Newbie Landlord wanting thought’s and advice on my plan

by Readers Question

9:42 AM, 21st November 2014
About 4 years ago

Newbie Landlord wanting thought’s and advice on my plan

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Newbie Landlord wanting thought’s and advice on my plan

I’m picking the keys up to my first ever property today which is hopefully the first of many in my BTL portfolio. Newbie Landlord wanting thought's and advice on my plan

I’m 23 and have just purchased a 3 bed recently refurbished terraced house near to where I live with my parents.

I have been wanting to start my portfolio for a few years. Whilst I have been saving up and I have read a lot of your website which I must say is amazing.

I have bought the property on an interest only mortgage after researching for quite a while. I think I’ve been as thorough as I can and also had a full buildings survey to highlight everything that possibly can before I bought it.

I don’t mean to run before I can walk but I’m already thinking about buying another, but obviously I’ll need to raise further funds.

Would your main advice for that be use my monthly savings + rental income + remortgage where possible to raise for capital to buy another property?

I want to raise around £40,000 before I buy another so that I’ll have a substantial amount behind me even after I buy another property with a 20% or 25% deposit.

Would you recommend saving and saving until I reach that figure to be safe or risk having slightly less behind me but have the 2nd property sooner?

Also I haven’t chosen an accountant yet and I’m not sure who to trust. I have read about your recommendations of the accountants in Norwich which sound good. I live in Derbyshire but I wouldnt mind travelling for the best accountant. Do you think I should try and find one closer to my home or one that I will have no recommendations?

Sorry if I sound like a Newbie! 🙂

Thanks

David Wigley



Comments

Mark Alexander

9:51 AM, 21st November 2014
About 4 years ago

Hi David

First of all, CONGRATULATIONS on managing to save enough money to become a landlord.

I remember buying my first investment property at 219 The Paddocks, Old Catton Norwich NR6 7HS back in June 1989. I still own it and it has served me well. However, it is only with the benefit of hindsight and 25 years of experience that I realise how brave I was back then knowing as little as I did. Enjoy the learning experience, it is far easier to access good information now than it was back then.

With the wonders of modern technology I don't think distance should be an issue these days. Therefore, I would choose a strong recommendation over distance every time.

Don't run before you can walk, learn, save, be safe. You have time on your side. Make sure that you have reserves so that the unexpected is at worst inconvenient and not disastrous.

Get yourself a good letting agent to begin with, there are simply too many things to trip you up if you don't. Please read this if you haven't already >>> http://www.property118.com/finding-perfect-tenants-and-minimising-risk/

By all means keep asking questions 🙂

Good luck 🙂
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Mandy Thomson

13:50 PM, 21st November 2014
About 4 years ago

Reply to the comment left by "Mark Alexander" at "21/11/2014 - 09:51":

Absolutely - firstly, the right tenant is CRUCIAL - it really is worth spending money on the very best agent with good negotiating skills to find you the very best tenants.

Secondly, again Mark is absolutely right about having a very generous sinking fund - if it can go wrong, it will, even with decent tenants who take care of the place.

Since starting to let 4 years ago, I've had the following maintenance issues:

Damp issues (Victorian property that was my home before I let it)
Compensation to my tenants for having to put up with damp (my idea, not theirs)
Replace shower consumer unit - twice
2x new washing machines
Repair to leaks in bathroom
Compensation to downstairs neighbour for damage to her personal property from leak (goodwill gesture - nice lady on benefits who didn't have contents insurance)
Replace tap
Replacement boiler
At least 2 minor electrical issues
Contributions to block maintenance funds
Ground rent and insurance
Additional maintenance work to blocks (x 4, soon to include roofing work)
Installation of 4 fans and PIV unit
Share of work to repair intercom

And this is not counting the two rogue tradesmen who ripped me off for at least £1,500...

Oh, and it looks like landlords in one of my boroughs will soon have to pay £1000 per property for landlord licensing...

And then there's voids, and possibly council tax and utilities during that time.

I would keep back around £10k for maintenance and other issues, to be on the conservative side.

However, if you can save as much £40k, you should be able to put down a healthy deposit against a BTL one bedroomed flat in a sought after city location (one beds let best in those areas as they're in most demand by young professionals).

Hope this hasn't put you off, and even though I've had a lot of worry with various issues (but never the behaviour of tenants), I'd do it again.

Lots of luck with your property investment/landlord career!

Jonathan Clarke

15:56 PM, 21st November 2014
About 4 years ago

Congratulations .
Your contingency fund is always a subjective personal decision. I used to run at about 2% of my loan total when i was aggressively building a portfolio. Too low for many but it sat comfortably with me. It largely depends on your attitude to risk. I now run at about 7% for a variety of reasons . Mark advocates 20% I believe. There is no right or wrong though. Its your portfolio so you ultimately choose its speed and design as you lovingly craft it together property by property.
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Mark Alexander

16:00 PM, 21st November 2014
About 4 years ago

Reply to the comment left by "Jonathan Clarke" at "21/11/2014 - 15:56":

I agree with that Jonathan, and I think we can both agree that the landlords who are most likely to fail are those with a low liquidity reserve and especially those with no money at all.
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david wigley

20:16 PM, 21st November 2014
About 4 years ago

Thanks for your replies guys means alot 😀
I'm open to any advice and appreciate it all.

Regarding what you said about recommended accountants, I have had a little think and I'm going to contact the firm you advise to on here. Would rather go with one so highly rated instead of going my own way and learning the hard way.

Is there anywhere on here such as a check-list I could maybe use when I compare different lettings agents? Got a couple in mind that are in my area that sound OK but not sure what to ask them to decide between them.

Thanks

David Wigley

Mark Alexander

20:34 PM, 21st November 2014
About 4 years ago

Reply to the comment left by "david wigley" at "21/11/2014 - 20:16":

Hi David

Where are you based?
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david wigley

20:49 PM, 21st November 2014
About 4 years ago

Hi Mark

Near Derby

Mark Alexander

21:30 PM, 21st November 2014
About 4 years ago

Reply to the comment left by "david wigley" at "21/11/2014 - 20:49":

I think Letting Supermarket have an agent covering that area, let me check with Chris Sheldon for you.

Thongs to check with agents:-

1) Can you see their Client Money Protection Policy
2) Can you see their Professional Indemnity policy?
3) What are their termination charges and how long are you tied in for?
4) How much do they charge tenants?
5) How much do they charge you?
6) What do their charges include and what do they not include? (see this check-list - http://www.property118.com/property-management-checklist/67891/)
7) What are their qualifications and how are their inventory clerks qualified?
8) Does the referencing they do allow you to purchase a Rent Guarantee Insurance product if the tenant passes referencing and if so how much does it cost?
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Chris Sheldon

10:48 AM, 22nd November 2014
About 4 years ago

Reply to the comment left by "Mark Alexander" at "21/11/2014 - 21:30":

Hi David,

Congratulations on your first purchase and yes we have agents which cover the derby area.

Please feel free to give Tony or myself a call if you wish to discuss anything further or fill out the contact form and we can send you some details through,

http://www.property118.com/property-management-checklist/67891/

Colin Dartnell

20:05 PM, 22nd November 2014
About 4 years ago

Reply to the comment left by "Jonathan Clarke" at "21/11/2014 - 15:56":

Agree totally with what you say, its all about what you feel comfortable with, and how quickly you want to build a portfolio but if you want to do it quickly you have to fly a bit close to the sun at times.

I used to run at 0%, every time I managed to get a bit together I used it as another deposit. It was very exciting stuff but I wouldn't recommend anyone tried it unless they are fully aware of the dangers, and could live with the consequences if it failed.

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