First time Buy to Let

Hi Praveen

I'm sorry to be the bearer of bad news but you are going to need to raise more money.

Theoretically it is possible to do a deal with a 15% deposit but there is only one lender doing buy to let mortgages at 85% LTV so far as I know and I think you would really struggle to get a two bed flat in Ilford to stack up to their criteria.

75% LTV is realistically going to be as good as it gets which means that you will need a £37,500 deposit. You will also need to factor in purchase costs such as valuations, legal fees, broker fees, stamp duty, lenders fees etc.

Will you need to spend any money on the property before it is lettable?

What if it doesn't let immediately and what about letting agents costs?

If it's not a brand new property, what will you do if the boiler breaks down after a few months?

What if your tenant doesn't pay the rent?

I'm not trying to put you off, I just think you are going to need around £50,000 to get into a £150,000 property deal as your first one and to leave a buffer in terms of liquidity.

Good luck though 🙂
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1) is Ilford a good area for investment in 5-10 years timeline? And beyond

The answer to that is to find the tenant demand, before you go about creating a supply.

My post below explains how to do that:

http://www.propertytribes.com/how-get-started-btl-10-easy-steps-t-8255.html

2) what are the things I need to be careful with?

There is a comprehensive list here:

http://www.propertytribes.com/top-10-fatal-mistakes-made-by-novice-property-t-242.html

3) are there any investors in this forum that already have properties and are willing to be contacted for advice?

Do you mean properties in general or properties specifically in this area?

I am always happy to act as a sounding board if you need pointing in the right direction.

Having grown up in ilford ive witnessed its decline over many years. there may be some benefit from cross-rail but i cant see the slide ceasing.

Reply to the comment left by "Vanessa Warwick" at "23/08/2013 - 11:43":

Hi Vanessa

Can you be a bit more specific about what exactly you mean when you say "find tenant demand" please.

There is demand for pretty much everything if the price is right. You've only got to go to a car boot sale this weekend for evidence of that. Some of the crap people buy is staggering!

There are landlords with every type of property in every area of the UK. I can't imagine that more than 0.1% of properties would sit empty for more than a month, despite their condition, if they were priced right. People live in shop doorways and on park benches because it is free. The next step up is a roof over their head and benefits will generally pay for that so there will always be demand if the price is right. I hate the idea of people having to live in beds in sheds but it's better than sleeping in a shop doorway. Even beds in sheds are in demand, the only reason people live in them is that they can't afford the next step up. You'd probably struggle to find a better yield than this but it doesn't mean we should all rush into building sheds does it?

And therefore, back to my question, what do you mean when you say "find the tenant demand, before you go about creating a supply".
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I mean what it says Mark.

Find tenant demand.

It's no good buying a flat for private tenants, only to find that it is mostly LHA in the area.

It's no good buying a 2 bed flat, when there are 80 two bed flats in the area to rent due to over-saturation of investors buying in the area.

It's no good buying a family home without a garden when families want gardens.

Hope that explains in more detail what I meant?

Reply to the comment left by "Vanessa Warwick" at "27/08/2013 - 10:34":

Ah but I still disagree Vanessa.

In every one of the examples you have given it is still possible to make a good return if the purchase price and the rents are at the right level.

In every example you have given, the first property to be let and/or sold will be the one which is priced at the right level. For example, if 80 identical properties are all available to rent the cheapest is likely to let first. If it can be purchased at the right price the deal can still stack up.
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Mark,

I am not sure of any business that would recommend creating a product BEFORE finding out what the customer (tenant) actually wants.

I agree that you can rent any property at any price, by why settle for buying in an area of low tenant demand? That is surely riskier than buying in an area of high tenant demand?

Surely, for a sustainable property business, you want to find where the demand is high and the types of properties that are in high demand?

I have just posted some new research which says that 48% of people looking to move are looking to buy in a specific school catchment area.

http://www.propertytribes.com/what-more-important-tenants-than-any-other-factor-t-8848.html

Therefore, it might be good to search for properties in good school catchment areas, as you know that there will be a high demand for tenants in that area ... and a sustainable high demand.

I guess it boils down to your attitude to risk.

For me, I would personally want to produce a product that 80 people want, not 8 people, but each to their own in property.

Reply to the comment left by "Vanessa Warwick" at "27/08/2013 - 13:07":

Hi Vanessa

Price and demand go hand in hand. Favourable locations = great demand = high prices = crap rental yield normally. The opposite is also true, i.e. Undesirable locations = low prices = lower demand and bigger rental yield. There will be bargains for both landlords and tenants at all ends of the spectrum. It is most unusual to find favourable locations with great schools, great demand and great yield all in the same area. Therefore it's a balancing act, somewhere between renting beds in sheds and mansions next to Eton for most of us.
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