(Potential) new landlord questions for the experienced

[Jimreaper]

well, not so much questions as asking some of the more experienced among you to see if my plans stack up, if that's ok.

Currently have my own classic car restoration business which thankfully is successful enough for me to have accrued a decent lump sum so far and continues to do so. However, given the rising environmental pressures against motorists, electric cars etc etc I'm wondering just how viable the business will be in the long term, classics should hopefully fare a little better than everyday cars but I think the writing will be on the wall eventually.

I am looking to take my lump sum, or some of it at least and make the move into property, with the short term plan being to run the 2 businesses side by side and the long term plan being to step away from the motor trade altogether with enough properties to make my monthly income from rent, and the long long term plan being when I retire I can sell my portfolio and use the money as a pension. im 39 now so 25 odd years before retirement

I'm still researching the basics and plan to complete the Nrla fundamentals course before doing anything

The properties that peak my interest the most are flats, they can be picked up for around 50 - 60k in the areas im looking at (areas I know well as I grew up in them) and they are not a million miles away from where I live now, For this sort of money I can afford to buy the first outright which obviously appeals, now I suppose my first proper question is can you find tenants for flats easily enough or would houses be a safer bet? the yield on these flats is coming out at around 8 - 9% (best case scenario, not taking into account ground rent etc) whereas houses with their higher cost in the first place come out much lower, that's assuming a £400 p/m rent on a flat which in most areas round here gets you a room in a shared house so should be easily achievable with most flats unless I'm missing something.

with the cars I have in stock ready to be restored and sold I reckon I could buy another one, with a personal loan to top up the cash with a view to clearing it earlier using rent from flat 1 & 2 and then buying a 3rd the same way, this is assuming flats are a viable way to go, houses would have to be mortgages and obviously I wouldn't be moving as quickly

While I am still earning a wage from the cars I plan to leave any money from rent alone, either to be used as reinvestment capital / paying off loans as already mentioned or simply as a contingency fund for repairs etc - on that note what would be a sensible fund to have at the beginning for this purpose, 5 - 10k?

So, am I talking bollocks? are flats worth it and do my plans sound reasonable?

Your thoughts would be appreciated

[DPT57]

In normal times that all sounds quite reasonable. We are not in normal times and expect conditions to get worse for landlords both before and after the end of covid. I would not personally get into this market now if I wasn't already involved. I think you should research other investment options alongside property and only when you have done some comparisons move forward.

There was an interesting post on Propertytribes that I read earlier in which a guy compared his property investment with other investments over the past year or so.

[jpkeates]

Personally I don't let flats, because the area I operate in is quite rural, and the flats there are tend to be above shops, which can be a problem.
But there's definitely a market, you can usually tell on right move how much they let for and how much they're going for.

I let through an agent, and they'd be able to steer you towards the right type of flat in the right area.
But if you know the area yourself all the better.

The biggest issues with flats tend to be getting maintenance work done where it's not actually in the property and noisy neighbours.
And cladding and fire issues are well publicised at the moment.

You're not doing anything unreasonable though.

[Jimreaper]

jpkeates,

probably should have said the sort of things I'm looking at are fairly modern, small blocks of 6 / 8 etc, not high rise ex council jobbies (so cladding etc not an issue) and are in towns, take your point about maintenance but hopefully that's what service charges are for, could I be held accountable for something that's within the "public" are of the building but not within my flat?

[Jimreaper]

DPT57,

Thank you and its not something Im rushing into right now, the plan is to sit back for a year or so and see what unfolds post (hopefully!) covid

[jpkeates]

could I be held accountable for something that's within the "public" are of the building but not within my flat?

Yes, the leaseholders are usually liable for paying for work that affects them collectively.
That's an issue with leaseholders and flats generally, though, it's not specific to letting.

[DPT57]

Thank you and its not something Im rushing into right now, the plan is to sit back for a year or so and see what unfolds post (hopefully!) covid

That sounds very sensible. By then some of the expected changes will have taken place, (such as CGT increases) and you will have a stronger basis for comparison.

[Beswick]

I'd just buy one and see how you feel about it after a year or so. Personally I prefer houses to flats. It's bad enough paying council tax & utilities during void periods, without having service charges to pay as well.

25% deposit, 75% mortgage. That way, if you hate it you have invested as little capital as possible. It will also increase your return on investment. If you think it's the thing for you, you'll still have a fair chunk of your 'lump sum' left over for other deposits, and you'll be able to buy more in total. This reduces the effects of getting a bad tenant.

Remember, this is a long term investment. Once you're in, getting out quickly could prove costly !

[ATC]

You know what : I am going to suggest you buy low rise light industrial sheds/storage/garages. Worst case you can always put vintage cars inside! Commercial tenants have far less rights because the letting does not comprise living accommodation.

[Section20z]

Storage units is probably a good shout with the amount of anti landlord legislation about but with the OP's experience I'd be thinking of converting classics to electric, particularly those big juicy motors beloved of people with more money than sense..

[doobrey]

with the OP's experience I'd be thinking of converting classics to electric.

I thought the same. That seems to be a good business to be in.

[Jimreaper]

Storage units is probably a good shout with the amount of anti landlord legislation about but with the OP's experience I'd be thinking of converting classics to electric, particularly those big juicy motors beloved of people with more money than sense..

Funnily enough converting classics to electric is something else I have been investigating lately

[Jimreaper]

You know what : I am going to suggest you buy low rise light industrial sheds/storage/garages. Worst case you can always put vintage cars inside! Commercial tenants have far less rights because the letting does not comprise living accommodation.

Good idea too, trouble is actually finding them for sale!

[ATC]

"the more I practice the luckier I get" Arnold Palmer


Keep looking!

[Flashback1966]

They are banning the sale of petrol and diesel cars in 2030 and hybrids in 2035. That does not mean, they will stop selling fuel?. You are 39, assuming fuel is available until 2045, that takes you to 64 yo.

People like to own Classic Cars, even as collectors items. You have a fun business.

Things are bleaker for the rental market. It has become political. In recent years, the number of regulations have gone up from 118 to 156. Councils are introducing Licensing schemes, which is more paperwork and expense. It is only going to get worse. Landlords are an easy target for politicians. Shelter campaign against landlords. We have had unfair tax rises, which lead to landlords spending money on tax advice. Regulations are great for professional, who profit from them. I had the electrics done a few years ago. Now told, I need to upgrade the consumer unit from plastic to metal one. There is constant new regulation driving up costs. Signing up to data protection and paying their annual fee. There are changes to S21 in the pipeline.

You say rents in that area are £400pcm (£4,800p.a.). I don't know how other landlords work with such numbers. A modest kitchen and bathroom refurbishments will cost £12,000. You need to do these every few years. A new gas central heating system £3,000.

The rental market is no longer fun, as you spend more time doing paperwork. If you miss a new piece of regulation, then you are in trouble and you may struggle to get the property back.

It sounds pessimistic. You are better off renting out your classic cars. ;-)