UK Landlord Forum / Life

Firstly hello everyone.

I am a 55 year old single man. I lost my job a year ago, and it was recently suggested to me I look at BTL as a business idea.

I have my own home with clear equity of £200k, and liquid savings of approx. £60k. I am expecting an inheritance to come through in the next four to six months that will be around £400k.

I would be looking at buying properties for cash, no leverage to start with until I have a little experience. I am looking into properties in the North of England, and I intend to move up there as soon as possible. I have a friend who lives in the area with experience as a letting agent, her husband is a retired builder, and both are willing to help me where necessary, so there is good local knowledge.

I will only buy for cash to start with, probably with a start budget of around £300k but I would appreciate a little advice if possible. I am carrying out a lot of due diligence on the area, the types of property, local services, schools etc where relevant to the type of tenant I am hoping to attract. The area I am looking at is between Sheffield and Leeds.

Where I am in need of helpful advice is the best type of properties to go for at the start.

Do I look at buying five or so for £60k each and letting to DSS or similar low income?
Do I consider HMOs, for students or also DSS?
Do I consider fewer higher priced properties for small families and nicer areas (3 bed semis for example)?
What about small but attractive flats for young individuals looking for small cheap rental accommodation?
Another possibility is two or three far cheaper properties that need renovation and then let or even flip?
A combination of the above?

Any advice is very gratefully received, thank you.

A generalised rule of thumb in this geographical area (I know Sheffield and Barnsley and Leeds well) is that a property worth £100,000 will bring you £500 to £550 rent per month. Properties costing you £60,000 are, obviously, likely to be lower and, obviously, you need to find out how much lower - I doubt many rents would go lower than, say, £375.

Is 4 or 5 x £375 per month of interest to you? Is it much better than you can get via other investments than could be much less challenging and involved?

Try to stay away from leasehold (popular in Sheffield) and properties that have a service charge, like many flats and apartments. Decide what kind of Landlord you want to be... are you a Rachman type, or do you want to provide good quality homes to pleasant Tenants and look after them [the properties] properly - it doesn't mean you have to become a philanthropist, not by any stretch, but targeting "The North" because it's cheap and because people will live in squalid condition are different things entirely.

What is your end game? I assume you don't just want to expand and expand..? There must be a point where you have enough of an income stream, possibly with your money tied-up, to keep you in fine upkeep for the rest of your life? Is it 5 properties bringing in, on average, £500 per month, or is it 10 properties? What do you think your expenses will be like... it's fair to say that some expenses are just the same at the higher end and the lower end.

Do you want to target people who receive LHA? Really? Have you had your eyes opened regarding how Councils deal with Landlords? Are you OK with that?

Starting out with HMO doesn't sound like the wisest idea, at least to me. Sheffield, Barnsley, Leeds, they're all full of standard 2 to 3 bedroom terraced houses that can be bought for good amounts. They're freehold, they're solid, they're self-contained, they're always pretty easy to let. I'm just about to come to the end of a refurbishment project I started in Sep last year... finishing-touches only... I think I will let that out, but I might be tempted to sell, not for £60 though... this is not a palace, but it will bring more than that, so for £60,000 I suspect you might be looking at the real low-end of stuff - that's always a worry. I find that it's hard to care about a property that is only bringing you in, say, £375 per month - especially if you have a mortgage on that and your profit is only, say, £100 per month... where's the incentive? So, for that and other reasons, I often like to target higher-end properties. Got a cracking couple of deals on new builds a few years ago when they couldn't sell them - show-home on sale and lease back (the Developer paid me £750 per month for 2 years, no expenses at all - lovely)... now got Tenants in and they're paying £850 per month, but obviously I have all the Landlord considerations, issues and expenses.

Best deal right now... 2 bed apartment slap bang in Sheffield city centre, let to a single Executive, bringing in £1,200 per month. Everything's new so there's not a peep from the Tenant and apart from the service charge (which is why I'd never do it again) it's more than paying its way. Mortgage is £494 with 12 years remaining (repayment), service charge is £500+ every 3 months - painful, but maintainable.

I have numerous Tenants and the only one that gives me constant hassle and the one I have to always chase for the top-up (not the rent, mind, as that is paid direct - just the top-up amount) is the one receiving LHA. It's not for the faint-hearted, I would say.

And, yes, all the additional tax and removal of relief... you couldn't choose a worse time (with what is known today) for getting into the game.

Flipping is fine if you're local and have experience - it's not all homes under the hammer figures
HMOs are fine as long as you're an experienced landlord, local and have the time and effort to put in
DSS is fine as long as you know you are letting to time/problem intensive tenants

IMHO easiest would be first time buyer type houses or the 3 bed semi family homes where families will want to stay while the kids are in school - not going to set the world on fire in terms of maximising income but a good compromise from all the hassle.

Cheap properties are fine but remember that the cheap rent you receive for them does not compensate you for say a replacement boiler.  Boiler replacement cost is the same in a cheap house/cheap rent as a more expensive house/more expensive rent but takes alot longer to recover.

Do you actually want to be a landlord?  Whats the end plan?  Do you just want your 400k to work for you and grow?  There are easier ways.

Do you know about the recent stamp duty increases?

Thanks for such prompt replies, extremely helpful advice, thank you.

Firstly, I have been lounging around at home, living in an area I hate (there is a specific reason for this), I have become a virtual recluse, and apart from banter and chat with local shop workers, and the occasional chat with neighbours, all of whom are fine by the way, I have no friends at all here, a deliberate action on my part after something very bad happened.This gets me out and about, meeting people, working for myself, and I am not in a huge rush to accumulate wealth, I want a reasonable income for five years or so, with some capital behind I can sell if I wish as I near retirement age, or even keep on to supplement income. I will keep a healthy liquid balance of capital to cover any disasters, and also to live off for the first year or so if required. I am used to living cheaply, have had to for the past year. Of course I may expand, and start to leverage more, but that is not the immediate plan.

I would like to be friendly with tenants, although I know that is not possible a lot of the time, but maybe one or two, never forgetting this is my business and must be treated professionally at all times. The comments above tell me that family renting is quote possible my best start, but I will look into that a little more.

Yes I know all about the stamp duty changes, it is an initial start up cost. The tax relief changes do not affect me initially as I will not be borrowing, but they are a consideration. Changes to wear and tear are a pain as well, so I will need to talk with local agents with regards to furnished or unfurnished. As demand for housing continues to increase, there may be more adverse changes on the horizon, but they are likely to be partly if not wholly balanced by capital increases as the population grows, and will continue to do so even if there is a leave vote in June, albeit slower.

It may be a bad time as regards law changes, but it may well be a good time as there is extensive regeneration work ongoing, some completed and more in progress that will add value to the area. I am not hugely concerned with capital growth to start with, but obviously I will buy in an area that is desirable for the type of tenant I want, and is therefore likely to appreciate rather than fall in value.

Quote from: Phantasm on March 24, 2016, 03:32:06 PMI would like to be friendly with tenants, although I know that is not possible a lot of the time, but maybe one or two, never forgetting this is my business and must be treated professionally at all times. The comments above tell me that family renting is quote possible my best start, but I will look into that a little more.

Each to their own, but this could be a fanciful notion... and a mistake. You are talking about people who pay you to have a roof over their heads. Quite often this relationship is amicable at best... it being buddy-buddy seems concerning, at least it would be for me. I was once invited to a house-warming party by some Tenants... I agonised over whether to go, it held so many dangers when you think about it. In the end I showed my face... but departed, politely and quickly, at the first sensible opportunity. Tenants are not friends and there is a good reason for that... you may one day need to evict them. Being friendly is understood to be different - I get that - I just urge you to be careful.

That said, at least you are asking questions.

Duly noted, although I did say friendly, not friends. A good relationship with a good tenant is the pipe dream of course, and I am fully aware it is not often possible. Remain on good terms is probably a better way of putting it. One area I have probably discounted is DSS, at least at the start. The law that overpayment of housing benefit can be claimed from the Landlord due to benefit overpayment arising from misleading information from the tenant to the DWP, or the tenant working black market and not disclosing has put me right off that idea.

Only a fool would go into a new venture and not ask questions surely!

Being friends/friendly with T's isn't an ideal strategy.  I want tenants to leave me alone as much as I'm sure they want to be left alone to live in their home.  An inspection every X months and at a push a 1 line email confirming the rent has been paid is about it.

Have you considered a B&B?  Get to meet people, rent rooms out and then they go after a couple of days max.  Would keep you busy, occupied and sociable.

That is a brilliant idea.

No I hadn't and no I do not want to, but thanks!

i lost my job, and i would like to be busy again. This is an idea that I am spending a lot of time researching. i am not doing this to get friends, i am doing this as a business, friends and business are a dangerous mixture, but getting on with clients/tenants is always a good thing, i had good relationships with all mine. it is a minefield of legislation, The licences some areas demand for example, the DWP having a claim against LLs for over claiming of benefits are just two i have discovered just today. Checklists are available, but i think a decent solicitor to ensure i get it right from the off seems sensible.

i am looking into this carefully, hence my registration here and probably elsewhere later. Lots of reading, research, rent desirability for each area, what type of property and where, potential yields. Like anything in life, hard work is the key.

You're going to have to have a pretty large portfolio to keep you busy busy.  Ideally look for tenants every 18 months absolutely maximum, arrange a gas safety certificate once a year.  Unless you're looking for things to do to the properties that don't need doing when the tenants are there (and costing you money to do them)

I just install tenants, leave them alone, they leave me alone and it's not work. 

You should be kept busy researching, buying, titivating and installing tenants but that's where the work should stop ideally.

You don't need a solicitor to set you on the right path, membership to one of the landlord bodies (http://www.rla.org.uk/) for example, doing some distance learning would be cheaper (tax deductible) and much more beneficial.

Do you like animals?  Maybe set up a cattery/doggery, nice and social.

Well, reading up all the information (deal with the deposit myself) is keeping me really busy, but it is educational (deal with the deposit myself) and enjoyable. Forums are an excellent source of information, I have learned how vital it is to deal with the deposit myself, and much more, but far more still to learn. Thanks for the advice about a landlord body as opposed to a solicitor, that is helpful to know.

The idea of leaving tenants alone is also something I have learned, it is repeated again and again how the woes set in when landlords and tenants try to be too matey. Being friendly with tenants is now off my list.

Love cats, have two. Don't love cats enough to have more than two.
Hate dogs.

Do I detect a teensy undercurrent of "you should not go into BTL??!!

Quote from: Phantasm on March 24, 2016, 11:02:00 PM
Do I detect a teensy undercurrent of "you should not go into BTL??!!

Not really, it's just that I keep having these 'flashes' of inspiration.

Dealing with deposits are one of the biggest issues new landlords seem to face, only because they've done less than 20 minutes internet research on how they should be taken and dealt with.  It's pretty straight forward if you do research (which you are)  Another useful forum is landlordzone.  Alot busier than here, not knocking here, ust directing you.

I'm not saying you shouldn't go into BTL but alot of people say "I want to be a landlord" which seems a strange motivation (not saying this is yours).  Do they really want to be a landlord, deal with blocked drains, requests for pets, attempts to get the T's to get you to deal with neighbours and other issues that really aren't your problem or are they saying "I want to be a landlord as I want to make my money work for me?"  A number of people do it to passively to improve their own accommodation (pay it off quicker etc)

There are lots of ways to make money work.  I was thinking about a passive ISA and Investment bonds as I was painting a fence at one of my properties and thinking how un-passive the whole thing is/was.

Recent tax changes (some of which you've said don't affect you) seem to make the proposition less attractive.

If you want to keep busy, and you'll be cash rich you could try the buying at auction and flipping scenario as you've described.

BTL with mortgages is a slow burner as that's the way it works. 

Not entirely sure I'd use 400k cash to get say a 10% yield and have the issues that come with getting that 10% plus SDLT and CGT when selling.

Thanks Rip. i am finished for today i think beer and a film is way better than any more tonight.

i am looking for a way to work for myself, get some steady income whilst still having capital, with a future prospect of income for retirement. i am not going to get back into my previous career due to age discrimination, and i am not keen to do so anyway. I have spent months trying to think of what to do, and this is the only idea that feels right. i am however concerned at what does appear to be anti landlord legislation. one or two stories about tenants breaching no pet rules, or allowing several others to move in are causing me some anxiety, but i need to read more about the possible pitfalls. Not getting involved in tenant/neighbour disputes is more admirable advice i did not know about.

I am fully aware this is a business, not just property but people as well. what i do not know enough about are the legal issues.

Quote from: Phantasm on March 24, 2016, 11:36:56 PM
I am fully aware this is a business, not just property but people as well. what i do not know enough about are the legal issues.

It's people management not property management.  Bricks and mortar don't need managing.  If you have good tenants it's pretty easy.  Finding them is the challenge.

The undertone of "don't get into BTL" is not there. We just know some romanticise the 'job' quite easily. Difficult to see how with all the relatively factual programmes on the telly these days. I have always stated it's a people business, I haven't changed my view. Reading your input here shows you have some ideas I'd call strange, but you are changing them as you get more input. It will help if you are a new Landlord and have no emotional attachment to any property, a mistake so many first-timers make.

Handle those deposits yourself too.

Thanks guys, all the advice is very helpful. i have already discovered that i can answer a lot of questions on this forum myself, i am astonished at how little some seem to know about a business they are already in, and i know very little!

i am considering scaling down, and instead of starting with 4-6 properties, thinking more seriously about just two, but in a more upmarket area i have been advised on that attracts working families, but I need to look into this more. I may look into one flip, but auctions are scary to say the least, so again far more research is needed.

Ideas are definitely changing as I read more into it, and get input back, it is why I joined this forum,

Quote from: Phantasm on March 25, 2016, 09:13:29 AMi am astonished at how little some seem to know about a business they are already in, and i know very little!

Does seem pretty par for the course.  Alot of people don't see it as a business, just a way of getting money in with no consequences.  It all ends up biting them in the bum at some stage.

Gosh, aren't people good in giving their time. I've been doing this for 16 years now, and it's been brilliant, except when it isn't, and then it's disastrous! Watch the programmes - they are all real (I've had most of them).
My other half dabbles a bit too, and we are at the ends of the spectrum: she has nice flats, gets proper tenants and sees it as more akin to buying a bond (rents = interest). I have a couple of HMO's and it's more a full time job - they do not look after themselves: I go down most days and eg do the washing up (if not me, who?). The profits (for me) are much higher but the managing (of people) can be extremely irritating (I'm in the process of getting out of the business).  It's helped me through the (many) dark times to remember 'if they were the kind of people you want them to be, they wouldn't want your rooms'.
All the other advice has been given, but I will re-iterate 2: they are NOT your friends and NEVER trust the Council.
Other than that, I'm quite sympathetic with your motives.

Thank you David, more very helpful advice. Not too sure i want to be my tenant's washer up, but you never know what is round the corner!

i know about councils, and also friends, and I have already watched some programmes. I am swaying towards a couple of nice semis, I am not looking to leverage myself for a while, I want to walk before I start running. i would always interview prospective tenants myself, preferably in their current home, so i can see how they live (is this possible?). As I said I am thinking of flipping one or maybe two, but not looked into that, research into this starts today, so be warned, i may have a question or two in another thread!

One question I have. Would you advise employing a cleaner to clean the house once a month? That gives me a pair of eyes inside, whilst appearing to be nice to the tenants, which is not the reason i am doing it?

You can't enforce a Cleaner going into someone's home. HMO might be a different kettle of fish. You can make the offer... but normal people would refuse it, I reckon.

I think interviewing people in their previous home is a good idea. Mind you, as a tenant I would jump at the chance of someone (else) paying for a cleaner. House tidy (she can do - oops, other sexes are available - the things I don't like) = good, and continue. House untidy (why should I have a dog and bark myself) = bad, and may reconsider.