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Buying a second house


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Best to speak to an accountant so you know how best to do this from a tax efficiency perspective. You could buy it yourself, you could setup a Ltd company and buy it; pros and cons to both but all dependent on your other income.

I always buy something that needs work and has hidden value. Capital appreciation will see you right so long as you are able to sell or remortgage at the right time. If you need to get your cash out during a dip then the fact you added value with a refurb will cancel out any shortfall leaving your investment safe.

That’s how I do it anyway.

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As a landlord with many years experience i can tell you a few things

1) The big long term earner was capital appreciation, Thats going to be at best dead and at worst property prices are forecast to drop 20% in next few years post covid.

2) Changes in tax laws have had a huge detrimental effect on profitablity

3) Much harder to evict bad tenants and so many tenants are losing jobs through no fault of their own

4) Landlords are getting out of letting like rats deserting a sinking ship in their droves

its not a good time, that ship has sailed  

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2 hours ago, crossy 666 said:

Hi, I’m currently looking into buying a second house to rent out as an investment for the future. Is there anything thing I should think about before spending my money ?

Lots!

Most mentioned above but lots not.

A lot depends on your plan. Do you want to make income now or just looking at it as saving for the long term?

Can you afford the mortgage if you have problem tenants? Not to mention repair costs if they're really bad ones.

Will it be interest only or repayment? Pros and cons to both.

Capital appreciation, whilst not looking good in the medium term, could well be your biggest profit long term.

Not a great way to invest at the moment, says Someone who bought another BTL last week to add to my small portfolio and is looking at another next week.

Edd

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When I was retiring my Company sent us on a retiring preparation course. One of the talks was what to do with your lump sum and "buy to rent" was covered. At that time in 2012 they said if you could afford around 4 or more properties it was worth considering. Only one property was a risk as if you got bad tenants, they could do damage, not pay the rent and take legal costs to get them out. All the time this is costing money and you have lost your income. Over 4 or more properties the chances of getting more then 1 lot of bad tenants was reduced. A lot depends on the type of property and area too, but an expensive property in a good area is no guarantee of good tenants. Some landlords are lucky and some not so.

Edited by loriusgarrulus
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If you have some money and you just want to stash it in a long term investment, have a look at woodland. It is fun. Somewhere to shoot and they go up in value. Ours is worth about £8000 more than we bought it for in 2016. Most don't attract rates or water rates either and don't act as part of your estate for valuation for death duties. As long as you do your homework on what you want and what you will use it for and check for covenants It can be a good usable investment as Mel will tell you too. 

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Think hard about it. We’ve had buy to let for 14 Years, now getting out of it. 1 months bond is not going to go anywhere near covering the damage tenant’s can do. We’ve had good tenants we’ve had bad tenants, we’ve had good payers and bad payers. It’s a lottery.

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The changes to tax, meaning pay income tax on the income rather than the profits made a big impact and tipped a lot of people with a job and 1 property to rent into the 40% tax threshold. 
 

Massive cut backs on what you can claim as expenses and wear and tear added another hit. 
 

Landlords getting constant abuse from third sector organisations and made out to be money grabbing scum. 
 

Then the government clicking their fingers and changing the situation at the drop of a hat as they wish to raise extra funds. 
 

With Covid, predicted dip in house prices. Lots of people losing their jobs and other issues it’s not a great time to invest surely. 
 

 

 

The return seems to be fairly low (5% or less ish in most areas). Capital appreciation can be good (and probably the most profitable element). 
 


I have savings and was going to buy one and looked into it seriously. As my income has risen in work it not really worth it anymore. I didn’t think setting up a LTD company looked worth it either unless you’ have money for several properties. 
 


I would do what Oowee has said and look hard at other options that can give a decent return. Some of the finance guys I know at the moment are pulling everything out of the market. 

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lots of very sensible advice............

i think the only area you can buy to rent ..and would be reasonably safe with a small return on the rent as well as the property price uplift ...would be spersific as to who you would rent to...ie;....buy small 1/2 bedrooom bungalows and rent them to retired/over 65 people......

otherwise steer clear of the buy to rent market

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3 hours ago, ditchman said:

lots of very sensible advice............

i think the only area you can buy to rent ..and would be reasonably safe with a small return on the rent as well as the property price uplift ...would be spersific as to who you would rent to...ie;....buy small 1/2 bedrooom bungalows and rent them to retired/over 65 people......

otherwise steer clear of the buy to rent market


There are a LOT of elderly people who start losing their memory, live in squalid conditions without anyone noticing and then can’t pay their bills etc, even with plenty of money in the bank. 
 

I used to have to help them out in work. I couldn’t think of a worse age group I’d want to rent to to be really honest. 
 

 

Ive always said if I was going to do it, I would look for flats or 2 bed houses near a major hospital. I would look for newly qualified nurses, OT’s etc, people who work in the nearby hospital. 
 

Young professionals who want to buy their own houses on day. They’re on semi decent money, and don’t want a CCJ against their name for not paying the rent, as they hope to buy their own place one day. 
 

If they move on, then being near the hospital. You have a new influx of nurses and professionals coming in every year. 

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7 hours ago, loriusgarrulus said:

If you have some money and you just want to stash it in a long term investment, have a look at woodland. It is fun. Somewhere to shoot and they go up in value. Ours is worth about £8000 more than we bought it for in 2016. Most don't attract rates or water rates either and don't act as part of your estate for valuation for death duties. As long as you do your homework on what you want and what you will use it for and check for covenants It can be a good usable investment as Mel will tell you too. 

Bang on the money 👍. My only regret is that I didn't buy somewhere with a fishing lake or river , but , I'm still looking.

I've got a few friends that are landlords , and they're having a very worrying time at the moment.  It was something that I was very interested in a couple of years ago  , but I was already too late to the party. 

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1 hour ago, mel b3 said:

Bang on the money 👍. My only regret is that I didn't buy somewhere with a fishing lake or river , but , I'm still looking.

I've got a few friends that are landlords , and they're having a very worrying time at the moment.  It was something that I was very interested in a couple of years ago  , but I was already too late to the party. 

You could always dig one and stock it with what you want. 👍👍

image.png.9fbe56a24c88223ea3c30bf660ff57d3.png

OH's new toy. Landscaping the garden at the moment. Lots of work down the wood later. He bought the log grabber too which is also great for shifting concrete posts and blocks etc.

Edited by loriusgarrulus
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This is were I’m at, I’m just about to finish paying my mortgage off on my house so trying to figure what to do next. I earn good money but I work really hard and it’s back braking work so trying to find something that I could do/invest with my money so I could possibly retire early

(39 at the moment ) where my brother lives there is a nice 3 bed house come up for sale so was just thinking about things as they are building a very large industrial estate down the road so the houses in that area have already started to rise. 
Thanks for all the advice so far

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I am not in a position to worry about it but if you have spare money is it not safest to just keep it or just throw into bonds? I have known a few people who have retired with a little nest egg and then thrown into a little business only to watch it go down the pan. Or have inherited and again started a little business and watched it go. 

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I looked into it a couple of years back and found that buying/running costs against potential rental income made it not worth bothering. Obviously you have the appreciation in value (hopefully) to give you a payday in the future... but I was interested more as a way out of my current career... the people who make real money buy houses and set them up as HMO's for scumbags, but i was not interested in the least in doing that.

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9 minutes ago, yates said:

Are there any differences between renting out a second home and having a second home as a holiday rental?

There are differences in the tax treatment of furnished and unfurnished accomodation.

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16 hours ago, Vince Green said:

As a landlord with many years experience i can tell you a few things

1) The big long term earner was capital appreciation, Thats going to be at best dead and at worst property prices are forecast to drop 20% in next few years post covid.

2) Changes in tax laws have had a huge detrimental effect on profitablity

3) Much harder to evict bad tenants and so many tenants are losing jobs through no fault of their own

4) Landlords are getting out of letting like rats deserting a sinking ship in their droves

its not a good time, that ship has sailed  

I agree wholeheartedly,  it used to be ok but not any more. I sell them when mine become empty. I can't be bothered with the hassle any more.

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18 hours ago, oowee said:

Your priorities. Risk. CG tax and unearned income tax. Maintenance and professional fees. Alternatives and in particular pension tax relief you could get for putting your money elsewhere.

This.

Pay for some professional advice with an FA/Accountant who specialises in these things.

The advice you get on PW can be worth exactly what you paid for it, namely £0.   A good professional will earn his fee with what he saves you in tax and time (remember your time is not free).

https://www.telegraph.co.uk/property/renting/landlords-snap-flats-yields-soar-record-high-coronavirus/

 

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