Jump to content

A newbie in need of advice.


Recommended Posts

Hi John here, 

 

I'm looking for a bit of advice regarding property in general to see if its something which would make financial sense. I've looked at it in the past however with lack of funds it hasn't been viable. 

 

Recently I have come into some inheritance due to a family member passing away and instead of spending it, I would like to invest it into something that will continue to grow. 

 

Little about me - 

 

24 Years old, Salary 20-25k, Lump Sum £125k. 

 

What I'm Looking for -

 

- Should I invest in a house or flat?, I understand that houses are usually less and incur no service / ground rent charges? however flats seem more desirable. 

- For my first investment, what should I look at buying? any Tips/Tricks?

- Is a Buy-to-Let mortgage a better idea or should I buy it outright?

- Should I go for fully Managed or rent only with an estate agent (any estate agent recommendations in the north west would be great)

 

Thanks for you time. 

John Skidmore

Director

Koselig Co.

Link to post

Hi John,

 

I am in similar boat to you but have done quite a lot of research, below is what I have gathered based on books/forums/online resources. 

 

If you want to maximise your returns you are better off using it to purchase a couple of properties on BTL interest only mortgages, this seems to be a general rule of thumb unless you have huge capital to invest if you want to expand. This would allow you to purchase 2x 200k properties (with a 25% deposit) plus have cash for renovations if needed. You'll want to make sure the expected monthly rental income (calculate it at 11 months allowing 1 month for empty property) meets your requirements. When looking at mortgage interest payments, use a high rate of 5-6% in your calculations, rates are far lower than this now but they won't stay low forever and if this changes you don't want to be in trouble. There are loads of resources on the forums here about all the costs involved, just make sure you account for all of them and when you have the total costs, see if the expected returns still make sense. I have put an example below:

 

200k House

50k Personal Cash deposit

150k Mortgage

 

1.5k legal feees

10k renovations/other

 

Total personal cash investment 61.5k

 

Rental income: 1500 pcm

Mortgage interest: 750 pcm

Maintenance: 100 pcm

 

Profit: 650 pcm

 

Now, even if in the above example we deduct 1 months rent to account for empty property, your return on investment is still over 10%. If you buy a property out right you are extremely unlikely to find that level of return, rental yields average between 3-7% with 7% being considered very decent.

 

 

I am planning to target HMO market, it is more work but generally you get better returns and I'm looking to stop working in my day job. For single lets, if HMO isn't for you, flats generally offer better returns but it's all about paying the right price and finding the right properties. 

 

Good luck to both of us :)

 

Cheers

Link to post

I actually should also say (as per advice I have been given) focus on your end goal. What do you want to achieve? Do you want to do this full time or just subsidise your income? Are you looking to build capital quickly which may increase risk and effort or slowly build capital over time? 

 

If you know the answers to these questions, it will quickly close off some options and help you narrow it down a bit.

Link to post
  • 2 weeks later...

Hi John,

 

I have to agree with Richard, focus on your end goal and choose whichever method aligns with that goal.

 

Something one of my clients once said to me always pops in my head whenever anyone asks for advice;

 

'If you have 1 property, with 1 tenant and that tenant leaves, you've lost 100% of your income. If you have 2 properties and 1 tenant leaves, you've only lost 50%. Always leverage and always buy bulk.'

 

It seems like common sense, and you might read this and think 'Yeah nice one captain obvious', but I just think it might be worth sharing. 

Link to post
On 07/03/2018 at 5:56 PM, arua prop said:

Hi John here, 

 

I'm looking for a bit of advice regarding property in general to see if its something which would make financial sense. I've looked at it in the past however with lack of funds it hasn't been viable. 

 

Recently I have come into some inheritance due to a family member passing away and instead of spending it, I would like to invest it into something that will continue to grow. 

 

Little about me - 

 

24 Years old, Salary 20-25k, Lump Sum £125k. 

 

What I'm Looking for -

 

- Should I invest in a house or flat?, I understand that houses are usually less and incur no service / ground rent charges? however flats seem more desirable. 

- For my first investment, what should I look at buying? any Tips/Tricks?

- Is a Buy-to-Let mortgage a better idea or should I buy it outright?

- Should I go for fully Managed or rent only with an estate agent (any estate agent recommendations in the north west would be great)

 

Thanks for you time. 

 

What area are you looking to work in John?  I see you mention the NW, are you local to up here?

 

With regards to getting started, I would look at buying 1 using a BTL mortgage so you can wet your feet and learn.  I just have 1 rental at the moment (Unplanned) and it has been a great learning experience so far.  With the funds that you mention above you could do really well.  What you need to work out are what your goals are which has already been mentioned, and also once the £125k pot has been spent on "deposits" etc, what is your plan going to be to fund your following deposits etc?  I often read about people who have gone and invested their capital, but haven't quite thought about how to generate enough money to fund the following BTL's etc.

 

I would highly recommend that you continue to work through the courses that the Rob's have on this site, and continue speaking to other hubbers.

 

Goo luck with everything!

 

 

Darren

 

www.fmp-investments.com

www.f-m-p.uk

property@f-m-p.uk

 

Link to post
  • 2 months later...

Sorry chaps, I'm finishing my Masters dissertation at the moment and its taken up quite a lot of my time. 

 

Thanks all for the advice though! I am going to continue to read/learn when this is finished and look at my options. do you think a mortgage advisor would be worth the money? 

 

Buy-to-let seems a viable option, but again I don't want to rush it and get into troubles. 

 

I'm currently in the Yorkshire area, if that helps. 

 

John

John Skidmore

Director

Koselig Co.

Link to post

As others have said, your goals are critical, because they impact everything else.

For instance, is this just a sideline and you intend to carry on working? Look into section 24 mortgage tax relief and consider what it will mean to you - I'm guessing you're expecting your normal salary to increase, so you could end up with a very big tax bill. You can get around that by setting up a ltd company, but probably a better bet if you don't want the monthly income - either keep the profits in to grow the business, or move profits into a pension, both of which are very long term strategies at your age.

Do you already own a residential property? If not, you may struggle to get a mortgage, but there are ways around that.

First thing is to carry on doing what you're currently doing - learning. I'd really recommend the Property Hub podcast and Rob's book to give you a good grounding.

2nd, get looking on Rightmove. It'll probably take you months to find something anyway and the more you look, the more you'll learn. You mentioned the north west, but that's a very big area. Find out how to narrow it down (and maybe consider something more local in areas you know). Find out about apartment and house prices and the likely rents for each.

3 Mortgage broker - absolutely speak to one. There's a few on here and I'm sure you can find other good ones, just make sure they understand investment, not just residential. Mine has been great to help with the occasional quick question about whether something is going to be easy to mortgage.

4 unless you want another job, use an agent. If you do want to do it yourself, you really need to be local until you get very experienced. It will cost you about 12% of the rent, but it makes it a much easier experience.

There's 101 more things to consider as well, so the more you learn, the more you'll realise you don't know, but don't let that put you off. Immerse yourself for a couple of months. If you don't enjoy it, stop and invest the money elsewhere (but invest it, don't spend it - try the meaningful money podcast for ideas)

Link to post
  • 1 month later...
On 6/8/2018 at 1:01 AM, dino v said:

As others have said, your goals are critical, because they impact everything else.

For instance, is this just a sideline and you intend to carry on working? Look into section 24 mortgage tax relief and consider what it will mean to you - I'm guessing you're expecting your normal salary to increase, so you could end up with a very big tax bill. You can get around that by setting up a ltd company, but probably a better bet if you don't want the monthly income - either keep the profits in to grow the business, or move profits into a pension, both of which are very long term strategies at your age.

Do you already own a residential property? If not, you may struggle to get a mortgage, but there are ways around that.

First thing is to carry on doing what you're currently doing - learning. I'd really recommend the Property Hub podcast and Rob's book to give you a good grounding.

2nd, get looking on Rightmove. It'll probably take you months to find something anyway and the more you look, the more you'll learn. You mentioned the north west, but that's a very big area. Find out how to narrow it down (and maybe consider something more local in areas you know). Find out about apartment and house prices and the likely rents for each.

3 Mortgage broker - absolutely speak to one. There's a few on here and I'm sure you can find other good ones, just make sure they understand investment, not just residential. Mine has been great to help with the occasional quick question about whether something is going to be easy to mortgage.

4 unless you want another job, use an agent. If you do want to do it yourself, you really need to be local until you get very experienced. It will cost you about 12% of the rent, but it makes it a much easier experience.

There's 101 more things to consider as well, so the more you learn, the more you'll realise you don't know, but don't let that put you off. Immerse yourself for a couple of months. If you don't enjoy it, stop and invest the money elsewhere (but invest it, don't spend it - try the meaningful money podcast for ideas)

 

Thank you for that, I've decided to keep the property I was left rather than sell and buy elsewhere. I still have a lot of learning to do, however I have got it managed with an agent at 12% inc vat. fully managed. 

about 2 months away from it being rentable (few things here any there) and then it'll be in there hands. I've looked at insurances and home-care covers, any there any recommendations? 

 

Thanks, 

 

John

John Skidmore

Director

Koselig Co.

Link to post

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...