Newbie Landlord wanting thought’s and advice on my plan

Newbie Landlord wanting thought’s and advice on my plan

9:42 AM, 21st November 2014, About 7 years ago 18

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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

by Mark Alexander

23:26 PM, 22nd November 2014, About 7 years ago

Reply to the comment left by "Colin Dartnell" at "22/11/2014 - 20:05":

I think it's important that landlords recognise that they are providing homes. If they don't have funds to deal with problems that's irresponsible and totally unfair on their tenants. Maybe you have access to funds via a credit card or something Colin, I don't know you so I'm not judging you, but I do worry for the tenants of some landlords even though those landlords clearly don't.
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by Colin Dartnell

10:53 AM, 23rd November 2014, About 7 years ago

Reply to the comment left by "Mark Alexander" at "22/11/2014 - 23:26":

Hi Mark

I think I may have given you the wrong impression, I wanted to build a portfolio quickly, it was in the early 2000's property prices were rising quickly so the only way to do it was to take chances. My wife was behind me so it was worth it the risk.

At no time did I compromise my tenants position nor the standard of their home, any necessary work was always done. I always looked at it that if I provided a decent home I would get decent tenants, not that that was always the case. It was purely myself that was at risk and that was a long time ago, I now have about a 20% fund behind me if anything ever went wrong.

I don't say this approach would be suited to everyone but it worked for me in the long term it was never done as a short term strategy
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by Mark Alexander

10:56 AM, 23rd November 2014, About 7 years ago

Reply to the comment left by "Colin Dartnell" at "23/11/2014 - 10:53":

Well done Colin 🙂

Just as a matter of interest, if a couple of boilers had broken down and a few tenants had gone into arrears just after you invested your last pound into your latest purchase, what would you have done?

Do you consider yourself lucky or did you have an alternative backup plan?
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by Colin Dartnell

11:58 AM, 23rd November 2014, About 7 years ago

H Mark

Thank you.

Boilers did break down and were repaired or replaced and tenants did go into arrears. The income from the properties was usually enough to cover most eventualities, but otherwise it would come from salary, credit cards or basically going without and gradually clawed back. I never included anything from the property income into our own outgoings it was always separate and reinvested.

I wouldn't say it was luck, I always had my head screwed on, I knew when to back off from something too risky. Usually when buying, it was case of factoring in the costs to bring the flats up to scratch, including the cost of a new boiler if it looked old, and then try to negotiate the price down or walk away, unless I could see it would make good returns later.

by Colin Dartnell

12:09 PM, 23rd November 2014, About 7 years ago

I have to add that I have a good Letting Agent who is has offered good advice and help over the years.

I decided not to deal with the day to day running of the lettings from the beginning, leave it to someone who has the experience, and who is in the position to find tenants quickly, you may lose a bit in fees but you save on so many other things.

by Mark Alexander

12:31 PM, 23rd November 2014, About 7 years ago

Reply to the comment left by "Colin Dartnell" at "23/11/2014 - 12:09":

I agree absolutely!

The biggest problem with being a newbie is that they don't know what they don't know.

As many have said on here, the best thing any newbie can do is to book themselves onto a landlord accreditation course such as those run by NLA, MLAS and LLAS. Cost circa £150, value gained immeasurable but certainly significant!
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by Jonathan Clarke

13:40 PM, 23rd November 2014, About 7 years ago

Reply to the comment left by "Mark Alexander" at "22/11/2014 - 23:26":

Thats a very fair point Mark. Its a fine line I guess between what could be deemed reckless or one hand and on the other hand having slim but effective margins to work on based on potential risk factors. Its a moving playing field often

We have to have insurance for cars by law as your reckless actions may harm others who may need to be paid huge sums in the event of a blame worthy acident.

Tenants too have rights and if the roof caves in or the boiler blows up you are I agree morally and legally bound to do something about it straight away. You need cash to do that and its horrible for all parties if you dont cater for that eventuality . I`m sure Colin like me has it covered so it raises the question of what exactly constitutes a contingency fund and what level is a safe operating level

Its an interesting debatable point. . My 2% figure was based around liquid cash in the bank. So in simple terms if I had 1 mill lending say I would want 20K in my current account to pay out on demand immediately. Say I had 10 properties then 20K would allow for example 10 x 1K boilers to blow at the same time and 5 new 1K bathroom suites and 5 x1K leaky roofs. - A very unlikely occurrence all at the same time so i was comfortable with 2% .

The cash flow profits pay for the normal day to day stuff. I had the majority on 3-5 year fixes so interest rate rises were not as issue and were mitigated against for that period so i could forward plan accordingly.
If you are on variables now though we know there is only really one way the rates will go so you have to stress test your total loan amount to see how you cope.

But at the time I had 2% fund I also had a guaranteed 50K loan facility from my bank and a 10K overdraft facility. That`s before you get onto credit cards or ( for me fortunately if it really went wrong ) the bank of mum and dad. That took my potential and one could argue my peripheral `contingency` funding within 2 days of being called upon to being at around 10%. That worked for me and certainly is well inside my comfort zone and provided a comfort buffer for the tenants as well..
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by Mandy Thomson

15:57 PM, 23rd November 2014, About 7 years ago

I agree that the main problem with being a newbie is that "you don't know what you don't know".

Where maintenance is concerned, it can be very hard to predict what issues you might encounter, even if you've lived in the property first yourself. Different people have different lifestyles and will run the property in different ways - condensation is a typical example of this.

For example, in an older property (which are more prone to condensation), you could have householders that leave a few windows open slightly, and run the heating on low most of the time - that household find they get minimal condensation. Another household moves in. They keep the windows closed to save heating, put the heating on full for a few hours each day, but don't run it at all the rest of time, and like to take lots of hot showers at full temperature and maximum pressure to boot - not only do these people encounter a severe condensation problem, but they find the shower breaks down and they get leaking pipes. BTW, I am NOT talking about rogue tenants here - sometimes, it's hard to even predict your own behaviour in any given situation. However, with the second household living in the property, the maintenance costs are likely to run into several thousand, whereas with the first they will be much less.

I had an issue such as I've described above - while I reasonably would've expected to incur maintenance costs of around £4k (the boiler was old, and the property had damp issues), I ended up paying near double that - another complication that is almost impossible for a small landlord to avoid is rogue builders and tradesmen - these people are a menace, and it's very hard to get your money back.

Taking out the very best and as much insurance as you can is another absolute must - though even the most comprehensive policies won't cover everything.

Obviously, this doesn't include the OP, but there is an issue with a lot of newbie landlords going out and simply letting to the first tenant that offers to pay rent - without knowing the first thing about what needs to be done - Gaiety Clark's shocking account is but an extreme example of this: http://www.property118.com/obtaining-money-deception/70469/#comment-48812

Unless it becomes mandatory, I don't think expecting landlords to become accredited is the answer - if you're buying or selling a property, you're not going to go off and study land law so you can do your own conveyancing, and in fact, even if you CAN do your own conveyancing, it's still advisable not to, so you have a legal comeback if something goes wrong - must solicitors don't do their own conveyancing for this reason.

What we need is for the PRS to reach the same level of maturity (to coin an IT phrase) as the conveyancing side of the property industry, so landlords either know exactly what they're doing, or they use reliable professionals who do it on their behalf. Very few people try to do their own conveyancing, and very few conveyancing transactions are unregistered.

This could be an effective deterrent against licensing, as landlords could be readily identified, slurs against landlords and rogue landlords.


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