Buy to Let starting out – Families DSS Student HMO?

Reply to the comment left by "Steven Tennant" at "28/03/2016 - 17:20":

Hi Steven

Yes I know Stewart, he has been there since before I even started work there, but I do not know the others. I'm really glad that their scheme is working well now, as I thought the HB change to the 30th percentile would have caused them a lot of problems attracting landlords, as it is not a leasing scheme so if tenants don't pay (or HB stops) then there is no income for the landlord. Am I right in thinking it is a tenant finding scheme, with a deposit guarantee, and a bit of help sorting out the Housing Benefit claims? - I've not contacted them for about 4 years so perhaps things have changed.

When I worked there (2010), they were only allowed to refer families that were statutorily homeless, so that excluded the thousands on the council waiting list, or other families in housing need, and limited the referrals to those families to whom the council had a legal duty to re-house. As most of these families knew that the Council had a legal duty to re-house them, they usually refused private rented accommodation preferring to remain in emergency accommodation until they were offered a council house. - Perhaps that option has been removed.

Why are you moving the properties over to charities on company lets, i.e. rent to rent schemes? I can think of many reasons for doing this (hence why I run a "not for profit" rent to rent scheme), but I wonder why you have chosen this as your preferred letting option?

Reply to the comment left by "Gary Dully" at "28/03/2016 - 11:32":

I wholly agree with your sentiments Gary, I used to call it DSS in the day don't go near, Capitol appreciation i think we have seen the best part of that for several yrs to come now, low inflation isn't going to help either, I have always put rent yield at the top of my priorities and like you say any increase in value is a bonus, for me i took the long term view.

You need to do a lot of research. 'Better' areas tend to have lower returns but less hassle and voids. Hopefully your friend can help you work out what is in demand. Don't start with an HMO and avoid LHA - too many problems if you need to evict. Good luck but do get some education first.

Well, I have no idea how my post on another forum ended up here, I stumbled across it doing my research!

Firstly thank you all for your replies. Since my original post, I have done a significant amount of research into this, including reading tenant forums to get a feel for the other side of the business.

I have already concluded the DSS and HMOs are not going to happen. The former is a veritable minefield, the second not something I would look at being a novice. I am looking at properties in South Yorkshire, and moving to the Dales, so not too far away, but a reasonable distance.

The idea of speaking with local letting agents to find out demand is a good idea, as that will give a better idea of location as well as property type, although i am veering towards 2/3 bedroom semis.

Whether or not to use a letting agent is a problem I need to solve. Being a novice, i am thinking it would be wise, but the number of incompetent or bordering on criminal agents out there is giving me cause for concern. Closer to starting out, i will try to get feedback on forums and do more due diligence on specific agents, but i think I would be unwise to start off on my own.

Flipping is still an option, but i have not looked into this to any real depth. I have a retired builder who would be prepared to view with me, and also knows the good plumbers, electricians etc. that I would require.

The research has kept me very busy, and I will not even be starting for several months.

Oh, two hard fast rules I have learned.

Never let to friends
Manage the deposit yourself.

Hi Stephen

Looks like you've certainly had plenty of 'two pennyworth' views on here! Perhaps I may add my own, seeing as you are still yet to 'make a move', as it were.

The first question I always ask clients is 'what would you like to ultimately achieve?' This goes both for revenue created as well as lifestyle. Other contributors have rightly suggested that you need to think about how much input you want to have in your business, as well as the more usual financial considerations.

It is really good to see you taking your time to think about what you are doing rather than rushing in headlong...

In my view, you need to have a clear understanding of how much income you'd like to create within, say 3-5 years, and how much time input you want to have, both building and running your business. It seems you have already narrowed down the options to your preferences based on the research you have currently done. You may find this article I wrote (a couple of years back now) helpful in terms of hitting what I call the 'sweet spot'. Hope it helps. 🙂

http://www.martinco.com/news/2014/04/29/how-to-hit-the-investing-sweet-spot/#.VvrnsPB4WK0

Reply to the comment left by "Hazel de Kloe" at "29/03/2016 - 21:49":

Hi Hazel and thanks, I have now read it.

I am looking to invest in a Yorkshire market town that is undergoing major regeneration. it has already had some of this, with a new transport hub and improved rail and bus services to nearby cities, with more planned this year and next.

I look at how long properties are on the market, both to sell and rent. I look at location relevant to the market I wish to attract. I am looking at yields of around 8% which are marginally below the yields currently available to give me a conservative estimate of what the actual yields will be.

Capital appreciation is not an immediate concern, but it is in the long term, and the regeneration of the area will help in this.

I intend to ensure properties are of a high standard, without being luxurious as this is not my target market, i am aiming for £80-£120k purchase price.

I am also looking into commercial renting, but i think that would be better served through an investment vehicle rather than directly.

I hace been involved in property for a long time and own a substantial property portfolio. I honestly can not wait for the day when I have disposed of the whole lot and have a decent capital sum to invest elsewhere for alternative income. My advice is don't get involved in property, especially residential property. If you are still working why not invest up to 100% of your income each year into a pension from your £460k lump sum and get tax relief. Hold a balanced portfolio of stocks bonds and property funds etc and take a moderate return of 5-6% per year free from tax. Withdraw the funds when you stop working, pay your taxes and enjoy your life. Forget dealing with all the agrovation that property brings - all tenants whether they are dss, student or professionals are a hassle you don't need. If you do decide to go ahead - good luck.

Hi Stephen,
This is not the advice that I assumed you expected to receive on a property site but here is my 2 cents worth.

Take the 400k, divide it into £75k chunks and invest it in different banks/building society to ensure that it is fully covered by the FSCS protection. If you are lucky you might get a wonderful 1%!, but is should be safe.

Keep your mouth shut about your windfall, and continue as the old unemployed Stephen. No flash new cars, or bimbo blond.

Definitely do not move to be near to your "friends" the realtor and builder. Friends and business is not an easy mix. I invested in a property on the advice of a "friend" realtor and builder, and got royally screwed, and not the lovely orgasmic type that you see in the movies.

Take a year out on developing yourself. Get fit, get healthy, get some hobbies, make new friends, travel, both in UK and abroad, do some good deeds, widen your network, study etc etc.

Now maybe I am not greedy enough but £460k at 55, with no mortgage debt is a great place to be in. How much more do you want to get? My personal opinion is that the real estate game is in for a rough ride at the moment, and you are in a fortunate position to sit back and watch it play out. It's all well and good when you hear the stories of millionaires made in real estate, but it is a long term investment, and can be a lot of hassle and some real stress.

So take a year out, balance yourself emotionally, read, research, enjoy, and then at the end of the year, make some reasoned, thought out decisions, about your future generally, your investments and real estate if that is the way you opt to go.
Good Luck.

Reply to the comment left by "Chris Chance" at "02/04/2016 - 15:20":

Chris,
That is not advice I will ignore, it has some sense to it. The friends I refer to will not be a part of the buy side, they will merely point out sensible areas and give an indication of renovation costs. No friends or friends of friends will be tenants if I do BTL, which after two weeks of research is now looking less likely. I am interested in a possible flip or two, I may invest some money in property funds that are minimally invested in london or the south east. i am fully aware that there is no such thing as an easy way to make a fortune, apart from the lottery (which i do not do anyway).

Not overly sure about travelling, done a lot of that, and it is now so much hassle due to high levels of security everywhere. Do not worry about the "gold diggers", I am wise to that sort of person.

I need to find something to get involved in, with some income. sick of financial services, and after nine months of total rejection, they can get lost! BTL seemed a good idea, but to be a good BTL landlord with decent tenants is to have little do to, which defeats the object.

Property bought in the right area is a wise investment, however i would like to get a business going, and whilst BTL is not completely discarded, I need to find out other possibilities.

I have a different take on all this as I am relatively new in property and so have not been stung as badly as some other people by the recent changes. I bought my first two properties three years ago with the intention of paying off the mortgages as quickly as possible. That means I am not over-exposed now and can even afford to be a bit bolder as I have equity now that was not expected.
My initial motives were to maximise the returns on my savings, safeguard my financial future into retirement and to have my own business. I was frustrated in my day-job and yearning for a challenge.The whole property thing has been an adventure that I have enjoyed enormously, the properties have performed well, I have great tenants and I've provided them with good homes.
The important thing is to do plenty of research and make sure the sums add up. Zoopla and Rightmove are great tools for that. You and I are fortunate that we can move forward knowing that legislatory changes are a risk factor that has to be taken into account. People who began investing earlier were taken by surprise and many have had their plans and dreams destroyed.
I suggest you start with one or two fairly cheap properties on a straightforward buy and let basis and see if you enjoy being a landlord. Then you can think about HMOs, conversions etc later if you want more of a challenge. Personally I don't use agents. That would defeat the purpose as managing the properties is the most interesting part. Online agents like Upad are good for the initial advertising and to help filter the applicants but I like to be in control of things like tenant selection, the deposit, the rent collection and the tenancy agreement. I'm in the NLA and they have on-line courses and all the forms you could ever need.
The first property is the biggest learning curve and you can expect to make mistakes and have a few anxious moments. After that it gets easier and you also get to find out about other options. HMOs, Commercial property, conversions, holiday lets, partnerships, rent to rent, SPVs, SIPP and crowd funding..... it's a big and fascinating world.
I recommend going along to local landlord groups as they are friendly and provide a wealth of ideas. I do know people who have been very badly burned, but most haven't and if you are cautious and take the time to study the market, property can be rewarding; financially and personally.