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Advice on best way to invest a lump of cash, to generate rental income.

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Author Topic: Advice on best way to invest a lump of cash, to generate rental income.  (Read 373 times)
Newbie
Posts: 3

I like property

« on: November 29, 2020, 04:03:54 PM »

Hey all,

First post on this forum :-)

I'm hoping for some honest feedback and guidance on the following...

My girlfriend and I have 30k saved and this should soon increase to around 45k, maybe in around 12 / 18 months or so. we're just planning some ideas for the money, in advance.

We currently rent a property as tenants and are considering making a move in to property ownership. We don't own any property at the moment. We have a long term goal of reaching Financial Independence, primarily through property as landlords (buying for positive monthly cashflow) and would like to make our first purchase of a rental property soon. For context, we're both 35.

I'm thinking that it could make sense to use the 45k savings for 20% deposit on a rental place, (maybe 30k or so of the savings) which would be probably the minimum possible for a flat or small house where we are in the Midlands. The remaining 15k of savings would be for a small place of our own (10% deposit), meaning we wouldn't then be renting the place we're in at the moment. These are just loose ideas, but as experienced landlords yourselves, what would you say would be the best approach in our current situation?

- Would your first buy be a rental vs having your own place initially?
- Should we continue to rent the place we're in, alongside our new rental purchase?
- Would you say we should put all funds into a larger rental property, or split it as I've mentioned?

What do you think should be our first steps and the best way of maximising the return on this money?

Any thoughts would be appreciated!

Thanks all :-)

Dave.


Newbie
Posts: 47

Landlord - always learning

« Reply #1 on: November 29, 2020, 05:09:12 PM »

Quote
use the 45k savings for 20% deposit on a rental place, (maybe 30k or so of the savings) which would be probably the minimum possible for a flat or small house where we are in the Midlands. The remaining 15k of savings would be for a small place of our own (10% deposit)

Assuming that you could get the two mortgages (one would be a BTL mortgage with a higher interest rate), then could you afford to keep up the repayments on both if, for whatever reason, you had a void period (no tenants) on your rental place?

Some other folks will be along soon to tell you why else this double investment might be a risky move.
Newbie
Posts: 3

I like property

« Reply #2 on: November 29, 2020, 05:38:57 PM »

Good point and one certainly worth considering, thanks Handyman :-)

Hypothetically speaking, if only one property could be obtained and we went for the rental property only, do you think the lenders would look more favourably on us continuing to rent ourselves too, or would having a second property (our own) to pay for would be 'better' in their eyes, as at least they have the security of obtaining it in worst case scenario?

Following on from your above comment, I'm assuming you would advise we maybe go down the route of a single property - the rental one and continue to to be tenants ourselves in the current place? Is that what you would do?

Also, do have any investment properties yourself?

Thanks again.
« Last Edit: November 29, 2020, 07:43:35 PM by Altonator »
Newbie
Posts: 47

Landlord - always learning

« Reply #3 on: November 29, 2020, 09:01:47 PM »


...do you think the lenders would look more favourably on us continuing to rent ourselves too

...I'm assuming you would advise we maybe go down the route of a single property ... Is that what you would do?

...Also, do have any investment properties yourself?

1. No idea, I'm afraid. It may even vary by lender.

2. I'm not qualified to advise you. Your circumstances, of which there must be additional factors to consider than just those in your initial post, are specific to you.

3. Yes. But acquired in a very different way to that which you are planning to do - and therefore not helpful to your situation.

Global Moderator
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Posts: 4120

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« Reply #4 on: November 29, 2020, 11:09:12 PM »

- Would your first buy be a rental vs having your own place initially?

No.

No-no-no-no-no-no-no-no. Terrible idea. Naughty Altonator... look at what you did, and in your bed! Always sort out your own home first before playing in the private rental sector. Otherwise you're just in a giant merry-go-round of funny money... someone is paying your mortgage, you're paying someone else's mortgage... what's the frikkin' point? You wouldn't be a big fish... you'd be a tiddler and I assume you'd still have real world jobs... so this won't be your main focus... nor will you have that interested in it. The sector is moving... negatively... not in favour of Landlords... pay attention to the News man... figure it out. Where do you think the taxes are gonna rise to pay off all this Covid debt? Landlords will come in for more than their fair share. Stay out of it. In fact, run for the hills... get yourself a nice little nest sorted out for you both, and exit the merry-go-round until things start to be more understood. Now is not the time for what you're thinking. Stop paying the mortgage for your Landlord and get some positive debt yourself that will be at a low interest rate, fix it for as long as you reasonably can and prepare to ride this out while paying down your own debt... benefitting you... maybe in a few years you'll have a chunk of equity and you can remortgage to get the funds back to start to play... but that's another thought for another time. Your current plan isn't a plan... it's a pipe-dream. There's no pot of gold at the end of this rainbow... not now.
Newbie
Posts: 3

I like property

« Reply #5 on: November 29, 2020, 11:42:00 PM »

Thanks both, appreciate the input, especially the actionable points Hippogriff, this is useful and great to have another perspective on things.

I'll focus on securing our own place first and then use any spare cash as a springboard for other ventures later down the line, or like you have said, by paying off the debt. Doing this is a good step forward. Interesting how you have framed it - totally agree about removing the "paying off my landlord's mortgage" part, makes sense now you have stated it.....sounds obvious now :-)

Anyways, that's exactly the point of the post - to get fresh eyes and opinions on things, so thanks again for the help. If anyone else has viewpoints, I'd love to hear them also.
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