Buy to let portfolio – help me see the bigger picture

Reply to the comment left by "kelvin kaliyati" at "23/07/2014 - 12:43":

The buy to let millionaires risked everything and most of the current crop did under very specific market conditions - rapidly rising market, easy access to high ltv products, etc.

A lot also went to the wall when the credit crunch happened.

Property is a long term business, and your houses will have a life cycle - some people join the game by buying a few, refurb, refinance, get 5 or 6 years cashflow out of it and then timing the sale of it at the top of the cycle.

For the longer term you need to be looking past that and planning for replacing boilers, roofs, kitchens, bathrooms etc over time.

For example my portfolio is now quite mature and my oldest property has been mine for 10 years. In that time I fitted a new kitchen, double glazing, redecorated, new carpets. Its probably had three sets of carpets, two full repaints, a new boiler, and the roof is due for replacement within 5 -10 years, and a full refresh of the furniture (its a student let). Grabbing the cashflow is great but its the fine management of detail (we spend a lot of time on this) thats important and banking money for ongoing repairs and planned investment.

Having said that, I'm in it for the long run and see it as a 20-30 year window (into my retirement), not get in and out between property cycles.

So my advice would be to start slow, build up a good cash reserves, keep 6 months mortgage payments to one side, and put 10% of your gross income to one side for repairs (and service charges if its a flat) and 5-10% away for ongoing investment. You might be able to leaverage your own time in maintenance etc to keep costs down which is quite common for new landlords. Don't get carried away with rising values and remortgaging - the plan is to make cashflow, not generate tax free refinance cash, as that money will always have to be paid back (at some point) and you are paying interest on it. However that's your call and no-one can tell you if its right or wrong, and only a tight trading environment (drop in demand, spike in interest rates) will tell you if you've got it right.

Final word - cashflow is king! Capital appreciation is the end game, but if you're making enough profit from day to day *rentals* (not relying on further advances) you *will* come unstuck - as many of the landlords I see on a weekly basis have.

Little bit more to add and that is Capital Gains Tax. - Plan a schedule so that you start to sell and repurchase once the gain on each is over you personal allowance £10,900 at the moment. Hence think about moving mortgages rather than starting new ones. Theres a lot can be said about CGT but just include it in your plan.
Enjoy. Allan

You will need more than £10,000. For a first time landlord, mortgage providers sometimes even ask for 40% deposit. And, as Rob says above, chances are your profit would be zero. You have to pay insurance on top of your mortgage and there is always ongoing maintenance. If you are thinking of managing this yourself, there is a lot you will need to know too unless you already have some experience here.

Reply to the comment left by "kelvin kaliyati" at "23/07/2014 - 12:43":

Hi Kelvin
I admire your enthusiasm and ambition. It is disappointing to see that people choose to mock that rather than support you, but the internet sometimes brings out the harsher more cynical parts of people's nature.

Having said that - the comments are fundamentally correct in what they say and you should not be mislead by seemingly easy rags to riches stories. It is NEVER easy.

Speaking from someone who adopted a high risk highly leveraged strategy in buying lots of flats in the boom years - I have learned that you need to build in a very generous contingency if you want to be able to sleep at night. Unexpected expenses and voids happen all the time and service charges on flats are horrendous. They will destroy your profit margins in most cases and there is nothing you can do about it.

I note you work at the Lime Bar - I am also based in Manchester. If you want to come to my office for a coffee and a chat, you are very welcome. Contact me if you would like to do so. If not I wish you the best of luck.

Reply to the comment left by "Frazer Fearnhead" at "26/07/2014 - 09:15":

Ive spoke to some financial advisors - I t seems 75% is the minimum - so to start me off - a one bed apartment seems to be the best place to start. 50k budget = £15k deposit - achievable in two years..

Right.. I'll do more research as I go.

Thanks ya'll!

Hi Kelvin

It is not all doom and gloom. Please don't not think people on here want ridicule new investors for buy to let. It is new investors that make s it work for everyone.

There has been a lot said on here so far. I have done it on my own and learnt by talking to other investors reading and playing it safe and of course making mistakes.

You need to plan and think about what you want from property. The most important thing I believe is your credit rating never over extend. If you cant get credit you can not grow your portfolio.

Please remember this pay the tax you earn as you go. That way when you are successful it won't be taken away from you. There is things you can do to limit the amount of tax you have to pay. Remember every thing is now done at the touch of a button and information it used to take month to work out now can take minutes.

Property is not easy you need to deal with all sorts most are decent honest but some just think it is there right to have what is not theirs.

Are you willing to deal with housing benefits tenants or only private. Remember anyone can end up unemployed through no fault of your own.

Some mortgages and insurances have terms who can let your property to.

With new rules to how many mortgages you can have from one lending group. some are only three others are more.

If you are married or will get married by putting a mortgage in both names you limit the amount of mortgages to three if done individual names you can have six with the same lender (3 in your name 3 in the wife's name).

Never get carried away biding on a property sometimes it is better to let it go than pay to much.

Never buy at auction unless you have had you solicitor look at the legal pack. Only ever bid and buy at auction if the money is in your account. Don't rely on a mortgage offer that is due in two weeks time thinking I should be ok. It can go wrong and sometimes does.

Try and find course's you can attend now with landlord registration a lot of councils run course's for local landlords and keep them informed of changes for little or no money.

Become an accredited landlord which will give you the knowledge of what is expected of a decent land lord.

Always treat your tenants with respect. I get a lot of new tenants from my current ones. Listen to what they have to say if something needs repaired fix it. Yes some tenants will treat you like dirt but the most are great.

Look after and invest in your property by maintaining as you go it can cost less and if you ever have to sell in a hurry then you will get the best price.

I hope I have not bored you but planning is key to everything even before you start buying.

Funding, Location, Bread and butter 2 bed terraced. with changes to house benefit one beds will become in great demand,

Build relationships with trades people remember they have a family to feed as well, a lot of landlords want things done for little or no money. Pay a good rate get decent trades when you need them they will be there.

I've not been commenting much for the last week or so as I'm in Russia and have very limited Internet access. I have just read this thread in full and must say that I am generally very impressed with the advice and support that has been offered.

We created this forum to facilitate the sharing of best practice. Having not contributed much to the forum for 10 days now it is a dream come true to be able to log in and read threads like this one.

Regards to all

Mark.