Questions from a buy to let newbie

by Readers Question

11:07 AM, 8th June 2015
About 3 years ago

Questions from a buy to let newbie

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Questions from a buy to let newbie

I’m new here, and new to the letting industry, so first of all hello! Questions from a buy to let newbie

I’m 26 and have a good income from another business that I started a few years ago, but rather than carrying on spending it on expensive cars and other toys I figured it was time to start trying to invest it. The first thing everyone says as soon as they hear you have some money seems to be “get in to property” … so I’ve been looking in to it for the last few weeks.

Now I really don’t want to just jump in to this without doing plenty of research first – just because other people say its a good idea (most of whom haven’t actually done it themselves), doesn’t mean it is a good idea in reality. So along with my own research which I’ll continue to do, I was wondering if anyone here had any tips or suggestions for someone in my position? Anything you would have done differently when you started out? Any way I can use my existing high income to my advantage for letting (other than just saving it up for more deposits on more houses to let out) ?

So far my understanding is that, contrary to what I initially thought, I should go for an interest only mortgage and rather than buying one house for £100K with a £60K deposit, I’d actually be better off buying 2 houses for 100K each with a £30K deposit on each. I know there will always be people that have different strategies but is that a popular opinion? If anyone would strongly advise against that then I’d be keen to hear why. All of the buy to let mortgages I’ve looked at so far have required at least 25% deposit so I don’t think I could go much lower than £30K on a £100K house.

Also a few specific questions:-

  • One thing that puts me off letting is unexpected bills for repair work, so I’d love to hear from people who actually let houses and hear how often that kind of thing really happens. I realise it could vary wildly from house to house and tenant to tenant, but just hearing people’s experiences of how often something unexpected eats in to your monthly profit would be useful.
  • Anyone recommend (or recommend against) any particular letting agents in the Lincolnshire area?
  • I’d really like to be as hands off as possible and go for a fully managed service from a letting agent, which I realise will take away some of my profit, but keen to hear other people’s experiences with such services. Would you recommend for or against this?
  • Is it the norm to do this as a sole trader or do most of you form Ltd companies and do everything through that?

I have a few more questions but this is already getting quite long so I’ll shut up now.

Thanks for any advice in advance!

Chris



Comments

Mark Alexander

11:11 AM, 8th June 2015
About 3 years ago

Hi Chris

I am the founder of Property118.

To share more than a quarter of a century of experience I wrote this series of articles >>> http://www.property118.com/how-to-become-a-respected-profitable-landlord/60765/

I think you will find they answer all of the questions you have asked and more.

Check out the various sections of this website by hovering over the blue Navigation bar. You will see FAQ's and useful tips there too.

All the best

Mark
.

Carol Thomas

13:36 PM, 8th June 2015
About 3 years ago

Hi Chris
Exciting and frightening at the same time- that's what it's like going into the Buy to Let world. Regarding your queries I can perhaps answer some of them from my own experience:
1. Buy the property in the best condition you can find/afford and make sure it is clean, tidy and has all the correct certificates. Most landlords do unfurnished but student lets do require furniture. HMO's tend to be a bit more labour intensive.
2. Re letting agents - I have used several of the big name companies but I was totally dissatisfied with their charges. I self-managed for years but due to health issues I needed someone to take them over for me. Lettingsupermarket, who are members of this site and come highly recommended by Mark, took over my properties just over a year ago and I haven't looked back. They are reasonably priced and their service is excellent. Void periods almost non-existent. Can't rate them highly enough.
3. Everything I've ever read on this site cautions against Ltd company status for a private landlord. There is lots to read, starting with Mark, on the matter.
4. I have taken the decision to add one more point to your list - the best money you will ever spend should be invested in a good accountant. They will save you money and keep you advised of the best way to proceed with your business.
I'm sure Mark will have much more to say on the above, after all, he has been doing this for a very long time!
Good luck and best wishes,
Carol

Chris Townsend

13:36 PM, 8th June 2015
About 3 years ago

Reply to the comment left by "Mark Alexander" at "08/06/2015 - 11:11":

Thanks Mark - I had read a couple of those before writing the post and have read all of them since 🙂 They definitely helped a lot but I'd still be interested to hear other people's opinions and experiences on here.

Thanks
Chris

Mark Alexander

13:43 PM, 8th June 2015
About 3 years ago

Reply to the comment left by "Chris Townsend" at "08/06/2015 - 13:36":

Hi Chris

Have you used the search bar in the top right of the page to find related discussions?

For example, if you want to see what other people think about using a Limited Company just type "Limited Company" into the search and read the discussions that come up in the search results.

Hope that helps 🙂
.

Chris Townsend

13:50 PM, 8th June 2015
About 3 years ago

Reply to the comment left by "CaZ " at "08/06/2015 - 13:36":

Thanks for the detailed response, much appreciated.

Yeah I've been looking for properties that are pretty much in "ready to move in" condition or just require a lick of paint. Certainly not anything that needs a lot of work or a new kitchen and bathroom installation etc.

I'll certainly look in to that letting agent you mentioned, although I've not heard of them before but if a few people recommend them then I guess that's worth more than brand name recognition!

After writing the original post I did see Mark's recommendations against forming a Ltd company so that clears that one up pretty easily.

I do already have an accountant for my other business to help me with corp tax calculations, self assessment, etc, but no idea how good he would be at anything to do with property. I think I saw that Mark had said he used a particular accountancy firm that specialised in property accounting but I don't think he actually mentioned their name. From a bit of google searching I can't find any accountants anywhere near me that specialise in property/BTL tax or anything like that, although I guess they don't really NEED to be local to me do they. I can always just speak to them on the phone and email documents to them etc. Do you use an accountant that specialises in property or just a general accountant for sole traders / small businesses?

Thanks
Chris

Chris Townsend

13:59 PM, 8th June 2015
About 3 years ago

Reply to the comment left by "Mark Alexander" at "08/06/2015 - 13:43":

I'm pretty clear on the Ltd company subject now after reading one of your articles on it after I posted the original questions, but for the other questions I haven't had much luck with the search. If I search "fully managed service" or similar to try and find other people's opinions on this for example, I don't find anything useful (in fact my own question is one of the only results that really mentions it).

I know there is already a lot of information and useful advice on this site and others, and trust me I am reading it, but I guess I'm asking these questions here to try to get a feel for what a lot of other real world landlords are actually doing and experiencing rather than just purely going off the advice on a couple of websites, some of which might be out of date or might be quite unique to the author's experience. Like you said in one of your articles, getting access to a lot of other landlords with much more experience than you had at the time was one of the best things you did as you could ask them your beginner's questions - that's what I'm doing here.

Carol Thomas

14:13 PM, 8th June 2015
About 3 years ago

Chris,
I can highly recommend Lettingsupermarket- Mark actually owns shares in them, as do many of this site's members (I would be too but I was a bit slow off the mark). They offer three levels of representation and you can also design your own package. I have known my current accountant for years from when I was doing other things. He is a general accountant and covers everything that comes up, eg CGT etc. I don't know where you are based, but as you rightly say, it isn't necessary in this day and age to meet your accountant. I believe Mark has contacts for these as well, in fact, there's not much he can't cover in the property letting field. Cheers, Carol

Mark Alexander

14:14 PM, 8th June 2015
About 3 years ago

Reply to the comment left by "Chris Townsend" at "08/06/2015 - 13:59":

Lots more to read about LettingSupermarket.com here >>> http://www.property118.com/?s=lettingsupermarket.com&submit=Search+Articles

They are working on their brand recognition and have just commenced a TV advertising campaign. Up to now they worked almost exclusively on recommendations, I've referred well over 1,000 landlords myself to them via this website, one of which was CaZ 🙂
.

Mark Alexander

14:17 PM, 8th June 2015
About 3 years ago

PS - my accountants are Pacific Limited Chartered Accountants. They have a specialist Landlord Tax team - see >>> http://www.property118.com/member/?id=452
.

Carol Thomas

14:18 PM, 8th June 2015
About 3 years ago

Chris, it's a good idea to join this group and read all the emails that come from them. The best one is the weekly summary, from which you can pick and choose what you want to know more about. You also get other emails when an interesting topic that you are involved in gets answers/updates.

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