net profit of £515.82

ROI 16.3%

These kind of ROI's can typically be achievable based on my local areas in Hull, Doncaster, Lincoln, Stoke on Trent, Newcastle etc.

ROI can be even higher if self managed but from a distance you would need to use a lettings agent.

These types of returns are rarely achievable on single lets based on where I've been looking. I think it's definitely possible for you to achieve your goal - you may just have to target northern cities and multi-let opportunities to achieve it.

Luke

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Hi Danny,

 

Not using any specialized people or agents. I'm just starting out in property as well so don't just trust my word for it but based on my experience so far I think it's just about knowing the areas in depth. 

 

I've set up an alert on rightmove so that any time a 3+ bed property comes on the market in the student area that I'm looking at I get an alert. I've researched the area quite a bit so I know roughly which areas you can get the cheaper properties with the higher yields and which streets to avoid. I've also got some good contacts at the estate agents and letting agents who are giving advice on specifics streets & properties etc.

 

My advice would be picking an area get to know it well by researching online & by speaking to lettings agents and estate agents over the phone. Then when good student/HMO properties come on the market spend a couple of weekends visiting the area, doing viewings, speaking first hand to lettings agents, speaking to local investors if possible and then look to make offers. The best contacts I've found when looking for properties are local lettings agents because they're not just trying to get commission for selling properties. Also if you find a good local lettings agent you'll have confidence when you are managing the property from a distance. If you have any family/friends in northern cities I'd suggest starting your search there so that it gives an incentive to come and visit the area and they may be able to help you out if anything goes wrong with the property that requires immediate attention.

 

It's important that the area is a good choice in the first place for your goals. (e.g. Grimsby, Bradford, Hull, Stoke, Doncaster etc. all have some very decent yields)

 

Also - for mortgages it's appearing a lot easier to get a mortgage at a good rate (lower interest rate = higher ROI) for 3/4 bed properties as opposed to 6+ bed properties that require a HMO license.

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Hey Danny,

 

I started with a similar amount, although I JV’d to get an additional £7.5k in order to complete a refurb.

 

Assuming I have nil voids, after insurance, mortgage, 10% maintenance, block fees, letting management fees I should clear £440 a month.

 

However in reality, you likely won’t make anything in your first year as your maintenance is likely to be bigger than 10% and you’ll discover fees you must pay you had no idea actually existed (in my opinion).

 

I’ve heard £500 PM thrown around when talking about HMO’s but I’ve not done one myself or properly delved into a profit and loss account of one either.

 

Keep in mind on a standard buy-2-let you’ll be spending about £2k on buying costs and you’ll want an emergency fund of at least £3,900 (loosely covers the cost of a new boiler, new tenant fees and 3 months voids) plus at least £1,000 in minor property fixes so with £33,100 to spend you’ll likely be looking at a purchase price of around £135,000.

 

This is likely a little low for an HMO, so I’d look at a single let in a good location and/or serviced accommodation (this is what I’d do if I did it again, instead I purchased a flat and a house but wouldn’t know what I know now if I hadn’t!).

 

Whether you’ll achieve £500 per month comes down to the rental values in the area of your choosing, time to pull out the spreadsheets!

 

Just make sure you don’t skimp on the emergency fund you need this in cash (not stocks or credit card debt), I made this mistake and only now am beginning to claw my savings back after a boiler and a new roof needed replacing in my first month!

 

Hope that helps,

 

Sam

Aged 20-30? Learn how to grow your wealth at Money Nest.

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"It's important that the area is a good choice in the first place for your goals. (e.g. Grimsby, Bradford, Hull, Stoke, Doncaster etc. all have some very decent yields)"

 

 

Hi Luke,

 

I am from Grimsby originally but now live down in Kent. I was surprised to see Grimsby make your list of good places from an investor perspective, but am very happy to be proved wrong!?

 

I would be interested to know if you have invested there or done any ROI analysis on potential investments there that you would be happy to share? I know the house prices are cheap, but whenever I have looked, the rents have been quite low as well. I have stopped looking there in the end as, in my view, even if the % ROI was high in these cheaper towns, the actual cash flow is still fairly low that the risk of major maintenance could easily wipe out a couple of years profit. A boiler might cost £3.5k whether in a £50k terrace in Grimsby or a £150k terrace elsewhere. However, I guess a way to adjust for this is to increase the % Maintenance allowance in your ROI analysis on properties under a certain value.

 

- David.

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Hello Danny,

 

Hope you are well. This seems like a possible option for you there are places in the Manchester area where you will be able to achieve that profit.

 

Are you looking to incorporate this property into a limited company out of curiosity? 

 

Feel free to contact me if you would like any more information.

 

Hi, what are the benefits of incorporating into a limited company with the first property?

The Liverpool Meetup takes place on the first Thursday of every month, find out more here

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Hi Danny,

 

The breakdown lmason8 gave you was excellent.

 

I'll give you another option to think about: save another 10k or so and then buy a cheap flat outright. There are areas in Manchester, Liverpool, Leeds where you can buy a slightly unloved flat for 50k that will rent for 450-500 pcm after a very light refresh.

 

The capital growth will probably be less than a larger property, but then rises in interest rates won't affect you, nor will tax changes surrounding interest relief.

 

Another upside would be less maintenance, and less work in general. In fact, you could self manage saving yourself 10% as workload from a small flat will likely be low.

 

If you get rent guarantee insurance and a good tenant you are well on your way to your first 500 in profit per month! My first property was similar to the above, pm me if you want more info about it.

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Hello DavidH82,

I haven't done proper research into Grimsby but just used it as an example.

I've just done a quick right move search on Grimsby for properties with more than 5 bedrooms that could be used as HMO's

An example I've just seen is a 6 bed HMO that's on the market for £144,950. Which based on the description is apparently achieving £24,000 p/a when fully let which is a 16.5% gross yield!!!

Another one is on the market (5 bedrooms) for £100,000 for a £12,000 p/a gross yield.

With a mortgage these properties could give >15% ROI

The assumptions here are that they're fully let. But if you're getting £24,000 income per annum even if the boiler breaks down and there are repairs you could still achieve >15% ROI

Obviously would have to do a lot more due diligence into the area/properties but just used these as examples.

Luke

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Hi Danny,

I live in Newcastle after many years of being in London but have rental properties in London and up here. I'm happy to assist you if you decide to go Geordie Shore :-)

Due to my business I have loads of contacts with estate agents who specialise in the lower end of the market and cheap places but also I know the area very well and also the local rental market.

The market here has been pretty flat for past ten years though with the exception of certain pockets here. But if you're more interested in income than capital growth that's not an issue.

Hope that helps a bit.

Natalie

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Hi Danny,

 

I live in Hull and have just started getting into property investment, hoping to buy my first BTL in the very near future. I've viewed 20+ properties so far this month with the majority giving a potential gross yield of between 7 and 9%. My strategy is to buy a property that needs refurbishment, complete the refurb and then re-mortgage 6 months later releasing as much cash as possible. I'm pretty sure with your 40K you could end up with 4-8 of these properties within a couple of years using this strategy, giving a return of £125 net profit per property per month so anywhere from £500 - £1000 per month. If your interested in having a chat about it reply on here or drop me an email at (EMAIL ADDRESS REMOVED). I also have around 40K of capital to work with.

 

Luke

Edited by Vicky Nunes
Email address removed
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hi thanks again to everyone for there help, ideas and replys, if there is any property sourcers in the northern cities, id love to hear from some of you, as im looking to buy below market value in northern cities and surrounding

 

thanks guys

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Hi Danny,

I posted here yesterday but it hasn't shown up for some reason. I live in Hull and am hoping to buy my first BTL very soon, viewed about 20 properties this month so getting a good feel for price and potential yields, between 7 and 9% seems very achievable. Once I get a purchase secured I'll let you know the final numbers, could look at some sort of joint venture in the future if it suits.

Luke

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