Invest with intention to rent?

[George79]

This seems to be a trend in my area. A lot of people are buying up vacant apartment buildings, split homes, or small homes and turning around and renting them out. I have to ask because to me, it seems like more trouble than it is worth... Why is this suddenly a booming investment people are seeking?

 

[Izzie Aslam]

Hi George

Firstly I couldn't locate where you are from to give you an in depth analysis, but from your question the answer is quite simple, people who have a vision and see what others don't see always are successful. If we all knew what the papers were going to write the night before we would all be millionaires the point is the people who are doing this have done their market research and most importantly have worked out their financial figures i.e. cost of investment vs final return and one can only think the return is stronger than cost and time put together.

Also there must be a demand of some sort within your area? students? new businesses opening up or major redevelopment or major infrastructure change etc

 

[Le Seb]

Well this is the only reason why I would ever buy a property!
Renovation for selling is speculation. If the market goes down you get hit.
What matters is the yield of the property and growing your portfolio one at a time until such time when it generates more passive income than your full time job, then life becomes real sweet
I actually own 5 properties already, though in my case I made the money the tech entrepreneurial way, but I am actively turning this money into cashflow, the name of the game.

 

[Northern Property]

I also forgot to ask : I am currently employed but want to escape this rat race. Would it be better to set up a Ltd company for properties?

 

[Le Seb]

So if you are going to do refurbishments, it certainly makes sense as you can offset the cost of the works.
Obviously it's more work to maintain the books and this will cost you each year, so for 1 property it might be overkill, but if you have several it starts making sense.
One downside (at least in Spain, but not sure about the UK),is that the mortgage would be much harder to obtain at a good rate for a LTD. There are some more qualified people on this forum who may be able to answer this better.

Hope this helps nonetheless.

 

[Luke Masters]

Le Seb - I believe from previous experience LTD company lending is difficult to obtain although possible.

Northern Property - Yes essentially it is beneficial but sit down with a tax advisor and run through a 5 year plan to see the savings, as you may need to implement commercial finance or a bridging loan to purchase. Which may out weigh the savings depending on the volume of transactions you are hoping to conduct.

 

[Le Seb]

@Luke Masters makes sense.
I was just unsure as in the past I did get a loan for a UK startup from the bank (but not for property),but had to guarantee the loan with my own name, regardless of the LTD status, as the bank would not lend otherwise.
I just wondered if this was at all possible for properties.

 

[Luke Masters]

@Le Seb It is something I am unsure on unfortunately, I have stuck with Commercial Finance or Bridging Loans. @Nicholas Wallwork may have some experience or knowledge on this one?

 

[Le Seb]

Actually another point I forgot to mention on this. An LTD could massively influence your inheritance tax bill as you can pass on the shares tax-free

 

[sergerybrin]

Firstly, you buy the property like small buildings,small apartments and then renting them out.This is actually beneficial.You can earn more money form this business if you are experienced to know how to do it properly in good manner.

 

[Jennifer Martin]

This seems to be a trend in my area. A lot of people are buying up vacant apartment buildings, split homes, or small homes and turning around and renting them out. I have to ask because to me, it seems like more trouble than it is worth... Why is this suddenly a booming investment people are seeking?

Real estate is without any doubt one of the best investment option. So investing in real estate to generate further income known as rental income will be additional income source. So I think this is a good option for one who is looking to earn extra income.