Considering purchase and letting a flat

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    Considering purchase and letting a flat

    Hi All

    My wife and i are considering purchasing and letting a flat. We are total newbies to this and would appreciate some advice to see if this is something worth proceeding with or not!

    The circumstances are:
    -We are in our mid 40s and are coming into an inheritence of about 140k
    -We are close to mortgage free (about 5k to go)
    -We live in a block of freehold flats where people either own and live or own and rent.
    -A flat is not yet for sale, but they come up reasonably often (hence we are researching early)
    -We live in a flat on the top floor, and a flat we are keen to get would be on the Ground floor (for long term future proof purposes (!) should we want to move in to it long term)
    -The flats currently sell for between 140-150k (so we would need a very small mortgage) rent for between £700-750 per calendar month.

    Our main reasons for considering this are:
    -Long term investment purposes.
    - As mentioned, we may want to move in long term.

    Any advice appreciated!

    Many thanks!

    Sounds like a fab idea. Only one factor needs to thoroughly thought about - calibre of tenants. otherwise property investment is sound!! i was landlord a few weeks ago, and had to evict my tenants. Now I am selling, because I have had enough stress.........

    another idea is why don't you rent out your apartment and buy a house for yourself.


      I would sell the flat you own and buy using the inheritance a larger property.

      Then no tax or difficult tenants to worry about


        If I was you I’d be taking out quite a large mortgage rather than a very small mortgage, mortgage borrowing is cheap at the moment, that way you can keep some of the money back to invest elsewhere - i.e another property, or stocks and shares ISA etc.
        Or as suggested above buy a house for yourself and remortgage your own flat to rent out.


          Thanks all for the comments; definitley food for thought!

          Re taking out a large mortgage. I do appreciate what you say about taking out a large mortgage. As i am close to paying off my existing mortgage (having managed to overpay by 30k) i am very pleased with myself (!) and am reluctant to get another large mortgage. (Limiting i do appreciate!). But will give it thought.

          Re tenants, yes, i appreciate you can never be 100% certain about someone, but we would do due dilligence.


            Originally posted by CCSN View Post
            freehold flats
            Sounds a bit like a contradiction in terms. Do you mean the flats each have a share of freehold?

            You are looking at a gross yield of about 6%, before voids, service charges, maintenance, etc. Personally I don't think I would.

            Depending on circumstances (e.g. tax) you could potentially increase ROI by maximising borrowing... although only basic rate tax relief is available on mortgage interest.

            There is a fine line between irony and stupidity. If I say something absurd please assume that I am being facetious.


              Yes, correct, that's what i meant; each have a share of the freehold.

              The maintenance fee (which covers window cleaning, shared electric, gardening etc etc) is in our remit to agree of course. Currently it is £90 per month, but we are looking to reduce that in the not too distant future. But yes 6% doesn't sound appertising for the effort involved.

              The plus side versus normal investors who are only profit, is that would have a future proof property to move in to.


                Understood on the bigger picture.

                One item to be aware of (which you may be already) is additional rate stamp duty, which is payable on purchase if you own more than one property.
                There is a fine line between irony and stupidity. If I say something absurd please assume that I am being facetious.


                  Your timing is totally wrong. If there is a bad time to get into BTL, it is now. Experienced landlords are quietly exiting the market and you will be one of the suckers taking up the burden.

                  Owning leasehold properties is also a bad idea if you don't absolutely have to do that (until the legislative framework changes).

                  No, you don't live in a "freehold flat" (and blocks in which a share of freehold is owned are often where the biggest nightmares arise). And the only £90/month service charge which they are looking to reduce is a big-time red flag


                    If buying a leasehold flat to rent it is important to check that the terms of the lease (a) allow letting without any input from the landlord (b) do not include terms restricting who can occupy the property and (c) do not require notice of any letting requiring payment of an extortionate fee or one which says it has to be reasonable.

                    On the whole you are better of buying a freehold property to let - though some do have restrictions on occupation and letting.


                      Originally posted by doobrey View Post
                      Understood on the bigger picture.

                      One item to be aware of (which you may be already) is additional rate stamp duty, which is payable on purchase if you own more than one property.
                      Thanks. No, i'm not aware of this. This is exactly why im posting, to get this sort of advice - thanks. How is that calculated?


                        It's an additional 3%. It applies, essentially, to any residential properties other than your Principal Private Residence.


                        My view is that if you are thinking of buying this property to have twenty years from now, you would do better to invest the money in tax-efficient options (ISA/SIPP) where it is likely to produce a better return. Then buy a property to live in if and when you need it.
                        There is a fine line between irony and stupidity. If I say something absurd please assume that I am being facetious.



                          thanks for your thoughts. i think given your advice and many others i will steer clear of renting the flat!


                            I had thought about doing something similar myself. Only my property is in London so the yield is much worse. Instead, I plan to sell up my BTL after the fixed term ends in a few years and buy a cheaper place further out in London near my family all for cash. Hoping for prices to rise given the downsize, but given it is a London flat I don't expect it.

                            Actually was wondering if its worth selling up now? Would have to take about a 10k hit in early repayment charge (although my investments have more than made up for it when i invested the equity release), but at least it means I am out of BTL and can buy my home sooner.


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