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making money

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Author Topic: making money  (Read 191 times)
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« on: July 29, 2020, 09:14:48 AM »

Hi all just doing our figures in order to rent our house, now in our eyes this will be a long term investment as by the time the mortgage is paid each month and we have paid tax, some letting fees, land lord insurance we pretty much break even, we have decent money in our houses etc, just wondering other than cash buyers do you actually make monthly profits? If so how? As we are in a good position? Maybe interest only mortgages?

Would be interested to know 🤔
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« Reply #1 on: July 29, 2020, 11:52:30 AM »

You don't give enough detail.Is this your own personal residence you now want to rent out,the decent money in your houses,are these other BTLs ? Are you in totally secure jobs?

I certainly have made money from BTL.Over 23 years the average return on investment has been 15%.That said,the times were unusual.The first deposit was 6k,the next 2 brought that up to 20k spent.There had been a bad crash before I started,then prices shot up,so I was able to draw down to bring the portfolio up to 6 modest properties.5 were Interest only,the final one I paid cash, I sold one and made 25k in the couple of years I had it.I have not used any money for personal use,all mortgages are now cleared.It was several years before any monthly profit showed.I really doubt that there will be such fortuitous circumstances again for a long time.Before Covid the properties would have been valued around 475k,but that will go down.They have been flatlined for a few years.There is such a thing as luck.

There is also the cost to one's peace of mind to factor in.My nature is a drawback.I am risk averse,overthink and can become ill from worrying.I would advise anyone to allow for the worst scenario,could you still pay the bills? Must go,nurse says it's time for my medication,everyone here is so nice.
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« Reply #2 on: July 29, 2020, 02:03:25 PM »

My tax bill each year confirms I have made money... after the tax bill is paid it certainly starts to feel like I haven't.

Why would cash buyer vs. any other mechanism matter? It's the investment itself... the management... the upkeep (whether required or not - ties back to the purchase)... the rent you can extract. For Landlords who go the IO mortgage route... you enjoy the proceeds monthly, plus take a punt on capital appreciation... for Landlords like me who cash bought some and have repayment mortgages on others, it's about a bit of pain now for what I am hoping are major gains later in life - so even though it might not sometimes feel like I've made money I have paid down debt... it is looking (even though I would say I have had a secure job for the last 22 years) like I just dodged surprise redundancy by exerting myself strenuously for internal redeployment... hopefully secure again, and for a while... but these are troubled times and I suspect that they're going to become more troubled. In troubled times people can do desperate things. If you are just jumping into this game... to make money... and you get a professional rogue Tenant off the bat, one who can smell your inexperience... you could be in for a nasty surprise. Tread carefully. Now is not a time to play.
« Last Edit: July 29, 2020, 03:01:38 PM by Hippogriff »
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« Reply #3 on: July 29, 2020, 02:34:53 PM »

I just did my sums again,my lot are allegedly worth 575,missed one out. Agree with Hippogriff,one big repair bill, one rotten tenant, can really screw things up.There are also more mandatory expenses than when I started,expect more will follow.I am glad I did it,but I would not contemplate it now.Sorry to be a wet blanket,you sound enthusiastic and if you do go ahead I wish you every luck.
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« Reply #4 on: July 29, 2020, 03:24:18 PM »

Ok so as it stands for me I will be renting my property out for 850 pcm.

Will pay 40 % tax (as im a higher rate payer) on 850

10% for letting management

Plus landlord insurance,

So monthly as long as there isn't any problems I will brake even pay a little mortgage off and hopefully gain on the value of the house in the future.

Is this similar to you guys?
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« Reply #5 on: July 29, 2020, 03:30:15 PM »

Do you have a spouse/partner on a lower tax band?
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« Reply #6 on: July 29, 2020, 03:31:37 PM »

There's not enough detail here...

Landlord Insurance, Deposit protection charge (possibly), GSC, Electrical Safety Certificate (now), CO alarm?, you do say "house" but anything like Ground Rent or Service Charge?, what's your mortgage payment? Where's your war chest for if something goes wrong? Are your figures based on a full 12 months occupancy / rental income... or have you been smart and worked them out on 11 months? Give us more to go and we will try...
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« Reply #7 on: July 31, 2020, 01:02:21 PM »

Do you have a spouse/partner on a lower tax band?

Yes my partner is a 20% tax payer
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« Reply #8 on: July 31, 2020, 03:52:07 PM »

It could be worth having a word with an accountant or mortgage broker.You could maybe lower the tax if your partner was involved. I really don't think this is a good idea though at the present time.I would certainly not consider an interest- only mortgage as things are.There is a real risk of negative equity.You might be better off buying some gold.
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« Reply #9 on: July 31, 2020, 05:08:08 PM »

You might be better off buying some gold.

Gold's pretty toppy at the moment: it's the teddy bear everyone reaches for when there's bad news, so it might not have a lot more up left in it. Then again, I'd say the same about residential property, only more so!
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« Reply #10 on: July 31, 2020, 05:53:51 PM »

Hearing the state of the High St.banks yesterday,which can only get much worse,I am wondering if stashing cash in the mattress is ready for a comeback.   
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« Reply #11 on: August 02, 2020, 07:47:04 PM »

Thank you for your replies.

This is a long term investment for me (30 years) so even if there are ups and downs with the market hopefully in years to come the house will have made me some money.

The purpose of this post was to see if people made more on house value in the future than monthly repayments
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« Reply #12 on: August 02, 2020, 10:02:35 PM »

Good luck to you,all investment should be looked at as a long haul.
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« Reply #13 on: August 03, 2020, 10:24:37 AM »

I have a small block of gold in my bedside drawers. I received it as a gift from someone I suspect is involved with The Triads... but that's by-the-by... anyway, I actually don't really know what to do with it - on weight and current prices it's supposed to be worth over 4,000 (it's not giant, like a small thin chocolate bar)... but how do you sell it for its real price... if I take it down to my local branch of Ramsdens (https://www.ramsdensforcash.co.uk/ - not an advert) or something are they like We Buy Any Car... they automatically low-ball you on the price thinking that you've brought it in, you're gonna basically take anything they offer? I bet it is. Can I deposit it in NatWest? Otherwise I'll probably just save it for the imminent Zombie Apocalypse.

I prefer property to gold... property solves problems... gold doesn't. I guess property creates problems too...

What a crappy gift!
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« Reply #14 on: August 03, 2020, 11:21:39 AM »

You ungrateful swine.The most I have had from a tenant was a bottle of low-alcohol wine and some flowers from the local garage.Now that is a crappy gift.Anyway,you have not said what you had to do in order to earn this gold from the Triad ?
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« Reply #15 on: August 03, 2020, 12:13:35 PM »

Have it melted down and made into some chunky jewellery. Then you can look like a proper landlord.

I had a good experience with Atkinson's in Sutton Coldfield, albeit with coin rather than bar so it's easier to check prices online. At any rate, they didn't treat me like a know-nothing numpty even though I quite clearly was a know-nothing numpty!
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« Reply #16 on: August 03, 2020, 01:05:18 PM »

The purpose of this post was to see if people made more on house value in the future than monthly repayments

I'd certainly expect to make money on the rent. It might not generate cash if you're paying the capital on the mortgage as fast as possible, but it should certainly generate profit. Mentally I tend to offset major maintenance costs (new kitchen/bathroom/roof etc) against capital growth but that's a bit of a false distinction.

It's also worth mentioning that it doesn't always work out: https://www.landlordforumproject.co.uk/landlord-advice-help/self-manage-vs-agency
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« Reply #17 on: August 03, 2020, 02:30:53 PM »

The purpose of this post was to see if people made more on house value in the future than monthly repayments

I'd certainly expect to make money on the rent. It might not generate cash if you're paying the capital on the mortgage as fast as possible, but it should certainly generate profit. Mentally I tend to offset major maintenance costs (new kitchen/bathroom/roof etc) against capital growth but that's a bit of a false distinction.

It's also worth mentioning that it doesn't always work out: https://www.landlordforumproject.co.uk/landlord-advice-help/self-manage-vs-agency

Thank you  ;D
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« Reply #18 on: August 03, 2020, 02:37:26 PM »

The purpose of this post was to see if people made more on house value in the future than monthly repayments

I'd certainly expect to make money on the rent. It might not generate cash if you're paying the capital on the mortgage as fast as possible, but it should certainly generate profit. Mentally I tend to offset major maintenance costs (new kitchen/bathroom/roof etc) against capital growth but that's a bit of a false distinction.

It's also worth mentioning that it doesn't always work out: https://www.landlordforumproject.co.uk/landlord-advice-help/self-manage-vs-agency

As I have a baby on the way I want to use a letting agent, my figures show I pretty much break even every month on a repayment mortgage but if I went interest only id make 200 a month, but I pay about 200 a month off my mortgage on the repayment so same difference as I have savings for repairs etc hopefully house value eventually goes up and I profit that way.

Do you do interest only or repayment mortgage out of interest?
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« Reply #19 on: August 03, 2020, 03:37:49 PM »

I pretty much break even every month on a repayment mortgage but if I went interest only id make 200 a month, but I pay about 200 a month off my mortgage on the repayment so same difference as I have savings for repairs etc hopefully house value eventually goes up and I profit that way.

Do you do interest only or repayment mortgage out of interest?

Again, it's important to grasp the difference between profit and cash flow. You make the same monthly profit whether you go interest only or repayment (assuming the same interest rate, which ain't necessarily so). Interest-only just generates 200 more cash. What would you do with that cash? Put it in a savings account and earn 1% interest? All things being equal, it makes much more sense to knock it off the mortgage so that it's 200 you're not paying 3% interest on. That's 4 a year more profit already!  :)

Unless you really need that cash to build up an emergency fund or pay down more expensive debt, I'd always go for repayment, or interest-only with a generous annual repayment option.

I don't actually have a mortgage at the moment. I did have a repayment mortgage ... but I repaid it.
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« Reply #20 on: August 03, 2020, 04:19:49 PM »

All things being equal, it makes much more sense to knock it off the mortgage so that it's 200 you're not paying 3% interest on. That's 4 a year more profit already!  :)

I think there's also a genuine emotional boon to reducing your debt burden, rather than collecting savings. I know it's typical of many successful Landlords, some famous ones actually, do grow via the Interest Only route... but it has never once interested me (I look down on these Landlords - sorry - as people who fly too close to the sun, sail too close to the wind, stray too far from the thingie - but people who aren't actually willing to do their suffering now - like I am - for a better future - they want it all, all the time).

Steady as she goes...

The OP's plan is starting to sound more and more mental the more I hear about it. I have to chill... and realise that everyone starts somewhere... but is this the right where, or the right when? I don't think it is. What I dread to think of is someone dipping their toe in the water with a property they used to live in... thinking they'll never need it again and it'll be a nice little earner... a nice Tenant moving in and then, a bit down the line, finding out life wasn't greener on the other side or Landlording really isn't for them after all, and they need that property back, either for themselves or to sell. I dread these scenarios.
« Last Edit: August 03, 2020, 04:22:20 PM by Hippogriff »
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« Reply #21 on: August 04, 2020, 10:29:07 AM »

If the OP is taking a very long view,30 years, that does make a bit more sense.When I started,most BTL mortgages were interest only,and in my case I used the extra money to update the properties and pay off mortgages.I would never have taken an endowment mortgage on my own house,way too risky.I really would advise anyone not to take interest only in this day and age.
The thing is nothing ever turns out as planned.I had it worked out that long before now I would be living the life of Reilly in Nice,or maybe Marseilles at a pinch,with my own animal rescue centre,run by paid staff.Instead here I am still shovelling merde for my bunch of ingrates.Like Mick Jagger said "You might just get what you need".
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