Buy to Let - Please help!

[dingram041]

This week, I have just invested in my first property investment. I thought it was too good to miss out, but am not experienced, but am in a position to learn as I go along. 2 years ago, I was fortunate to win a sum of money to pay off my mortgage. My house is worth £210,000. Was going to upgrade but thought otherwise when I saw a house that I have now bought for £124,000 (definitely worth between £135,000 and £140,000 - close to me and good area). Because I paid off my house, I have had to remortgage for 15% desposit which comes to interest only payments of £96 (5 years term). The BTL mortgage is interest only £507 pcm (again 5 years term) which comes to £603pcm and I can rent it out for between £550 and £580. Is this good? At the moment these are principal only as I'm signing this week. I know this may sound silly as I don't know how to be a landlord but it was just too good for me to miss out on, I felt anyway??? Can anyone tell me if as a BTL investment I have made the right choices with fixed terms etc.. Any advice would be well received. To do the property up, I have a budget of £700 as it only needs a new bathroom and bits and pieces. I have no debt at all (well........didn't have!). The solicitors will cost just under £950. The biggest question is should I have just bought and sold or do what I have done and see how it goes for the next 5 years??? (thought 5 years would let me see if house prices contine on upward trend). Also with being a home owner, could I have got a better deal remortgaging and on the BTL Mortgage. Thank You all!

[shabir11]

Hi,
whilst before you had no debt at all, now you will be paying out a net of around £35 per month. That is if you fully let the property. However, you do need to factor in rental agency fees, which could reduce your rental by about 15% (depending on what sort of management you do with the agency). If you do all the rental managing yourself, do factor in your advertisement costs and the costs of your time. Also, factor in council tax bills when the property is empty, getting safety certifications for gas and electrics (yearly and three yearly respectively). Having done all that, we now need to see whether the prices will stay steady or rise. At the moment, they are just steady (depending on the area you are in ofcourse). Five years down the line, they may or may not rise. I think the rise is not going to above inflation rate if any. I also think that properties you often think are worth more than you paid for are infact not so. They are just about right, and will be only be worth more than you think they are in a rising market. So, all in all, I dont think you have made the best possible decision, but neither an awful one. You have taken on a headache which may or may not be worthwhile in the end. However, you havent made a disastrous decision either (unless there is a long term crash in house prices). If you do lose on this one, it will only be about 10-15% of your investment at the moment by my rekoning. If all goes well though, you could end up getting around 30-40% return in 5 years.