Landlording - hassle vs benefit

[Tristan.]

I'm in a position where I have some extra money, not enough to invest in anything worthwhile, but I could afford a small house up north. Something like this:
https://www.rightmove.co.uk/property-for-sale/property-46932331.html
Looking into it, that kind of place rents for £200-300/month. A very quick look shows that landlord insurance could be ~£400/year. So if everything went to plan, I could have a return of £2k/year on £25k, which seems pretty good, compared to any kind of ISA or saving account. Plus obviously, the interest on the house itself. But thats the cheapest of the cheap rent in the country, and I guess managing that rental there would be just as hard as managing the rental of a much more expensive property, so I'm not sure it'd be worth it.

Obviously I will do a whole load of research beforehand, but as a quick starter for ten as I know a few BCFists own rental properties, is the hassle of managing one worth such a small return, or should I hold out for if/when I can get one that would rent for more.
(possible option to get a small buy to let mortgage on top of my cash, will be looking into that next week)

[J4mes]

Gainsborough is a shithole, no way would I want to landlord any property there!!

But in any case, it really depends on your tenants - how well they pay, how long they stay and what they wreck when they leave.

I let my place out once to a divorcee, couldn't have been a better tenant. Paid on time. Kept the place immaculate. Paid all her bills on leaving and never gave me any trouble. The house she was letting out after her split got wrecked, most of the furniture was stolen and the letting agent did fuck all to help her.

It's something I considered again - buying a property to let but I'm not sure I can be arsed. I'd rather rattle my own mortgage off early and worry about investments after that.

[Itchy]

2K a year is thin, even if it is about 8% on 25K

Even if it is pure profit (not turn over) you're going to pay 20% income tax on that £1600 making it thinner.

A boiler break down (and often there are false economies in buying cheap ones) will wipe that out easily. The one installed here cost £3.4K but it is alleged to be a good one.

Repairs and maintenance will wipe that out easily, going all Rachman or Wilson (evict on complaints) will just get you into trouble as councils at least in London are seeing Landlords are cash cows. One recently got a possession order and £272K fine, a real slumlord putting toilets in bedrooms.
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[Quornholio]

You'd get similar properties in Burnley, and probably get better ROI.
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[Nash GT]

Plenty in ROI
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[Tristan.]

[J4mes]

Word of mouth, she was my girlfriends hairdresser. I think I was lucky though as knowing someone isn't always a good thing when it comes to financial arrangements.
I also paid around £16 a month for boiler insurance, and had 5 call outs and £1000 of work over 2 years, which made it a very good investment!

Helps that I lived round the corner too as it meant whenever something was wrong she didn't just run to the nearest trader and cost me a fortune in electric and plumbers costs I had the chance to sort it out (faulty light fitting, leaking tap and leaking kickspace heater, all of which I fixed) so probably saved a fair few hundred in fees there.


I also didnt have a letting agent, I dealt with it myself with the help of a friend who did run a letting agency.

[Itchy]

[Clutchy]

Wouldn't bother, look at it this way:


If your employer asked you to take on a similar amount of extra responsibilities and risk equivalent to renting out a house in a crappy area and gave you a pay rise of (lets say £1,500 after all your insurance, letting costs/breakages) there's no way in hell you'd take it.


IMO, NO WAY!
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[Clutchy]

Get a Santander 123 current account (20k max) and earn a nice 3% AER on your money.

The other 5k, try your hand on the stock market or treat yourself
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*33 BHP restriction up on 10/12/14* Current bikes/car: SV 650 S/ MKIV GOLF
Guide to pass your test with no lessons!

[bikertomm]

Following this thread with interest.

I have no experience what-so-ever with being a landlord but has always appealed to me.

The idea being someone pays off my own mortgage

Also, clutchy that Santander account is insane

3%! Why haven't I discovered that sooner. Going to change my accounts now I think. Nice one.
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[drbaig]

[Clutchy]

[bikertomm]

Clutchy santander sound perfect for me

Why have I not seen this deal before! I spend a shit-ton on fuel, would benefit from a decent interest rate massively, love it.

Will sort myself out next week.

Should I close my old account and just have 1 or keep it open?

Also.. is it bad to have 2 credit cards? Because I already have one, but I don't use it.. won't harm my rating?

Cheers financial advisor
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[Clutchy]

[Clutchy]

[Rogerborg]

Do it.

One of my very few regrets is selling my previous house rather than renting it out.

Even with patchy occupancy and shit-happens, in the long run, owning bricks and mortar will destroy any other investment.
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[stephen_o]

I have 2 buy to lets and a lodger in my own home, 1 buy to let returns 30% a year, the other buy reduces the rent liability of one of my shops by 60% The lodger covers half my mortgage and bills.

In a few years time everythings paid off and I am looking at pure profit.

Yes there is the odd duff moment, but vet the tenants and be straight with them, respond quickly to issues and be fair and they will respect you and the property.

Do It
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[andyscooter]

mother and father in law had two houses they let

one from father in laws parents and one from mother in laws

the mother in laws house has a bloke in who wants to buy it if they ever sell the house

he has fitted a new kitchen and had the drive block paved

the mother in law paid some towards it but he paid the rest knowing he may never get it back the house is immaculate

the father in laws had a family of 4 in
when they left they had trashed the place

plaster broken off walls windows cracked fire ripped out of front room

bathroom needed repalceing as did kitchen and all carpets

no maintainence had been carried out and they hadnt said there was any problems

he sold the house as a project in the end as would of cost a fortune to do up and re rent out
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[dydey90]

I think the way to do it is to buy a small house in a really nice area or a flat near a city centre, so you can rent it out for more. From what I've heard from people at work with second properties, if you go for something right at the bottom of the food chain then there's a good chance of getting a tenant who won't look after the property, hasn't got a steady income or just plain refuses to pay and its a long process to evict them.
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[G]

I've got a friend with a cheap house he rents out in Gainsborough.
Overall more hassle than it's worth for him - but got a feeling he's in negative equity too.

Not sure if he can sell, but after my glowing report, happy to see if he does want to sell if you do end up being in the market - now done up with new tenants in after the last ones left it in a state.

[covent.gardens]

If you buy that for £23k and in 10 - 15 years time it's worth £50k, £60k, £70k+ then you've done well whether it gets trashed a couple of times or not.

The way I see it, population is increasing faster than houses are being built. Is it going to go down in value? No chance. If you've got the cash and the time to spare then go for it, even if the rent only covers the costs it's an appreciating asset.

[G]

Opps; missed that this was a 'guide price' not a down payment etc.

Problem with bottom-end property is you have a high chance of attracting bottom-end letters.

You can be taking a big risk of considerable hassle.

I would expect the house is going to require a lot of work; they've probably cleaned the faeces embedded in the walls out of just the field of view of the camera .

[Tristan.]

Cheers for inputs so far guys. I've done a fair bit of reading, and talked to a friend who is good at being rich. I have a few avenues

Option 1 is to buy a cheap house up north outright.
-no mortgage. So if it sits without tenants it costs nothing
-bigger hassle to manage due to distance
-makes ~1.2k a year and appreciation on a £25k property

Option 2 is to get as big a buy to let mortgage as possible, and buy a cheap house local
-risk of ending up paying 2 mortgages if I can't find tenants or tenants gut it
-makes considerably more in rental both due to location and due to tax on that income being written off vs the mortgage.
-makes much more as a long term investment, as it's interest on a 75k property. Unless the housing market crashes horribly then it's a bigger liability.

Option 3 is something complicated involving remortgaging my own house as buy to let and moving somewhere else. I don't think I want to do that really. I like my house.

I will speak to a mortgage advisor in the week, but it seems a pretty clear risk vs reward thing. The complicating factor is that both will require the same input from me. So I'm erring towards the 2nd option.

Tbh I'm not even sure I want to be a landlord. I don't really like the idea of making money off other people, any ideas for decent investments around the £25k mark?*

*ok I realise basically any investment will be making money off other people

[Itchy]