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What is the best location to invest up north looking to get started in BTL.


toby militao

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Hi All,

 

Looking to purchase property up north to rent out as a buy to let, just wondering if anyone can recommend a property hotspot at all ? I have a £100 k deposit to put down and was hopping to divide this up, Currently live in surrey but finding returns on investments not worth while. 

 

Any help would be greatly appreciated. 

 

Thanks 

Toby 

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Hi Toby,

 

Great question! I would avoid hunting out hotspots - if an area is hot, you may have already missed the boat. Most cities in the north have great fundamentals, so I would focus your time and efforts on trying to get a good deal rather than picking an area. However, if you're keen to find out which areas in the UK we’re tipping this year, check out this podcast: http://thepropertyhub.net/where_to_invest_in_2017

 

Cheers,

 

Rob

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HI Rob, 

 

Thanks for you're reply much appreciated, do you think it is much hassle renting out a property if living 4-5 hours away even if it is full managed ? 

 

Also, do you think I would be better investing in flats instead of houses as they are cheaper and also less maintenance ? 

 

Thanks very much Toby 

 

 

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15 hours ago, toby militao said:

do you think it is much hassle renting out a property if living 4-5 hours away even if it is full managed ? 

 

do you think I would be better investing in flats instead of houses as they are cheaper and also less maintenance ? 

 

Hi Toby,

 

I can give some input into these areas.

 

Assuming you have a reliable management company looking after your property then there is no reason why it would be a hassle.  After all, people have holiday lets in different countries and probably lead a reasonably hassle free life. I know people who are from East Anglia and have BTL's in Cornwall, Wales and Scotland and are completely "hands-off" because of the reliable agents (all different agents too I must add).

 

As for investment in flats, this is something I have personal experience of as I have 2 houses and a flat as well as being in the process of buying another flat at the moment.  You're correct in that flats are generally cheaper and easier to maintain, but flats are mostly all leasehold, meaning you will have to pay a monthly or yearly service / ground rent charges.  In the area I have my (soon to be) 2 flats, these charges seem to vary between £250 per year (£21/m) and £1500 per year (£125/m) so as you can see, that's immediately £100/m difference in your income. Plus you need to consider the lease length which can be costly if running low (say under 70 years or so)

 

In addition, flats in my area have a very slow capital increase whereas houses are increasing at a much better rate.  Also, from both my own experience and knowing friends with BTL's, tenants in flats generally have a higher turnover.  Especially if you were to rent to a younger singleton, who will eventually couple up, want a bigger place, etc, move out, whereas with a house, depending on the size, a singleton would be able to move their partner in and have more breathing space as spread over multiple floors.

 

Therefore with regards to a house or flat, you need to look at what you want?  Quick easy money in your account each month with lower initial outlay for a deposit, low maintenance, low interest only mortgage? Then go for a flat, but as above, look at those with low service charges, whereas if you want a longer term profit through capital growth but with a higher rental amount, then a house is probably better value but you will have a higher initial outlay with a larger deposit.

 

I'm not up to date with the podcasts available but I'm sure I've seen the House v Flat, Freehold v Leasehold question in several areas so expect there would be something available to give you a better input than to what I've just put!

 

Good luck though and interested to hear what you decide on!

TPH-Chris-Barnard.jpg

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Hi Chris, 

 

Thanks very much for your reply much appreciated. 

 

Although I am in building trade I can do all works myself, so maybe I would be better with a house, Although, I could buy more property quicker if I was buying flats. 

 

My aim is to replace my salary with btl properties reasonable quickly, so I do think I would be better with flats ?, I can always buy houses later. 

 

Thanks again Toby 

 

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I've had a quiet 10 mins at work so just knocked this up so hopefully it's understandable and remember, this is all estimates but based on 'realtime' figures of my current BTL flat(s).

 

Cash funds available: 100k

 

Looking at flats valued at £65k-70k but using £70k as the top end:

 

£70k > 25% deposit (£17.5k) = £52.5k mortgage

 

Deposit: 4 x £17.5k (25%) = £70k
Solicitors: 4 x £1,500 = £6,000

Stamp: 4 x 3% (£2,100) = £8,400

Mortgage Fees: 4 x £1,000 = £4,000 (App, broker, survey)

 

Initial outlay: 70k + 6k + 8.4k + 4k = £88.4k

Remaining cash as contingency: £11.6k

 

Mortgage details: £52.5k @ 2.94% = 1544/Yr > £129/m (Interest only / 2 year Fixed)

Rent: £525/m 
Agents: £63/m
Service charge: £500/yr > £42/m
Contingency: £75/m per prop

 

In: 525
Out: 129 + 63 + 42 + 75 = £309

 

x 4 properties:
In: 2100
Out: 1236

 

I - O: 864/m > £10,368/Yr

 

There's also room for increase / decrease on the rent and service charges, I've used £525/m for rent and £500 per year for S.charges as my current BTL flat gets £525 for rent and service charge of about £275/y and the new BTL flat I'm buying has tenants currently paying £540/m but it has S.charge of £750/y so have gone in the middle for these.  Also, depending on agents and property being purchased you may be able to get less than £70k purchase price if buying multiple through the same agents or alternatively, you could get a decent property for £67.5 and use the extra towards another for £72.5, etc.

 

Worth noting that the solicitor and mortgage costs are OVER estimates, I used the 2.94% as an example as I was recently offered that mortgage which had fee's of £495 and that inc. the survey, so if you were to get that, the £4k quoted would actually be £2k for the 4. In addition, I recently used the same solicitor for a residential re-mortgage and a new BTL purchase with mortgage and they gave me 20% discount so the BTL mortgage was actually £1050 and even pre-discount lower than the £1,500 I've quoted above so if you were able to use the same solicitors for 4 purchases, I would expect you could achieve atleast a 25% discount (£1.5k overall) making that £4.5k instead of the £6k quoted.  That would add £3.5k to the £11.6 making £15.1k.

 

Also, I've added £75 a month per property basically because I like to always have between 1-1.5k per property 'in the pot' in the event of something bad happening but if you were to keep some of the £11.6 purely for that reason, you wouldn't have the need to save the mentioned £75/m so your profit would be £900 more per property (£3.6k) so your actual profit (before tax) would be nearly £14k at the end of year 1.

 

Depending on what of your original £100k leftovers you use, whether it be £11.6k or £15k available, added to your potential profit of £10.3k or £14k as detailed above, you could have anything between £21k (£10k profit plus £11k contingency) and £29k (£14k profit plus £15k contingency).  This obviously doesn't cater for any tax being paid but hopefully you'll get an idea of the estimates I'm trying to supply.

 

Anyway, as stated in my first sentence, the above are reasonably accurate estimates but even if you were to have £20k in your pot at the end of year 1, that would give you enough for a 5th property in the same kind of area as those above probably pushing yearly income to around £15k (remember tax!).

 

As a final thought, with all of the above, you could potentially make overpayments on say 2 of the 4 in order to get down to a 70% or 65% LTV as come the end of the 2 year fixed, you will be able to remortgage all 4 and the 2 overpaid mortgage would drop to a much better rate and then re-mortgage all again on a mortgage at their respective rates, again making overpayments on the 2 and then at the next point of re-mortgaging, you may be able to release some equity back to the 75% LTV value giving you an extra £10k-£15k per property so £20k-30k but along with the extra 2 years worth of profits you could be back to having £40k - £50k available.

 

Having read it all back, I now wish you good luck! (And that's mainly based on understanding the above!!) :D

TPH-Chris-Barnard.jpg

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  • 2 months later...
  • 6 months later...

Hello Toby,

 

I am actually in a very similar position to yourself. I currently live in the South and I am also looking to invest in a couple of B2L up north, i am also looking into "best" locations.

 

I have been basing my searches around the proposed HS2 line because i am looking for long term growth as well as decent yield in the short term. Hoping to see the "ripple effect" happen to areas that are cheaper to buy in, outside of city centres like; Manchester, Leeds, Sheffield and Liverpool.

 

I notice your last post in here was on 29th Jan, so do let me know how your search has gone or is still going!

 

Kindest,


Elliott

 

 

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On 31 January, 2017 at 1:20 AM, barny2015 said:

 

As a final thought, with all of the above, you could potentially make overpayments on say 2 of the 4 in order to get down to a 70% or 65% LTV as come the end of the 2 year fixed, you will be able to remortgage all 4 and the 2 overpaid mortgage would drop to a much better rate and then re-mortgage all again on a mortgage at their respective rates, again making overpayments on the 2 and then at the next point of re-mortgaging, you may be able to release some equity back to the 75% LTV value giving you an extra £10k-£15k per property so £20k-30k but along with the extra 2 years worth of profits you could be back to having £40k - £50k available.

 

 

Hi Barney,

 

Don't know if you're active on here, but I read your post with interest! Was wondering if you or someone else could explain the rationale behind overpaying on your mortgage rather than just using your excess cash to go towards your pot?

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  • 4 weeks later...

I think this point was covered in a recent Ask R&R and it was all about cashflow and the eventual owenership of the property.  All depends on what you are planning to do with the incoming rent I guess. Just beware of making sure you have enough to pay any tax bills!

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