Another newbie thread - Property Investment

[alenip]

Hi,

I've been reading about property investment recently and doing a lot of research but nothing is better than an experienced opinion.

At the moment I have around £50k to invest and I'm renting privately the house I'm currently living in (circa £9k/year).

I'm considering a few options:

option 1: invest all the 50k buying my own house expecting some capital growth over the years if the house prices rise. My only problem with this option is that I work as a contractor, with short term contracts (3month-1year) and being flexible with location is a great advantage, however at some point i will have to settle down somewhere because my girlfriend is already getting tired of moving constantly.

option 2: invest in a low priced house with 4+ bedrooms and let bedrooms to students/young professionals. would be looking at a buy-to-let mortgage, let's assume 100k house with a 25% deposit would still leave me with £25k in cash for other investments, or i could stretch the deposit and get better conditions in the mortgage (probably not worth it). With rough estimations a gross income of £1100x11months = ~£12.1k year gross return. 12.1% gross yield in theory.

option 3 - invest in house to let (not to multiple occupants),lower yield but potentially some capital growth over time.

Thanks in advance

 

[Cyprus Property Buyer]

alenip,

Glad to see you make reference to gross yield as I'm sure you are aware net yield can be very different.
I bought over a 100 BTL's properties, a few dozen for me, similar number for a business partner and the rest for clients. In my experience it is difficult to make it pay with single family occupancy and I would recommend the HMO route. This means more legislation that you must adhere to but generally the rewards are worth it.
Good luck whichever route you take and don't be afraid to ask questions. No questions are stupid if you don't know the answer and it prevents you from making a serious mistake.

 

[George79]

Definitely buy-to-rent. There is almost guaranteed income which can be used for further investments. Until you will have more comfortable financial situation maybe rent-to-rent is even more appropriate for your situation.

 

[Nicholas Wallwork]

I'd personally buy a house under a residential mortgage (if it's your first and only house),say 4-5 rooms or as big as you can afford in your area (rooms being bedrooms and receptions rooms which make a great quick conversion to bedrooms in an HMO setup). Check that the mortgage will allow you to have a "right to let" or "consent to let" in the future though (very important if you don't want to break your mortgage terms).

Then live in it yourself and rent out the other rooms to young professionals. This will mean you are rent and bill free as the tenants pay your mortgage and bills from the rent AND depending on the number of rooms you have you'll probably make a small income as well.


If/when you move you can keep the house, rent the room(s) you were occupying and you should have a tidy income to take with you. If you've been saving the rent over this time hopefully that will be the deposit on your next house as you start to build your portfolio.

This was my strategy for my house in 2000 when I left university in the UK and now I have a controlled portfolio of over £20m. If it worked for me it can work for you... IF you are dedicated, work hard and smart and make a few sacrifices in the first couple of years (in this case house sharing for a year or two before you can save for your second investment)

Good luck on your journey
Nicholas

 

[Judith Beilby]

I agree that taking advantage of a residential mortgage has massive benefits and will allow any future capital growth to be tax free if the property is you main residence.
I would absolutely go the route of renting rooms to essentially live cost free and if you can make a profit then great.
Careful choice of your property must ensure your own privacy if this is a longer term solution. Perhaps look for a property with two different access opportunities so you could create a private space within the house for your own use?
Best of luck, go for it.