Property

[KUWTK_91]

Basically I am 19 and I have been left a house by my Nan. Its down in Brighton it's worth about £300k and in all honesty I have no idea what to do with it. I know rental is around £1,800 a month around the area which is great but I would really love to develop a career out of this fortunate position. So what would you do? I would love to own lots of property one day so how would I go about doing this? Do I just rent it out for years whilst working in a decent job and never touch the rental money untill I can afford to buy a second house, but that seems a slow process. So any experts there that have any help? It's a completely mortgage free house.

 

[berts]

Personally i would keep the property and rent it out. The property market at the moment is not doing particularly well. If you hold onto it for a few years you should be able to sell it for a lot more than you would if you sold it today.

£1800 pcm is a nice income for not doing a lot! A couple of years on this income you will have enough to buy a second property.

 

[KUWTK_91]

Personally i would keep the property and rent it out. The property market at the moment is not doing particularly well. If you hold onto it for a few years you should be able to sell it for a lot more than you would if you sold it today.

£1800 pcm is a nice income for not doing a lot! A couple of years on this income you will have enough to buy a second property.

Thanks for the reply.

So that is how its done then, after say four years buy a second property then rent it out and the income will raise. Then just keep going, buying more and more properties?

 

[berts]

Thanks for the reply.

So that is how its done then, after say four years buy a second property then rent it out and the income will raise. Then just keep going, buying more and more properties?

quite often the idea of buying rental property is to have the tenants effectively pay off the monthly mortgage payments. This way after 25 years you effectively have a free house.

You already have one mortgage free house so any income from that is profit that you can use for deposits on more properties in the future.

 

[FM1000]

What i would do is rent this property out for a few years till the property market starts rising again. Once this happens sell this house to raise money for more properties.

If it sells for £400k for example, it would give you deposits for a dozen properties.

Buy a dozen and rent them out till the prices are high enough to make you great profit. Sell them all and cash in.

I personally wouldnt keep properties and rent them out in the long term as too many of my friends have been experiencing difficulties with tenants.

One of my business partner has 5 properties and the hassle he's having isn't worth it

 

[oliverbanks]

I have no idea at all, and even less experience, but heres a suggestion:

Maybe rent this one out and take a mortgage/loan at the same time to buy a 2nd house and use the £1,800 a month to pay back the mortgage/loan? Whilst of course renting the 2nd property..?

 

[KUWTK_91]

I have no idea at all, and even less experience, but heres a suggestion:

Maybe rent this one out and take a mortgage/loan at the same time to buy a 2nd house and use the £1,800 a month to pay back the mortgage/loan? Whilst of course renting the 2nd property..?

Yes, I think that is the road I want to go down. Does that mean I can buy a third house also and let the other two rents pay it off? The problem is what if I cant get people renting it?

 

[tony84]

get a job and take out a small mortgage on the property and buy a second property.

Say you have a job paying £1k a month.
Thats an income of £2.8k a month (lets say £30k a year). After 10-18 months you could have a 15-20k deposit. Im sure you can find a house for £150k in that area to rent out.

You will then have have 2 rental incomes and a £130k mortgage.

Fair enough you will have to work for a few years but no reason that after say 5 years you couldnt have 3-4 houses.

Good luck, what a great opportunity and one you seem to be making the most off.

 

[KUWTK_91]

get a job and take out a small mortgage on the property and buy a second property.

Say you have a job paying £1k a month.
Thats an income of £2.8k a month (lets say £30k a year). After 10-18 months you could have a 15-20k deposit. Im sure you can find a house for £150k in that area to rent out.

You will then have have 2 rental incomes and a £130k mortgage.

Fair enough you will have to work for a few years but no reason that after say 5 years you couldnt have 3-4 houses.

Good luck, what a great opportunity and one you seem to be making the most off.

Indeed it is a great oppurtunity that many people would have to work a long time to have a £300k house. Thanks for the advice.

I was just wondering how far can you go with property?
Is there not a stopping point to how much money you can make with it?

I think I should try and get a job in the property industry, so I can learn the tricks of the trade. What do you think?

 

[Homshaw]

You are very fortunate and seem to appreciate the fact.

Best of luck with whatever you do with it

 

[Homshaw]

Some good books on Tax cafe

 

[Business1Solutions]

What do you do at the moment?

Maybe do that job in an estate agents/property company?

 

[sellickbhoy]

this is what i'd do........


Rent it out and squirrel the money away into the bank for 2 years. (remember you need to declare this income and pay tax, so get in touch with an accountant will also i'd probably use a letting agent to find and check your tenants and provide all the contracts and legal requirements if you don't know about them.)

once you have about 30k saved i'd look to buy a run down property, fix it up and sell it.

You should have enough income from the rent of the 1st property to support you and allow you to do 2-3 properties a year.

If you do well you can then start to keep one of the flats and rent it out so rennovating 3 a year, sell 2 and keep 1 to rent out.

i'd love to be in your position. Good luck

 

[tony84]

You could possibly look to get a job with a handyman or property management - learn how to do basic plumbing, electrics etc.

I did my house up to sell out and learnt how to fit sinks, tile, fit laminate flooring, decorate etc etc - all of these jobs will cost money if you end up needing it done and cant do it yourself.

 

[KUWTK_91]

Again thanks for all the advice, I am taking it on board.

At the moment I am a tennis coach, I have played alot of tennis as a junior which involved alot of travelling so I am starting to fall out of love with the game.

So I am looking for a career change and with this house I think I should go down the property route. I am beginning to realise how much money is in property and feel I can provide myself with a comfortable living in the future.

Estate Agent. Property Managment. I will investigate how I can get into the pair of them.

 

[Hillyer]

Don't get caught up in the monopoly of it. Yes, you do have a free house and could quite possibly rent it out, take loans out, have rent pay-off loans, etc etc. It is lucrative, but remember it can go both ways. It can snowball out of control and land you in debt as quick as it can snowball you onto a beach in the Caribbean!

Just whatever you do, make sure you have a reality check every few months! Maybe write your goals down and keep reviewing them every few months. Try not to get ahead of yourself.

Best of luck!

 

[oliverbanks]

Yes, I think that is the road I want to go down. Does that mean I can buy a third house also and let the other two rents pay it off? The problem is what if I cant get people renting it?

That's part of the risk of renting I guess. I'm sure if you set a good price you'll have tennants.

 

[Packaged Solutions]

I would put the rental income aside for 2 years and plough the £30k into starting new business (in whatever you like!).

Then you'd still have £1800 a month coming in to support you while it gets off the ground - which is just unbelievably handy!

Business fails? - ok save for another 2 years, & try again.

Amazing oppertunity for you at such a young age (please whatever you do, don't sell the house!).

 

[FM1000]

Indeed it is a great oppurtunity that many people would have to work a long time to have a £300k house. Thanks for the advice.

I was just wondering how far can you go with property?
Is there not a stopping point to how much money you can make with it?

I think I should try and get a job in the property industry, so I can learn the tricks of the trade. What do you think?

The rental market has risks. You need to have contingencies for when the property is empty or if the tenant doesnt pay the rent.

You are fortunate with this property as there isnt a mortgage so it doesnt matter as much, but as soon as you take out a mortgage against it you will be dependant on others paying you on time and the property being occupied otherwise you will have to fork out the payments from your own pocket.

If you want the safe way to make money from property then follow my advice and rent this one out and wait till the market is on the rise again.

 

[Packaged Solutions]

Does anyone else find that it's incredible a £300k house generates £1800/month rental income?! a £300k house here would get about £800/month. Brighton yuppies eh?!

 

[deniser]

Does anyone else find that it's incredible a £300k house generates £1800/month rental income?! a £300k house here would get about £800/month. Brighton yuppies eh?!

Is the OP sure of his figures? £1800 would be very top end for a three bed house in Brighton and would be a refurbished house with high spec interior in a top location.

 

[AmandeepS]

I got started investing in property around your age. Are you sure the rent is correct? If so, £1800 rent represents a fairly good yield (7.2%) for a property in that price bracket.

If I were in shoes I would rent out the property and then after a few years look to release some money from it by taking out an interest only mortgage and then buy a few more properties. This will help you build a portfolio that provides you with a passive income which you can then use for whatever you wish.

If you're really interested in property investing/developing check out my site or PM and I'll share some secrets with you!

 

[KUWTK_91]

Regarding the rent, there was another house on the road which was up for rental and it was at £1,800. But with the spec I have no idea, it would not be top range as an old woman use to live in it. The location is great, near schools, shops, public transport to the station and town.

For now I think I will just rent it out and not touch any of the income, I will also work so if I can save some money from that I will look to buy a second house in five years with as small a mortgage as possible.

PinkPurpleApple your idea seems like it could make alot of money and very quickly but is it really risky? I will PM you..

 

[deniser]

Regarding the rent, there was another house on the road which was up for rental and it was at £1,800. But with the spec I have no idea, it would not be top range as an old woman use to live in it. The location is great, near schools, shops, public transport to the station and town.

To get the right answer to your original question, the yield is very important. I would advise you to have the house valued both for letting and for sale by a local letting/estate agent and then post again here.

 

[KUWTK_91]

To get the right answer to your original question, the yield is very important. I would advise you to have the house valued both for letting and for sale by a local letting/estate agent and then post again here.

Yes I do need the house valued for rental, we did have it for valued about 5 months ago. Is that too long or do I need it valued again?

 

[deniser]

Yes I do need the house valued for rental, we did have it for valued about 5 months ago. Is that too long or do I need it valued again?

It't not too long but just seems high. Is it based on renting out the rooms separately or as a whole house?

You should get 3 valuations and take the average, both for letting and sale.

What you do with the house depends on the figures.

 

[vvaannmmaann]

This happened to guy I know.Left a property in similar circumstances.He was making plans for it.Only then did he find out that the house was subject to equity release,and that's when the trouble started.
So make sure it is free of any debt.
If you intend letting it out,it will have to be top quality.Lots of letting properties in Brighton/Hove so there is lots of competition.Also be very wary of letting agents and their charges.
Good luck with it.

 

[gordano]

Does anyone else find that it's incredible a £300k house generates £1800/month rental income?! a £300k house here would get about £800/month. Brighton yuppies eh?!

£1800 pcm is top end rent on £300K in Brighton, but note this area is packed with Students so student lets drive up rental yields.

To the original poster - I purchased my first buy to let property over 20 years ago, and from there added a 'few'. My advice is as follows:

1 - Golden Rule. Never over leverage yourself, it is too risky. By this I mean you need to ensure sufficient net income from rents to cover your outgoings at interest rates well above today's level.

2 - Take out a mortgage on your inherited property. Depending on your salaried income you should get around 70% mortgage (LTV) at an interest rate of around 3-4% (note rates will go up). There are plenty of specialist brokers who can advise on BTL mortgages. This should give you about £210K cash and a net income around £700-£800 after allowing for interest and expenses.

3 - With your £210K cash buy 2 other properties in the area with around 50% LTV mortgages. EG buy 2 flats at £200K each, use about £180K of your cash as deposits (always keep some in reserve). Choose the flats based on their rental potential and yield. With a £110K mortgage on each these should give a reasonable cash flow.

With the above approach you could own £700K of property, have a net income of at least £1K pcm. and have around £30K cash left in the bank. This gives plenty of cushion to cover unforeseen issues in the future and some protection against rising interest rates.

NOTE - the above is only an illustration, you need to choose properties carefully and also understand that being a landlord also involves effort in managing properties. You also need to flex-test the incomes and outgoings to make sure you are covered for future expected interest rates, tenancy voids, etc.

There is also another property investment option for you, that is development, e.g. buy somewhere and develop it to increase capital value. However unless you have some experience in property development this route has more risks.

 

[KUWTK_91]

Great advice from everyone. Thanks alot.

So I have an interview tomorrow at an estate agent, I told them I would work for free just so I can get my foot in the door a the company, I am very happy to do that so I dont mind. Hopefully if I get some kind of a role I can build knowledge and experience to be succesful.

I feel at the moment I am just a baby faced 19 year old that would get ripped off by all these money hungry people who know I dont have a clue. So if I can build up some knowledge I may prevent this from happening as well as understanding what are the best properties to buy and when to buy.

Anyway I will keep you updated with what I do and seek advice as it is very appreciated.

 

[gordano]

Great advice from everyone. Thanks alot.

So I have an interview tomorrow at an estate agent, I told them I would work for free just so I can get my foot in the door a the company, I am very happy to do that so I dont mind. Hopefully if I get some kind of a role I can build knowledge and experience to be succesful.

I feel at the moment I am just a baby faced 19 year old that would get ripped off by all these money hungry people who know I dont have a clue. So if I can build up some knowledge I may prevent this from happening as well as understanding what are the best properties to buy and when to buy.

Anyway I will keep you updated with what I do and seek advice as it is very appreciated.

Be careful, estate agents make most of their money from sales, e.g. 2% commission on 300K is £6K commission compared with say 10% on rent e.g. £2K per year on £20K rental. ... thus sales make more money for them!

My advice is listen to feedback from the estate agent, but seek "independent advice" before making any decisions.

 

[Craggy]

I understand owning more then 2 propertes would have tax implications when you sell one of them. Can anyone elucidate on this?

 

[Homshaw]

CGT is quite complicated and the savings to be made are large. You either need to read up on it (tax cafe do good books) or have half an hour with an accountant

I started to write some pointers but you really can't do it here

 

[Liite]

Be careful, estate agents make most of their money from sales, e.g. 2% commission on 300K is £6K commission compared with say 10% on rent e.g. £2K per year on £20K rental. ... thus sales make more money for them!

My advice is listen to feedback from the estate agent, but seek "independent advice" before making any decisions.

However they dont get commission on the price of the house. They get it from the fee of selling the house - which is much much less

(It might be different but this is speaking from experience of working in one)


ANYWAY

 

[Rainbow Chasers']

Keep it - rent it - and earn enough to learn the trade.

Then you have a base with which to expand. No-one will turn you away due to age, once you have some business courses behind you, for mortgages to expand your portfolio. The more you buy, the more you can borrow. Don't look at what you owe - you will die!

Friend of mine was a multi millionaire in ten years from doing this, just renting his old flat and buying another on mortagage from auction and kept doing the same. He owed a few million to the banks in mortages!

He had some good stock, some crud. Kept them to minimum standard to let. Once the property boom hit, he sold many of his 'poor' stock after tarting up and refitting them more a pretty profit.

Each time buying more! Look at the bigger picture - what you buy now, is what you will own when you are 30/40 - plenty enough to sell and retire on!

 

[puffin]

What did you decide?

 

[jon1984]

Release your capital from the property and purchase homes from auctions, do them up and rent them out, then once the market turns in 6 years or more you will be the developer you now inspire to be.

Thanks

 

[northwestlondonproperty]

KUWTk - are you still following this thread? What have you decided to do? I bought a property at a reasonably young age and benefitted from the large house price increases in the 90's which effectively gave me a 'free' property just like you. I have added to that - very slowly - over the last 15 years, to a point where it is my only business.

I would happily answer any questions or give you some guidance. There are many different ways to skin a cat of course and many people willing to give advice - some of it awful. Surprisingly there are many that will give good, free advice simply to help others - what do they get in return? The feeling of goodwill.

From a starting point of +£300k, if you play your cards right you can't go wrong, the flip side is also true.

Hope to hear from you.

 

[KUWTK_91]

Hi All,

Thought I would update you on progress. (Now just turned 21 years old)

Currently renting the house out for £1.6k a month, the ideas of building a huge property portfolio have taken a back burner though. I decided to become a freelancer in my job so I can work from anywhere in the World but obviously get no base salary just a higher commission rate (I'm a headhunter). So on Tuesday I fly to Madrid and will use the rental money to survive and live and money I earn through my job is a bonus.

Am I being smart?

I thought I wanted to be a big shot business man who owns a huge portfolio but I think all I want is fun (live for the now) at the moment.

 

[tony84]

Good to see an update.

Its entirely upto you. The more work you do now, the less you need to do later (thats the theory), however like you say your young so make the most of it whilst you can. I wish i had done more travelling before i settled down with my gf.

 

[QuickHomeBuyers]

As it has been mentioned already, you could potentially release some cash or perhaps borrow against it and buy more btl's. Rents are great at the minute and I don't see them coming down anytime soon.

Property is always a safe bet but you gotta know what you are doing cos it ain't soft money.