Student wanting first property and to be full time landlord by 30?

by Readers Question

11:08 AM, 19th October 2015
About 3 years ago

Student wanting first property and to be full time landlord by 30?

Make Text Bigger
Student wanting first property and to be full time landlord by 30?

I am an economics undergraduate(2nd year), 20 years old. My goal is to obtain my first BTL investment property within 1 year of graduating university. think

I am saving every penny(as hard as it is) of my student loan, and will have £9k of capital at my disposal when graduating. As ambitious as it is (maybe naïve) I want to become a full time landlord managing my portfolio before I turn 30.

I have a very healthy credit score, after several steps over the years being put into place to achieve this.(credit cards, direct debits etc) I have the basics down through reading several books and keeping up to date with forums such as this one. (As you can imagine) I have lots of questions but the main one that I cannot find the answer to is, “would any lender touch a newly graduate, hoping to obtain an interest only mortgage first time buyer, who is earning a salary of around 20k” Taking into account the £9k capital and the good credit score.

Thank you for taking the time to read my discussion post. Any general advice anybody can give, tips, hints,words of warning to help me along my journey.

Alex

“If your going to think, you may as well think big”



Comments

Howard Reuben CeMap CeRER

11:39 AM, 19th October 2015
About 3 years ago

Hello Alex

As an economics student so you will know from your own due diligence, and from noting the pros and cons of other property investors, that BTL can be a successful business strategy. There are of course many pitfalls that may occur along the way, but as long as your property investment is treated as a business (and not a sideline hobby) and you have the right controls and advice and financial products in place throughout the whole long term process, then you should be well positioned to start and grow a portfolio.

And this leads me on to the 'start' stage. You have asked if any lenders would offer a loan to you at this time.

One word that will crop up in your first venture is "plausibility". Especially if you are not a homeowner / owner-occupier yourself when you come to buy a BTL property for the first time.

If you have little or no evidenced income (i.e. usually below the industry standard £25k minimum income / salary level) AND you don't own your own home AND you have only been employed for short time AND you have outstanding loans etc., the BTL lenders will possibly ask .... are you trying to buy your 'home' via a BTL mortgage route instead, which of course is not allowed.

So, your case has to be robust and plausible, and if indeed you can write up such a business plan and you discuss this with a professional mortgage adviser who can assist you, I know that at this time there are a few lenders who would possibly be able to offer you a new BTL mortgage.

It all starts with a detailed and comprehensive Fact Find, which any of my team would be pleased to help you with, when the time is right for you to take the steps and buy your first property.

Hope that helps.

Joe Bloggs

13:11 PM, 19th October 2015
About 3 years ago

i think your dream will be old hat. the reduction in mortgage relief announced in the summer budget will be a severe impediment to any new BTL entrants paying the overblown prices at present (at least in the SE). it will be ok if you are a cash buyer but terrible for highly geared new entrants. I think a new more original plan is needed.

Alison King

13:48 PM, 19th October 2015
About 3 years ago

Reply to the comment left by "Joe Bloggs" at "19/10/2015 - 13:11":

Circumstances are very different in other parts of the country, and there are still opportunities in the North and East, and in related sectors such as holiday lets, overseas investment or refurbishment.
My advice would be to do a lot of research first, including into all the financing options, regional differences and business model.
If I were starting again, and especially if I was younger, the main thing I might do differently is to look more closely at the company model as a way forward.

Joe Bloggs

14:11 PM, 19th October 2015
About 3 years ago

Reply to the comment left by "Alison King" at "19/10/2015 - 13:48":

hi alison,

yes, i know you dont have to travel far from the capital to find some really down in the dumps places. i have just sold in clacton, essex.

however at present limited company is unlikely to be any use to new entrant needing big finance.

Alison King

14:44 PM, 19th October 2015
About 3 years ago

It doesn't need "big finance" to get started. I started my property business with 20k three years ago and I have a nice little portfolio now. If the OP is starting small he may not need to worry about the reduction in mortgage relief for several years in any case. There are lots of different ways to make property work.

Mike W

18:15 PM, 19th October 2015
About 3 years ago

I think Joe has a point. If the government can play this trick on the finance costs to 'level the playing field' with owner occupiers then 20% soon becomes 0% and then maintenance costs and repairs are disallowed too on the same logic.

So to answer the original question get out the excel spreadsheet and make a 10-20 year business plan. Consider a company structure. Get professional advice in particular as Howard has suggested on finance options.
It is becoming more difficult and will not be an easy option in 5 years time. Didn't Corbin talk about the tenants right to buy private rented accommodation? Or was I dreaming?

neils26

17:18 PM, 20th October 2015
About 3 years ago

Alex, btl is an absolutely awful business. High debt, maximum aggravation, pitifully low real returns (few people understand the real numbers). GET a different dream !

Rupert Proper

10:55 AM, 22nd October 2015
About 3 years ago

You do need to adjust your 'level of aspiration' downwards, as my grandma used to say, to avoid ending up whining about your bad fortune by the time you are 30.
I agree with neils26, BTL business is a lot trickier than most newbies believe and unless you are prepared to invest considerable capital and build up a highly diversified portfolio, the risks are far too high to take at this point in your life.
Best of luck

adam prospect

9:37 AM, 23rd October 2015
About 3 years ago

My objectives were to own my house outright by 30 and have enough to retire by 40. Both achieved comfortably. But property is something I love absolutely.

I would have some tips which are generally not well received with many advocating leveraging - but they have served me well.

1) know what you are buying and buy value. I expect at least a 30% uplift in value after a purchase. This is not easy, usually involves a refurb or a new lease etc. Also it slows the plan down.
2) consider the exit strategy. Number 1 helps this and selling and realising gains on some to repay debts on others has been my absolute formula to a much lower risk model.
3) expect rents to fall, expect house prices to fall, expect interest rates to hit 10% and expect legislation such as tax relief to change for the worse. I don't mean allow a contingency I mean EXPECT it to happen so it's not a shock when it does. Don't leverage and stretch hoping for the opposite. If prices dip and you hold debt your assets can very quickly disappear.
4) debt and leveraging is not a long term strategy. No other business or investment works in that basis - and BTL doesn't either.
Get rid of that debt as fast as you can - all rent collected and all gains made are used to repay debt rather than leverage further.
Reality is I may not always repay the debt - but I have kept the cash aside to do so.
5) I would rather own 3/4 outright than 50 houses with 50 debts. Think about the work involved managing 3 houses - bringing in say £2k a month. That is freedom and manageable. 50 houses are just leveraged to max gains and becomes a headache and commitment. And a not very profitable one based on the massive risk involved when considering point 2.
6) treat tenants superbly and charge a less than you should. They will thank you for it by staying years and looking after the place. You are responsible for their housing needs and accept that important responsibility. Unfortunately expect to be unlucky with the odd tenant.

Find out why there are so many opportunities in the North East. I don't know why and I am sure the rent will be profitable. But I buy in areas I know there is is reliable market to sell back into.

Okay, I have 'a few' more than 3 but that been my good fortune. But I own a lot less than I could with leveraging. I don't want to sit at dinner parties and be measure by my 'I own 100 properties' nonsense. Enough to get by and be free. And I plan to sell one every few years - my kids don't want houses and tenants.

I love bricks and mortar and it astounds me people do not buy value - anyone can buy a house - don't be an anyone. Professional car dealers don't pay retail and neither do I for property. Prices are way too high in many places. My last purchase was a rough bungalow for £125k with neighbouring ones at £200k. It needed £15k spending so stands me with £60k gain to be realised to repay any debts. Or at least help protect me against a fall in prices. Timing is key and when sentiment is low it's a great time to buy....so watch your local market and develop a network. I rarely buy from people who feel they are in a position to sell. I buy from people who have no choice.

Understand the contra and moral arguments against being a landlord. As FTB'ers struggle and cannot become owner occupiers - and LLs buy properties there will be a political conflict. Owning a property is not providing a home. That home exists already - all I do as a LL is use my ability to buy and make gains from those who cannot. Pretending we are providing houses and without us everyone will be in the streets is just not true. Do not ignore that or feel entitled for that situation to continue. It can, it should and it will change.

So when the rules of this game change in the same way pension rules will change - make sure (as with any business) you minimise risk and have one eye on the exit door.

It's a great business to actively manage - with all sorts of rewards including knowing you can help people in need. But don't expect praise for that - never feel entitled. Those tenants and families I have helped - allowed missed payments - lower rent during unemployment/mat leave are grateful enough. But I am grateful that it is only due to them that I am able to enjoy a freedom only a small % of people can.

Take a slice of everyone's advice - get a business mentor who has some decent morals and wider understanding. And the first time you tell someone how many houses you own at a dinner party.....get out.

Alison King

18:41 PM, 23rd October 2015
About 3 years ago

I agree with a lot of what Adam says. My intention is to retire within the next eight years, which is two less than when I started. I've resisted pressure to remortgage to release funds, and I am glad now as the forthcoming tax changes are less of an issue to me than for some others. My strategy is as follows:
- do a lot of research, listen to others, but make your own decisions
- look for bargains, such as properties that look scruffy but have nothing fundamentally wrong with them, or repossessions, or properties in areas adjacent to ones that have improved in recent years and are likely to do the same soon
- buy with savings and don't remortgage to release funds
- choose fee-free mortgages and remortgage to get the cheapest interest rates and to pay off some of the loan
- aim to pay off the loans as fast as possible, but avoid over-stretching
- plan to keep all the properties forever, but don't set that in stone. The possibility to sell is contingency
- be prepared to reassess your strategy if circumstances change, but don't panic when they do.
- look for high yields. I aim for 9%, but a little less is OK if the area is upwardly mobile, because rents will go up too in due course
- good tenants are ones who are motivated to stay, are trying to improve their situation and want to look after the house and treat it as their home. Always choose your tenants yourself and develop your own selection criteria.
- don't assume "experts" are right, or impartial. Understand how they earn their fees and learn their job yourself; enough to be able to supervise them. You are the boss and they are human and make mistakes which it is down to you to spot.
- if you can do something better yourself, do that, but your time is valuable so take that into account.
- aim to provide the tenants with a home that meets good standards and respond quickly to any problems so they are encouraged to report things early
- be consistent, fair, friendly and professional in dealing with the tenants and keep communication easy and open
- enjoy being a landlord and love property. .


Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Change to Universal Credit rent arrears payments

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More