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Anyone investing in UK property?

freelancedev

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Hi,

I'm wondering if anyone is investing in UK property on this forum? I'm considering getting involved.

I think property is fastlane based on the fastlane commandments although scale is difficult. My only issue in researching property is that it seems that banks are really really reluctant to lend to anyone who doesn't meet their criteria which as it happens is an obedient slowlaner who has a £25k per year job and is a homeowner. Any deviation from this criteria seems to lead to higher interest rates and reduced yields which could particularly become a problem when interest rates go back up.

Obviously this creates indentured servitude which is the antithesis of the fastlane and due to the difficulty in scaling a portfolio (while on a slowlane wage) to an income level worth living on, it isn't just indentured servitude for a short period of time, you're talking years and years. Banks just don't seem to be interested in lending to people who don't have a 25k+ per year stable job.

I have considered saving up to buy in cash, I earn money on the side at the moment which I have been putting away every month but this would take a while too. It would also reduce yield and would not allow the benefits of the capital gains you would get on a leveraged portfolio, although it would allow for other opportunities such as generating bridging finance against the value of any unencumbered properties in order to buy, refurbish, and flip other properties.

Not sure where I'm going with this thread, I'm hoping someone a little more experienced in UK property may be able to chime in?
 
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Waspy

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Wait wait wait.

You have a slowlane job paying less than 25k per year and you think real estate is your fastlane vehicle?

Dude, if anyone earning less than 25k could jump on the real estate wagon and fastlane it everyone would be wealthy.

Need
Entry
Control
Scale
Time

Real estate usually has a large barrier to entry. You are currently running into it.

You see guys on this forum buying real estate in the states for like $30k. You couldn't get Harry Potter's room under the stairs for that, it's just not the same over here.

You CAN however get a mortgage on the right house with a wage sub-25k. But you are going to have to get at least a 10% deposit, and forgo a little yeild to start out. Get something with 3 beds and you can rent the spare ones out. Live for free. But it's not fastlane.
 

pawelw

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I was thinking about investing in properties (London area). Buying 15 - 25 % below the valuation of property and then selling at normal valuation could be a good thing. At the moment for me two biggest entry barriers are money(investor) which I will share the profit 50/50 with and low knowladge of property market. But idea is good.
If you want to invest in properties good thing is also rent to rent. You rent 4,5,6 bedroom house at cheap price and then rent the rooms to students and grab the profit on it :) I know some guys that are making money like this.
 

freelancedev

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Wait wait wait.

You have a slowlane job paying less than 25k per year and you think real estate is your fastlane vehicle?

Dude, if anyone earning less than 25k could jump on the real estate wagon and fastlane it everyone would be wealthy.

Need
Entry
Control
Scale
Time

Real estate usually has a large barrier to entry. You are currently running into it.

You see guys on this forum buying real estate in the states for like $30k. You couldn't get Harry Potter's room under the stairs for that, it's just not the same over here.

You CAN however get a mortgage on the right house with a wage sub-25k. But you are going to have to get at least a 10% deposit, and forgo a little yeild to start out. Get something with 3 beds and you can rent the spare ones out. Live for free. But it's not fastlane.

I agree that entry is difficult, I think I highlighted why it's difficult in my OP in that you either have the choice of saving to buy in cash which is difficult, or getting buy to let mortgages where you only need to save a 25% deposit, but the lenders requirements seem to force you into indentured servitude. A large proportion of the times rich list made their money in property but it seems to be predicated on the idea that you will not go full time in property until retirement age.

I do earn more than 25k but some of that is not from my job which makes matters difficult. It's why I was hoping someone who invests might be able to chip in with more advice around lending.
 
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proper

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I'm a property investor living in London. You can get a BTL mortgage without the salary limits. All you need is a good mortgage broker, enough cash and a good credit history. I don't think it's a good time to buy in London though. You may look at somewhere north, like Manchester(picking up in recent years).

You always need to earn money to at least pay the 25% deposits, stamp duties, solicitors etc. However, there are some ways to make this process faster. For example, you can use bridging loan to flip a property. It is actually much easier than most people would think if you get the basic things right. I would recommend a book called "The Complete Guide to Property Investment" by Rob Dix.

On a side note, I don't think property investment in the UK is the fast lane unless you are the math teacher with hundred of properties and living in a time when banks are crazy enough to lend 125% mortgage to anyone. Thanks to the uncertainty of Brexit, my properties has dropped 20% in value last year... Think about it if you have 75% on mortgage... There is no control or scale. If you are not careful with the leverage, a single setback in the market could send you straight to broke, exactly what happened to some people in 2008.
 

freelancedev

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I'm a property investor living in London. You can get a BTL mortgage without the salary limits. All you need is a good mortgage broker, enough cash and a good credit history. I don't think it's a good time to buy in London though. You may look at somewhere north, like Manchester(picking up in recent years).

You always need to earn money to at least pay the 25% deposits, stamp duties, solicitors etc. However, there are some ways to make this process faster. For example, you can use bridging loan to flip a property. It is actually much easier than most people would think if you get the basic things right. I would recommend a book called "The Complete Guide to Property Investment" by Rob Dix.

On a side note, I don't think property investment in the UK is the fast lane unless you are the math teacher with hundred of properties and living in a time when banks are crazy enough to lend 125% mortgage to anyone. Thanks to the uncertainty of Brexit, my properties has dropped 20% in value last year... Think about it if you have 75% on mortgage... There is no control or scale. If you are not careful with the leverage, a single setback in the market could send you straight to broke, exactly what happened to some people in 2008.

Yeah I have read Rob's book and listen to his podcast, their advice is to stay clear of London for the moment. When you say you can get a buy to let mortgage without the salary limits, how flexible are you talking? Can you get one with literally no provable income at all (as is often the case for business owners)? I'm assuming rates would be affected? Everywhere I have looked (mainly Rob Dix's forum) the brokers seem to suggest there's no chance without meeting the criteria.

As for bridging and flipping, have you done it yourself? To be honest I'm probably in a position to start flipping in the near future, and it's something I would like to do but it's intimidating taking on your first project. I was considering taking out a residential mortgage to do a flip since I'm not yet a homeowner. Again I'm unsure of how much they take your income into consideration with these sorts of projects?
 

SparksCW

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I'm in the UK and the "housing crisis" is blamed on these mid-salary earners with two houses and the banks that funded them.

You know the type, they have their own house and a cushy job then they mortgage up to buy a second property so they can call themselves a "property developer" or "landlord" but in reality a 1% increase in interest rates see them selling their cars and taking the TV's off the walls to flog on eBay to pay the mortgage!! Not to mention what happens when their tenants leave and they have a void, or the tenants stop paying, or the tenants wreck the place, or they're made redundant from their job they have no control over or the government changes the tax laws like now! It used to be pretty easy to get that second mortgage, not so much now.

Property is 100% fast lane.

However, buying a property with a massive mortgage and no "machine" is not fast lane. It's simply too big of a risk for not enough reward, you could create a semi-automated part time company that earns you as much profit as the rent from one property with less risk and less sleepless nights. (my UK based opinion)

I've been where you are, I am a qualified tradesman and I have contacts so I thought I could do it cheaper/easier/better too. But the reality is, property is only fast lane when you buy property from profits made in a business.

That's how people get properly rich.

Create a value adding company, make good regular money, buy property instead of cars, rinse and repeat for X amount of years then you can sit back and live off the rental income with a properly diversified portfolio of property, business and other investments.

If you have less than 6 figures cash and are living pay check to pay check then I would suggest you forget becoming a landlord and perhaps look at other businesses you can start to get you to 6 figures of cash and regular decent income.

I'm still not there either, but I'm doing a whole lot better than I was when I wanted to be a "property developer".

Just my thoughts, there is no right or wrong answer and I think the property game is a bit different in the USA.
 
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proper

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Yeah I have read Rob's book and listen to his podcast, their advice is to stay clear of London for the moment. When you say you can get a buy to let mortgage without the salary limits, how flexible are you talking? Can you get one with literally no provable income at all (as is often the case for business owners)? I'm assuming rates would be affected? Everywhere I have looked (mainly Rob Dix's forum) the brokers seem to suggest there's no chance without meeting the criteria.

As for bridging and flipping, have you done it yourself? To be honest I'm probably in a position to start flipping in the near future, and it's something I would like to do but it's intimidating taking on your first project. I was considering taking out a residential mortgage to do a flip since I'm not yet a homeowner. Again I'm unsure of how much they take your income into consideration with these sorts of projects?

Lenders like The Mortgage Works had no minimum salary requirements. It's kind of like you need to earn money at least, by working part-time or being self-employed. But they don't care how much you earn. This was my knowledge from 2016 though. Actually grabbing the phone and talking to a BTL mortgage broker will get all of your questions answered. Rob was constantly wrong about the London market, but I think this time he could be right. ;-)

Regarding bridging loan, I was so close to getting a deal done. However, the seller pulled out at the last minute. So no, I haven't done it myself but have some knowledge about the whole process. Below market value and speed is the key. This is also a cash heavy path. It is just the cash can work much harder for you. A residential mortgage is not suitable to do a flip, as it is not designed to work like that.

I would work on something else if I am short on cash or have a relatively low-paid job. Self-education and improvement are always the best investments. Actually, I myself took a break from property investments from the end of last year after the Brexit results. I invested the supposed to be deposit cash, into a physical products selling business, which mainly sells on Amazon.
 

freelancedev

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I'm in the UK and the "housing crisis" is blamed on these mid-salary earners with two houses and the banks that funded them.

You know the type, they have their own house and a cushy job then they mortgage up to buy a second property so they can call themselves a "property developer" or "landlord" but in reality a 1% increase in interest rates see them selling their cars and taking the TV's off the walls to flog on eBay to pay the mortgage!! Not to mention what happens when their tenants leave and they have a void, or the tenants stop paying, or the tenants wreck the place, or they're made redundant from their job they have no control over or the government changes the tax laws like now! It used to be pretty easy to get that second mortgage, not so much now.

Property is 100% fast lane.

However, buying a property with a massive mortgage and no "machine" is not fast lane. It's simply too big of a risk for not enough reward, you could create a semi-automated part time company that earns you as much profit as the rent from one property with less risk and less sleepless nights. (my UK based opinion)

I've been where you are, I am a qualified tradesman and I have contacts so I thought I could do it cheaper/easier/better too. But the reality is, property is only fast lane when you buy property from profits made in a business.

That's how people get properly rich.

Create a value adding company, make good regular money, buy property instead of cars, rinse and repeat for X amount of years then you can sit back and live off the rental income with a properly diversified portfolio of property, business and other investments.

If you have less than 6 figures cash and are living pay check to pay check then I would suggest you forget becoming a landlord and perhaps look at other businesses you can start to get you to 6 figures of cash and regular decent income.

I'm still not there either, but I'm doing a whole lot better than I was when I wanted to be a "property developer".

Just my thoughts, there is no right or wrong answer and I think the property game is a bit different in the USA.

Thanks for your input :)

As a tradesman, have you considered doing refurb flips?

I get what you're saying with the fear of interest rate increases, I'm young enough to not remember when interest rates were as high as they have been previously, but I guess if they ever went back up to 15% a lot of people would go bankrupt.
 

SparksCW

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Thanks for your input :)

As a tradesman, have you considered doing refurb flips?

I get what you're saying with the fear of interest rate increases, I'm young enough to not remember when interest rates were as high as they have been previously, but I guess if they ever went back up to 15% a lot of people would go bankrupt.

No because even refurbs apply to the above.

I used to run a large contractors and we worked for builders on a daily basis so I saw the good and the bad. The small one man bands generally didn't really do so well. Some ended up applying to work for me as labourers!! Most builders were doing multiple dwelling projects for rich people with primary businesses...

The only "developers" that did well were established companies who were making decent regular profits from business and then re-invested it all into property. One in particular went from well off to retired in less than two years and his son who took over is now set for life. That was a good lesson in property flipping/development/rental done properly and is exactly why I'm not trying to do it until my company is making real good money.

And trust me, most people will go bankrupt way before the interest rate gets to 15%!
 
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freelancedev

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No because even refurbs apply to the above.

I used to run a large contractors and we worked for builders on a daily basis so I saw the good and the bad. The small one man bands generally didn't really do so well. Some ended up applying to work for me as labourers!! Most builders were doing multiple dwelling projects for rich people with primary businesses...

The only "developers" that did well were established companies who were making decent regular profits from business and then re-invested it all into property. One in particular went from well off to retired in less than two years and his son who took over is now set for life. That was a good lesson in property flipping/development/rental done properly and is exactly why I'm not trying to do it until my company is making real good money.

And trust me, most people will go bankrupt way before the interest rate gets to 15%!

I suppose it depends on what deal(s) you get. A friend of mine has added a good bit of equity to his home by converting it from 3 bedrooms to four and is planning on taking out equity shortly for his second buy to let.

What in your opinion set the established companies apart? Was it just the sheer scale (fastlane principle) of what they were doing? I know it's not realistic for your average Joe to turn over 500k per year if they're just starting out, but do you not reckon even 20-30k per year extra income is doable?
 

B V Marlon

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About the only thing that UK property has going for it is that it's easier to leverage - banks will happily lend you money to buy a house. Funds to leverage a business start, or purchase are much harder to come by. Leverage is one potential way to big returns, but it also magnifies the downside when things head south (as mentioned above by proper).

I'm no expert, but I can see more than a few people losing their shirt in London, and probably beyond, in the next few years. The major problem with property investment, in my mind, is that it's so illiquid. Should things go horribly wrong, which is always a possibility, then it's very difficult to get out quickly and stop your losses before they get too big.
 

Fanny Bomb

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Thank God I found this thread. Was 'possibly' about to make a very expensive mistake. Thanks for the input everyone especially @SparksCW.

I'm in a slowlane job making 24K a year and was thinking about buying a bigger place to move into while holding on to my current place to rent out. My thinking was that a tenant could pay for my first mortgage while I pay for my second mortgage. I have a big enough deposit to get mortgage for second property. I've heard the arguments above for avoiding this due to a lack of control (Interest rate changes, bad tenants etc) but has anyone on here successfully managed to implement a strategy like this or is just too risky especially after the uncertainty of Brexit?

The passive income sounds good but am I best to concentrate on another business venture?

Any input would be appreciated.
 
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proper

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My thinking was that a tenant could pay for my first mortgage while I pay for my second mortgage. I have a big enough deposit to get mortgage for second property. I've heard the arguments above for avoiding this due to a lack of control (Interest rate changes, bad tenants etc) but has anyone on here successfully managed to implement a strategy like this or is just too risky especially after the uncertainty of Brexit?

That's how I got started in property. It worked fantastic for me. However, it was back in 2009, when some property developers in London would give 20% discount and cashback to sell their unsold flats. Although the interest rate back then was about 6.5%, it was good times. I don't think it is good timing right now in London. I made the decision last year to stop investing in property and focusing on starting a business.

By lacking control, I mean you don't control the price of the property. I wouldn't worry too much about interest rates or bad tenants. They are the cost of the property investment business. However, you do need to do the math and stress test. My mortgage is below 50%. I always do intensive credit checks on tenants and meet them in person. I never had bad tenants. If I do in the future, I have the rental guarantee insurance to cover that. This is just my experience from London though.

Obviously, the property path lacks scale as well. England is a small island with a certain amount of properties and demands. So my conclusion is that investing in property is not Fastlane.
 

Fanny Bomb

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Thanks for taking the time to reply. I live in Glasgow. Has anyone got any experience of investing in property up here. Would love to hear people's thoughts on buy to let's. As you can probably tell I'm a total newbie!
 

Forfar

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Some good points made, I work in the property industry in the north of England and meet high net worth people with big property holdings fairly often. Very very few of them have made their money solely through property investment. The majority have an established business they use as a cash machine to pump into a property portfolio. Or they have a business that requires commercial premises so they buy and develop property to base their business and expand from there.

Having said that, if you are keen I'd say this: stricter lending requirements, govt pressure (ie Section 24) and inflated prices make things difficult for everyone, not just you. If you can think of a different angle you could be getting into the game when other people are deciding to leave. Some things that come to mind:

HMOs: nothing new but still an area avoided many by faint hearted btl landlords. With your limited funds you might be restricted to a low income area so don't count on much cap growth, but you can make plenty of rental income.

Serviced apartments: we are seeing more and more of these recently. Look to buy in a major city centre and the extra income you receive might not be astronomical but it can give you the edge over other investors looking to buy and let on a standard AST, you can afford to pay a little more for a prime location and play it long term for appreciation.

Final thought: I know the property industry well, I work in it, I have held a HMO for the past 7 years which has a solid chunk of equity and produces decent monthly income and my dad is a builder. Even with all these boxes checked I'm working on my business instead of investing in property because the returns and scale-ability on property pale in comparison to a successful business. The obvious downside is that it is that the route to a successful business is much more difficult and less clear cut. But that also makes it more interesting.
 
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