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Best way to start buy to let
Frazer Roberts
Posted: 10 October 2012 12:58:33(UTC)

Joined: 10/10/2012(UTC)
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Hi currently in need of some advice.

I am 19 and currently training as an accountant in practice in Harrogate, N Yorks.

I have been looking at wanting to get by 'foot in the door' with properties for the last year or so. Preferably to start buy to let as this seems the best option given my circumstances. Having read pages and pages of forums etc and speaking to professionals who have regarding this I just have a couple of questions.

In around 18 months I will have a healthy amount to put down as a deposit as most mortgages i have seen are looking around 25%. It will most likely be a 2/3 bed terrace in Leeds. Having looked online I have seen most lenders are looking at around a minimum of £25k pa income. Has anyone had experience of getting a BTL mortgage lower than this? Also has anyone had any experience getting in to the property market around my age.

I understand what BTL involves and all the tax implications there are once having the property - I also see rental accounts on a regular basis so understand all the different costs involved in venturing into BTL.

If anyone can help that's great!

Thanks, Frazer
Neil Liversidge
Posted: 11 October 2012 11:07:10(UTC)

Joined: 17/11/2009(UTC)
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Fraser, forgetting the financials for a minute, go in with your eyes open. At that price level you will not necessarily get the easiest tenants to manage. I speak from experience! I recommend reading Tessa Shepperson's excellent book 'Residential Lettings' or similar before you commit to anything. Good luck.
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Guest on 12/10/2012(UTC)
Posted: 11 October 2012 11:18:15(UTC)

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I concur with the first response. Do not get in to the market with DSS or lower income renters. When you do start, you may be interested in the innovative scheme to pay you 6 months rentals in advance (for a fee of course) run by Advanced Rent Limited backed by venture capital which would help you get cash upfront towards a decent rental property. Check out The package protects and preserves your property and its rental income.
Soozie Campbell
Posted: 11 October 2012 11:23:22(UTC)

Joined: 02/02/2012(UTC)
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It's great to see such spirit and ambition in one so young.

And while I hate to dampen your spirit I'm afraid I must throw a large bucket of cold water from a great height.

Three years ago I spent six months trying to get a buy to let mortgage and failed. I was earning over £50k and had about £200k equity in a property already. I had never ever defaulted on a mortgage. My credit record was squeaky clean . I had good references - but I still couldn't get a this country.

My position was slightly complicated by divorce and dividing of spoils but whose life isn't complicated by something or other.

So I took out a buy to let euro mortgage in France and bought a French country house. I rent it for £1000 a week in high season and spend many happy weeks there myself every year. My clients are all decent respectable people who take good care of my house.

I can put you in touch with a English speaking French mortgage broker if this floats your boat.
D Wood
Posted: 11 October 2012 11:32:52(UTC)

Joined: 10/01/2010(UTC)
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If possible buy a decent size house 95 % mortgage :) , live in it and commute to Harrogate (where I used to work !, a fantastic place). Then take in lodgers and get rent a room relief. If you get a bad lodger its much easier to get them out of your house if there are problems. Also, with lodger turn over you will get a lot of experience of the good, the bad and the UGLY tenants. Just make sure you meet all the health and safety of tenant stuff eg gas, electrics, handrails etc. If in doubt get environmental health around they will help.
Posted: 11 October 2012 11:49:37(UTC)

Joined: 26/03/2012(UTC)
Posts: 1

Nice to see someone trying at a young age. My suggestion is get in their and feel the experience. If you are good at maintenance then this will save a lot of money. Buy small let to good tenant , not DSS as they dont have their own income. once you start getting income problems will begin to solve by themselves. You will find a very steep hill to get a BTL mortgage , but not impossible. Just keep knocking doors who will lend . Let us know who lends .
Posted: 11 October 2012 11:57:07(UTC)

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Aldermore are giving good rates at the moment for BTL.

Steer clear of DSS and make sure you get an agent who is established and local. Goes with out saying close to rail
and centre as possible..Good luck!
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Frazer Roberts on 11/10/2012(UTC)
Posted: 11 October 2012 12:03:26(UTC)

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Simple really.

You are young, have reached the age of majority and training to be an accountant.
From a lending institution's p.o.v. not a bad scenario one would have thought.

If however you have a finance difficulty then go and interview all the Financial Advisers in your area, you might be amazed how easily they can fix a mortgage for you.
My son did this and he was unemployed!

Before actually buying anything, first talk to a local letting agent or three, see what it is that the market needs and thus will let easily.

The rest is the fairly standard stuff that you will by now know about or you are about to read in the book recommended above.

I wish I was your age again, I would do the same as you are proposing.

All the very best of luck in the world to you.

Please do not be put off by the 'tooth-suckers' that appear on boards such as this.

Just go out and prove 'em all wrong.
chris gurney
Posted: 11 October 2012 12:21:04(UTC)

Joined: 17/09/2012(UTC)
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I was lucky with this one; at age 18 (14 years ago eek!I) inherited some money and despite friends recommendations to go to Vegas I bought a house with a small mortgage. Initially I occupied the house and had lodgers (3 female dancers!)- whilst friends loved it I found there to be too many hormones in the house so having seen the rents attainable locally I decided to buy another to live in and to let the first on a single tenancy. Continue the above repeatedly and end up with a reasonable portfolio.......

-Always keep a balance available in the best interest paying instant access account to cover mortgage payments in voids; regard the difference between received and paid interest as an insurance premium.

-Remember return on capital employed. After you have paid your mortgage what have you left against your initial investment? I try to explain to clients that buying with no mortgage makes little sense; multiple properties increases cashflow, profit, and the opportunity for capital gains (hopefully) in the long term.

-Do not over-gear any property; in a dire situation you may need to sell and do not want to be in negative territory.

-Ensure that you comply with tenancy legislation (energy performance certificate, deposit protection, use correct tenancy agreement, gas safety certificate, a good quality inventory, etc etc)

-Avoid Housing benefit like the plague. Many HB tenants are lovely people, look after houses, and have no intention of causing problems, the local authorities are reducing HB entitlements and this in many cases leaves the claimant short of rent to pay to the landlord. If a landlord serves notice in this situation the authority (certainly around here) will "advise the tenant of their right" to remain until there is a court order requiring them to leave at this point they will provide emergency shelter- ridiculous but I have several clients to whom this has happened.

-Look after the property; if you do the tenant is more likely to reciprocate.

This business is not a means to a quick buck but can be lucrative in the long term and is surprisingly addictive!

Good Luck!
Posted: 11 October 2012 12:32:04(UTC)

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It's rather outside the scope of your question, but I'm curious to know why you have selected BTL as the most appropriate form of investment? At a time of generally declining or static house prices there isn't a lot of prospect of capital growth and the rental income after tax, voids and maintenance costs isn't going to be much better than you could get in an equity ISA and without any of the hassle...

I guess that at your age, there might be the question of liquidity too. It's much easier to get you hands on the cash from many other forms of investment should you need it.

I'm not saying 'don't do it', I'm just interested in your reasoning.
jo soap
Posted: 11 October 2012 12:51:33(UTC)

Joined: 21/01/2012(UTC)
Posts: 3

Well first of all you have to make sure that you actually have the character and want to have the lives of other unfortunates in your hands; i suggest reading some books on the Highland Clearances or the potato famine in Ireland of the 1840`s and take being a LandLord from there
david boyne
Posted: 11 October 2012 13:30:14(UTC)

Joined: 01/09/2010(UTC)
Posts: 2

As advised above the lending criteria of most banks actually means they do not want to lend. My daughter (24) is a full time 2nd yr student & has one property under her belt, & another in legals. The BTL mortgage on the second property was complicated because she is at Uni & under 25. We solved this by putting her mother on the Natwest mortgage. In 1 yrs time we will transfer the property into her name
Jerry Jones
Posted: 11 October 2012 14:10:02(UTC)

Joined: 12/08/2010(UTC)
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There are lenders out there. I recommend that you go and talk to a good, specialist B2L mortgage broker about how to present yourself and to whom.

I have a small portfolio of houses in Middlesbrough and the South West, where I live. Half of them are let to benefit recipients and they can be challenging. I have now found good letting agents who specialise in that market. You need to take their advice on where and what to buy and satisfy yourself that they know what they are doing.

You also need to decide if you are primarily looking for cashflow or for capital growth. You have a long term possibility so the latter may well figure but you may decide to build up the income portfolio first and use that to help you subsidise the more speculative growth properties.

Finally, spend a large amount of time educating yourself about how to be a good property investor. There are ways of making your money work very hard by buying well, adding value and refinancing your deposit funds back out to use for another purchase. Read books such as Simon Zutshi's Property Magic, Angela Bryant's Complete Guide to Property Investing Success and similar.

Finally, go and mix with people who are walking the walk. there are a large number of property investor group meetings all over the country for face-to-face networking and very good forums at Property Tribes and Property118, both being full of people who really know their stuff and are happy to share their experience.

Who knows, you could end up as a property investment specialist accountant with a great reputation in the investor community.
2 users thanked Jerry Jones for this post.
Guest on 11/10/2012(UTC), Guest on 12/10/2012(UTC)
Stuart R
Posted: 11 October 2012 14:53:27(UTC)

Joined: 11/02/2012(UTC)
Posts: 3

you might find some difficulty in that buy to let lenders have made the criteria more difficult for someone in your position.

they don't want first time buyers (most), require minimum incomes; some £20k (Skipton) , others £25k(BMS & Natwest) and they also often apply a minimum age of 25 (BM Solutions) too.

the earlier suggestion of buying to live in and then renting a room is something that might be more achievable in the short term. Otherwise the addition of a parent may smooth the way through a very difficult lending area.

good luck all the same.
Posted: 11 October 2012 17:57:53(UTC)

Joined: 24/07/2007(UTC)
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Hi Frazer.

well done for making the best decision of all, already; that is, 'to investing start young'. this is the most crucial of all tips. over time, (ironically, very apt as a cliche), you will benefit in folds by starting investing so young. so much so that retiring at 40 or even younger is very much on the cards, having started at 19. I bought my first property at 19 so know it is not going to be easy for you and at times you will think, "why on earth did i tie myself down like this". But life is never easy and when those feelings pass, you will look back and thank your lucky stars for making what is likely to be one of your wisest ever decisions at this young age.

that said; think about buying the house for you to live in. then rent out the spare rooms (so, get in lodgers, rather than tenants). you'll end up likely better off as you get tax breaks for renting out rooms and you are very much in control. it should mean that you are living for free and with a bit of spare cash after the mortgage is paid. more importantly, that way, you can side step the 'how do I get a buy-to-let mortgage with a low income. I am assuming your income is low just because the £25k limit is an issue you have mentioned.

Once settled into the house and having rented it out for a couple of years, you should be able to demonstrate higher income, by way of pay rises/promotions as well as the rental receipts from your lodgers. This, coupled with the fact you are a home owner/occupier, will mean more lenders willing to accommodate you for your first BTL.

Good luck and don't be fully put off by DSS or HMOs.......there is good money to be made there; just more work involved........but then when did higher returns ever come without a down side.

Let me know how you are doing at 40.

Martin Hicks
Posted: 11 October 2012 17:58:42(UTC)

Joined: 28/11/2010(UTC)
Posts: 2

As a very small time landlord I would echo the sentiments above and seriously consider postponing any immediate thoughts of investing in property to rent for at least 5 years. In all probability property prices will continue to stagnate or more likely fall during that period and there will be better bargains available by then. During that time it may become clearer what is to happen to this country's economy(as well as Europe's and America's), and maybe decide to invest elsewhere. My recommendation would be Canada. Plenty of time to read those books and talk to other landlords about their experiences.
Jim Moore
Posted: 11 October 2012 19:36:40(UTC)

Joined: 11/10/2012(UTC)
Posts: 1

Hi Frazer

Good for you!

I founded a business called "Inside Track" to help people just like yourself get started in this fabulous industry.. many people became very wealthy investors.. and of course some called me a "crook" when the market crashed and it collapsed... (welcome to UK attitudes which is why i dont live there full time!)

25,000 people later - i still believe buy to let is a great vehicle to help anyone, especially someone like yourself with time on their side, to make an enormous amount of personal wealth in a relatively short space of time.

I would be happy to help and advise you myself - what to look for and where, best use of your capital, pitfalls etc. I would be prepared to do this "free of charge" on an ad hoc basis (ie between my own projects) - i look forward to having another "superstar student"...

I do hope i can help.

best for now.

Jim Moore
Posted: 11 October 2012 19:57:31(UTC)

Joined: 24/07/2007(UTC)
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Note for Jim,

If I am not mistaken, you took out £35m in dividends over 10 years selling 'how to be a property millionaire' courses that were nothing more than a marketing mechanism for selling the same people over-priced stock that was never worth the prices asked. When the credit crunch hit and you could see that your business model was finished, you wound up the company and then refused to cover the losses of the business as soon as things turned sour, leaving many debts unpaid (despite having banked all those dividends over the years). Hardly what I call the sort of stock I'd want the next generation of investors to learn from.

Note for Fraser,

Sorry Fraser, but I suggest you can learn all you need to from a few good books and a bit of common sense and by talking to people and researching the internet a bit. People out there will want to 'help you out' but really, they want to make some cash out of you and sell you overpriced rubbish.

Jim Moore;16572 wrote:
Hi Frazer

Good for you!

I founded a business called "Inside Track" to help people just like yourself get started in this fabulous industry.. many people became very wealthy investors.. and of course some called me a "crook" when the market crashed and it collapsed... (welcome to UK attitudes which is why i dont live there full time!)

25,000 people later - i still believe buy to let is a great vehicle to help anyone, especially someone like yourself with time on their side, to make an enormous amount of personal wealth in a relatively short space of time.

I would be happy to help and advise you myself - what to look for and where, best use of your capital, pitfalls etc. I would be prepared to do this "free of charge" on an ad hoc basis (ie between my own projects) - i look forward to having another "superstar student"...

I do hope i can help.

best for now.

Jim Moore

2 users thanked Morpheus for this post.
Frazer Roberts on 11/10/2012(UTC), sgjhaghsdg on 16/10/2012(UTC)
Jerry Jones
Posted: 12 October 2012 09:33:45(UTC)

Joined: 12/08/2010(UTC)
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Oh and two things I'd recommend:

1. Avoid new build on a development where a) actual value is hard to determine because of no track record of sale prices being achieved in an open market, hence hard to determine if you are really buying at a good price and b) lots of properties are hitting the rental market simultaneously offering a great deal of identical competition for tenants.

2. Flats come with several problems, such as no control over service charges, possibility of damage caused by leaks and spillages on floor above, shorter periods of tenancy. I'd always go for 2-3 bed terraced houses with small, low maintenance gardens.

If I understand correctly, these two issues caught out many of Jim's Inside Track customers
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Micawber on 19/02/2013(UTC)
Matthew Charles Flinders
Posted: 12 October 2012 12:20:18(UTC)

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Quite interested to know your aims and reasoning behind this investment route?

It must be difficult to be a landlord as well as hold down a full time job, i'm sure people with experience can vouch for that?

Why would you not rather build up a diverse stock portfolio, spend your time managing your shares and hopefully netting 8%+ compounded annually?

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