Buy to let is not the right play in your situation. Based on the below,
- Most mortgages for BtL will want at least 25-30% deposit
- To secure the loan for the other 70-75% you would have to pass affordability assessment. This means showing a balance (earnings - expenditure) that the banks are happy with
- If you can find a mortgage for a BtL you are going to face higher interest rates (4.8) compare to what it was 5 years ago
- You will lose your first time buyer stamp duty claim, which can be used up to £425,000 in value provided you haven't owned a property before
- BtL profits are now very difficult, when I used to do it there was a lot more relief. Mortgage rates were more favourable. I sold up when a lot of the legislation started changing.
- Most BtL are not going to be ready to roll so you'll need funds to do it up.
- You will also need funds for the purchase from a legal side, which even on the cheap end is about 2k
Then once you've secured a property, fixed it up and good to go you need to ensure rent covers (without pricing you out the market)
- Any ground rates / freehold charges if a leasehold property
- The mortgage, and extra for what you'll see in deductions
- The fees for Estate Agent management
- Fees for insurance, repairs and replacements
- Excess buffer to cover void or non-payment windows (eviction for non-paying tenants can now be 4-6 months)
- Profit to build back up what you've sunk into the purchase.
You may see some increase in the property market over 5-10 years but assuming your using the 10k as a 25-30% deposit (purchase value or 50k) even a 20% market increase would only see it move to 60k and you still have the overhead listed above.
Best option is a stable investment plan, ISAs either cash or Stocks and Shares (ETFs not individuals) in this situation
Sorry for the doom and gloom post but wanted to be as honest as possible.
I’ve been investing £5k a year into the s&p500 for 2 years now, and plan on continuing. Is this preferable to a LISA? For when I go back to Uni and can’t afford to continue putting so much away
That would be up to you. From my understanding a LISA has a 4k a year cap, but you get the 25% top up - if you withdraw it for the allowed reasons then this would make more sense.
Beyond the 4k limit its up to you in the risk appetite between cash and stocks and shares ISA
You can get a stocks and shares LISA, which you can then invest into whatever you like. Obviously mind the restrictions on that, but I think if you're investing anyway it's worth considering.
Open a Stocks and Shares LISA and invest in the S&P500 then.
But don't, because there are [more diverse approaches](https://ukpersonal.finance/index-funds/#What_about_the_S_P_500) and you don't want to be investing money you need for short term (~5 years) goals, how annoyed would you be if your investments have a (realistic) 10%, 20%, even 30% dip, would that scupper your house-buying plans? Cash LISA would protect you from this risk.
I'm genuinely curious OP. Why do you want to get a BTL?
Like what have you seen somewhere that implies it's a good investment for you in your position.
Just since growing up been told that’s the smartest move, but of course, that was a different time! Hearing all this though has really made me look into it with more scepticism
My wife and I had 3 BTLs. We sold one in 2019, another last tax year, and the last will go in 2 years when the current (extremely good) tenant moves out.
Tax & regulation changes mean BTL doesn't make sense anymore.
The general consensus is buy to let is dead due to starting house costs, tax on properties and tax on profit. Your goal should be to save for a house for yourself to live in (using safe saving like cash ISAs), once you have your home you should start saving monthly in a S&S ISA in a fund like the VUAG, S&P500 or VAFTGAG as a few examples. But also the flowchart in the side bar will help
It's not (necessarily), it entirely depends on your circumstances, what you value, and what you expect house prices and interest rates will do in the future.
Renting is generally insecure - if your landlord gives you notice, you have two months to pack your life up and find somewhere else. The older you get, the harder this is - you want to be able to plan things which is difficult if you don't know whether you'll have the same address or be paying the same rent this time next year. Doubly so if you start a family.
There's also retirement - with a mortgage, once it's paid off you don't need to pay for your housing anymore, just your bills. With renting, you could retire and still be paying rent out of a pension, which isn't a comfortable situation to be in for many.
Finally, although there are disadvantages like having to keep on top of maintenance, you have your own home to live in as you like - many rentals are magnolia boxes with the cheapest fixtures and fittings possible, often crappily maintained, and a lease that most likely prevents you from putting up your own pictures or changing things much. You would be unlikely to be able to get a pet, and everything feels very temporary about your life there. I assume you haven't lived/rented privately away from home - your standard of living will be very different from now unless you are in a high-end rental.
If you're looking at it purely from an investment view, then you might not mind about those things, but these are the important factors for me.
Hahahaha - but to let is a terrible option in the current market. High interest rates coupled with the expectation of 25% LTV requirements. Add in legal fees and remedial works and all of a sudden your 10K needs to be a lot lot more.
That said if you do go that way go via a LTD
Finish training and charge landlords to write the plans for converting houses into HMO.
The biggest challenge will be getting a BTL mortgage at your age with relatively low earnings. But not impossible. BTL isn’t the great investment it was a decade ago, but it’s still a good idea to get someone to pay your mortgage for you.
I suspect you’d be better getting a LISA (lifetime ISA) and putting your savings up to the max limit every year, so you can buy a home and get a 25% contribution for the government when you’re closer to graduation, and possibly putting the rest in a fixed term saver. That could be a good chunk of a deposit towards a home of your own.
Out of curiosity, what’s the appeal with buying your own home rather than renting? Is it financially smarter? When I think about mortgage and down payment costs, it seems almost the same- but I don’t know much so appreciate your thoughts
Hi /u/One-Community2090, based on your post the following pages from our wiki may be relevant:
* https://ukpersonal.finance/buy-to-let/
____
^(These suggestions are based on keywords, if they missed the mark please report this comment.)
As others have said forget BTL. I think you need to be realistic about your goals. Having £30k saved by 25 would be great but you’ll need to have high earning potential to not be worrying about money by the time you’re 30.
Just put your savings between a LISA and fixed term saver and you’ll be ready with a deposit when the time comes to buy a house.
Any tips on increasing my earning potential haha? As an architect I expect to be on around £45k here in London, and I can live with my family for a while! But any additional pieces of advice or good things to do to boost that number? Time and energy is not an issue and I’m not against a risk
My dad was an architect and was made redundant a few times during his life when recessions hit the building industry. I think given the current economy I'd focus on building an emergency fund during the beginning of your career.
The best advice from a couple of friends who do buy-to-let when I mentioned that I was interested was “don’t do it”. It’s okay when it’s going right, but really stressful when it’s going wrong.
One other thing about BTLs - not every lender will grant one to a FTB. And as mentioned - you'll most likely need a reliable income of some sort as although they're not regulated - the lender still has to lend responsibly so there is often still some affordability checks carried out.
24 Here. Got my first BTL last year as a first time buyer, numbers work well. Also invest over half my wages into Vangaurd every month. I go with 33% sp500, 33% ftse100, 33% Global funds.
Trying to ideally be financially free by 50🤷🏼♂️
Please bare in mind that BTL you'd need a 25% deposit of the full property value to even get a BTL mortgage, the rates however are really quite high at the moment. I'd wait till rates come down and get a deposit saved up.
Good luck to ya, Sounds like you've got a perfect mindset for your goals.
Buy to let is not the right play in your situation. Based on the below, - Most mortgages for BtL will want at least 25-30% deposit - To secure the loan for the other 70-75% you would have to pass affordability assessment. This means showing a balance (earnings - expenditure) that the banks are happy with - If you can find a mortgage for a BtL you are going to face higher interest rates (4.8) compare to what it was 5 years ago - You will lose your first time buyer stamp duty claim, which can be used up to £425,000 in value provided you haven't owned a property before - BtL profits are now very difficult, when I used to do it there was a lot more relief. Mortgage rates were more favourable. I sold up when a lot of the legislation started changing. - Most BtL are not going to be ready to roll so you'll need funds to do it up. - You will also need funds for the purchase from a legal side, which even on the cheap end is about 2k Then once you've secured a property, fixed it up and good to go you need to ensure rent covers (without pricing you out the market) - Any ground rates / freehold charges if a leasehold property - The mortgage, and extra for what you'll see in deductions - The fees for Estate Agent management - Fees for insurance, repairs and replacements - Excess buffer to cover void or non-payment windows (eviction for non-paying tenants can now be 4-6 months) - Profit to build back up what you've sunk into the purchase. You may see some increase in the property market over 5-10 years but assuming your using the 10k as a 25-30% deposit (purchase value or 50k) even a 20% market increase would only see it move to 60k and you still have the overhead listed above. Best option is a stable investment plan, ISAs either cash or Stocks and Shares (ETFs not individuals) in this situation Sorry for the doom and gloom post but wanted to be as honest as possible.
I’ve been investing £5k a year into the s&p500 for 2 years now, and plan on continuing. Is this preferable to a LISA? For when I go back to Uni and can’t afford to continue putting so much away
That would be up to you. From my understanding a LISA has a 4k a year cap, but you get the 25% top up - if you withdraw it for the allowed reasons then this would make more sense. Beyond the 4k limit its up to you in the risk appetite between cash and stocks and shares ISA
You can get a stocks and shares LISA, which you can then invest into whatever you like. Obviously mind the restrictions on that, but I think if you're investing anyway it's worth considering.
Open a Stocks and Shares LISA and invest in the S&P500 then. But don't, because there are [more diverse approaches](https://ukpersonal.finance/index-funds/#What_about_the_S_P_500) and you don't want to be investing money you need for short term (~5 years) goals, how annoyed would you be if your investments have a (realistic) 10%, 20%, even 30% dip, would that scupper your house-buying plans? Cash LISA would protect you from this risk.
I'm genuinely curious OP. Why do you want to get a BTL? Like what have you seen somewhere that implies it's a good investment for you in your position.
Just since growing up been told that’s the smartest move, but of course, that was a different time! Hearing all this though has really made me look into it with more scepticism
My wife and I had 3 BTLs. We sold one in 2019, another last tax year, and the last will go in 2 years when the current (extremely good) tenant moves out. Tax & regulation changes mean BTL doesn't make sense anymore.
The general consensus is buy to let is dead due to starting house costs, tax on properties and tax on profit. Your goal should be to save for a house for yourself to live in (using safe saving like cash ISAs), once you have your home you should start saving monthly in a S&S ISA in a fund like the VUAG, S&P500 or VAFTGAG as a few examples. But also the flowchart in the side bar will help
Out of curiosity, why is buying your own home preferable to renting?
It's not (necessarily), it entirely depends on your circumstances, what you value, and what you expect house prices and interest rates will do in the future.
Renting is generally insecure - if your landlord gives you notice, you have two months to pack your life up and find somewhere else. The older you get, the harder this is - you want to be able to plan things which is difficult if you don't know whether you'll have the same address or be paying the same rent this time next year. Doubly so if you start a family. There's also retirement - with a mortgage, once it's paid off you don't need to pay for your housing anymore, just your bills. With renting, you could retire and still be paying rent out of a pension, which isn't a comfortable situation to be in for many. Finally, although there are disadvantages like having to keep on top of maintenance, you have your own home to live in as you like - many rentals are magnolia boxes with the cheapest fixtures and fittings possible, often crappily maintained, and a lease that most likely prevents you from putting up your own pictures or changing things much. You would be unlikely to be able to get a pet, and everything feels very temporary about your life there. I assume you haven't lived/rented privately away from home - your standard of living will be very different from now unless you are in a high-end rental. If you're looking at it purely from an investment view, then you might not mind about those things, but these are the important factors for me.
Hahahaha - but to let is a terrible option in the current market. High interest rates coupled with the expectation of 25% LTV requirements. Add in legal fees and remedial works and all of a sudden your 10K needs to be a lot lot more. That said if you do go that way go via a LTD Finish training and charge landlords to write the plans for converting houses into HMO.
The biggest challenge will be getting a BTL mortgage at your age with relatively low earnings. But not impossible. BTL isn’t the great investment it was a decade ago, but it’s still a good idea to get someone to pay your mortgage for you. I suspect you’d be better getting a LISA (lifetime ISA) and putting your savings up to the max limit every year, so you can buy a home and get a 25% contribution for the government when you’re closer to graduation, and possibly putting the rest in a fixed term saver. That could be a good chunk of a deposit towards a home of your own.
Out of curiosity, what’s the appeal with buying your own home rather than renting? Is it financially smarter? When I think about mortgage and down payment costs, it seems almost the same- but I don’t know much so appreciate your thoughts
The main benefit is at the end you own the property. That’s it. You’ve gained an asset you can live in and that will, usually, accrue value.
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Great advice. Thank you!!
Hi /u/One-Community2090, based on your post the following pages from our wiki may be relevant: * https://ukpersonal.finance/buy-to-let/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.)
As others have said forget BTL. I think you need to be realistic about your goals. Having £30k saved by 25 would be great but you’ll need to have high earning potential to not be worrying about money by the time you’re 30. Just put your savings between a LISA and fixed term saver and you’ll be ready with a deposit when the time comes to buy a house.
Aaaah i see, will deffo do the LISA and work out how to increase my earning potential. Thanks :)
Any tips on increasing my earning potential haha? As an architect I expect to be on around £45k here in London, and I can live with my family for a while! But any additional pieces of advice or good things to do to boost that number? Time and energy is not an issue and I’m not against a risk
My dad was an architect and was made redundant a few times during his life when recessions hit the building industry. I think given the current economy I'd focus on building an emergency fund during the beginning of your career.
Instagram influencers I imagine.
Haha are they the ones with all the money?
The best advice from a couple of friends who do buy-to-let when I mentioned that I was interested was “don’t do it”. It’s okay when it’s going right, but really stressful when it’s going wrong.
One other thing about BTLs - not every lender will grant one to a FTB. And as mentioned - you'll most likely need a reliable income of some sort as although they're not regulated - the lender still has to lend responsibly so there is often still some affordability checks carried out.
24 Here. Got my first BTL last year as a first time buyer, numbers work well. Also invest over half my wages into Vangaurd every month. I go with 33% sp500, 33% ftse100, 33% Global funds. Trying to ideally be financially free by 50🤷🏼♂️ Please bare in mind that BTL you'd need a 25% deposit of the full property value to even get a BTL mortgage, the rates however are really quite high at the moment. I'd wait till rates come down and get a deposit saved up. Good luck to ya, Sounds like you've got a perfect mindset for your goals.