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Advice Please - BTL Property

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Posted 27th May
Hi all,

I have seen a property (2 bedroom, new build) which I viewed yesterday. Landlord/owner is selling up and I’d like to put an offer in.

I’d like to know, if it is in fact a buyers market at the moment or is it just hype? I wouldn’t put a ridiculously low offer in as I wouldn’t do that.

But is 10% below the asking price reasonable? I have a mortgage in principle in place this morning.

Really would appreciate all advice please.
Many thanks.
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usually depends on how fast they want rid of the property.

10% I would say it maybe a little too much, between 5-8% usually but like I say it all depends on how quick they want rid of it.
Better times to buy than now.
My house is under offer at 1% below asking price... not sure where you are but down south (Somerset) houses are selling really quickly so you’d be unlikely to get a huge discount unless the landlord is absolutely desperate to sell at below market value!
No harm trying as I imagine some people may need to access equity tied up in a BTL property. Just be aware that the income of a lot of people has been affected and some tenants are finding it hard to meet monthly payments.
Be aware that you'll pay ground rent, maintenance and council tax regardless of whether you have tenants or not.
Always, regardless of everything offer 10% less than asking price.

Always, regardless of everything, advertise property for sale 10% more than valuation.

All rules of thumb.

Vendors can always say no. Negotiation is a very difficult skill to master.

There are discussions going around that property prices will slump in the next 12 months. Be careful.
no one really knows what is going on with property at the moment. the bbc website reported a big surge in viewings as people are getting out of lockdown and can start to move house again but that this may be temporary as it is due to the backlog of demand.

how much you offer on a property very much depends on the area in my experience. in some area, the actual selling price is a lot less than the asking price, but in some it is very close. no harm in offering 10% below and then see how it goes. it is really how much you think the property is worth yourself.
tardytortoise27/05/2020 12:27

Always, regardless of everything offer 10% less than asking price.Always, …Always, regardless of everything offer 10% less than asking price.Always, regardless of everything, advertise property for sale 10% more than valuation.All rules of thumb.Vendors can always say no. Negotiation is a very difficult skill to master.There are discussions going around that property prices will slump in the next 12 months. Be careful.


Woops, I’ve done it all wrong then... my house has been under offer twice, once at full asking (pulled out due to corona cold feet) and now at £2k less than asking price. Maybe I should have increased my asking price?!
shelliebish27/05/2020 12:48

Woops, I’ve done it all wrong then... my house has been under offer twice, …Woops, I’ve done it all wrong then... my house has been under offer twice, once at full asking (pulled out due to corona cold feet) and now at £2k less than asking price. Maybe I should have increased my asking price?!


It depends on area and what you're selling.

Being a first time buyer I wrangled with the 'what do you offer' question so I did some analysis with Rightmove and Zoopla data as they kindly keep old listings and show sold prices. From memory houses were selling around 2-5% under the listing price (keeping in mind if it was reduced at any point then I wouldn't know the original listing price only the reduced one). It also depended on the type of property. The lower down the market the lower that percentage was.

That kind of reflects what has happened in the market around here, there's been a squeeze in pricing, ie the jump between 2 bed and 3 bed etc is a lot narrower now.

Ultimately you offer what you want to offer and if you think it is too low or cheeky, who cares. If they say no, they say no.
Thank you very much to all who took time to answer. There are tenants in the property at the moment who I met yesterday. They were very transparent with the whole situation and said they would prefer to stay in the property for another 12-24 months if the new owner was to rent it out.

They said they had been given first refusal for purchase but they said their long term plans were for a bigger family hence a bigger house. The 2 bedrooms works for them currently with a baby.

So potentially, could keep same tenants if all is “okay” with new tenancy agreement etc etc.

Otherwise I have back up funds for the council tax, maintenance as well as for the important legislation (gas & electricity certificates etc etc)

I’m genuinely interested in the property and it’s a good investment for me due to location; schools hospitals shopping centres etc.

The asking price is £173k for a 2 bedroom.
The house next to it is a 3 bedroom and sold at £193k last week but was advertised at £210k.

Any other thoughts please? Really value all your opinions as it’s a huge decision for me.
Hennah27/05/2020 13:08

Thank you very much to all who took time to answer. There are tenants in …Thank you very much to all who took time to answer. There are tenants in the property at the moment who I met yesterday. They were very transparent with the whole situation and said they would prefer to stay in the property for another 12-24 months if the new owner was to rent it out. They said they had been given first refusal for purchase but they said their long term plans were for a bigger family hence a bigger house. The 2 bedrooms works for them currently with a baby. So potentially, could keep same tenants if all is “okay” with new tenancy agreement etc etc. Otherwise I have back up funds for the council tax, maintenance as well as for the important legislation (gas & electricity certificates etc etc) I’m genuinely interested in the property and it’s a good investment for me due to location; schools hospitals shopping centres etc. The asking price is £173k for a 2 bedroom. The house next to it is a 3 bedroom and sold at £193k last week but was advertised at £210k. Any other thoughts please? Really value all your opinions as it’s a huge decision for me.



You only need to decide, if and after any offer is accepted; not before - go fishing!
Offer £156k and if they refuse go to £160k letting it be known you cannot increase any higher than this, using as many sob stories as you can muster.
Edited by: "tardytortoise" 27th May
Personally I’d always lowball first, they can only say no and you can up your offer, what you do not want to do is start too high. I’d offer £160k as a feeler, it opens negotiations and you have your foot half in the door.
plebbygiraffe27/05/2020 13:02

It depends on area and what you're selling.Being a first time buyer I …It depends on area and what you're selling.Being a first time buyer I wrangled with the 'what do you offer' question so I did some analysis with Rightmove and Zoopla data as they kindly keep old listings and show sold prices. From memory houses were selling around 2-5% under the listing price (keeping in mind if it was reduced at any point then I wouldn't know the original listing price only the reduced one). It also depended on the type of property. The lower down the market the lower that percentage was.That kind of reflects what has happened in the market around here, there's been a squeeze in pricing, ie the jump between 2 bed and 3 bed etc is a lot narrower now.Ultimately you offer what you want to offer and if you think it is too low or cheeky, who cares. If they say no, they say no.


We’re selling a 3 bed mid terrace to buy a 4 bed detached... I’m too impatient to play games so I just put it on at a price that made sense without being greedy & wouldn’t put us in competition with newer houses or those in a better catchment area... seems to have worked, it was originally sold in Feb before it even went on Rightmove (damn corona!) and we had our current offer in the midst of lockdown because they were desperate not to miss out when lockdown was lifted.
Zoopla is a funny old thing, it says my current house is worth less than we’re selling for... but for the house we’re buying it’s put the value at £58,000 more than we’re paying! The most recent sold price is £35k more than we’re paying too.
And don't believe any estate agent BS!
How do the numbers stack up?

look at this as a business purchase - what are your estimates for maintenance costs, interest, etc what sort of return are you expecting?
I was speaking to my solicitor a few days ago. He was telling me that sales are still going through and have been during the lock down but mainly on empty houses and new builds.

what I would say Is a btl is a long term investment if you can make the figures work go. Then long term you should be fine. If you are taking it in with a sitting tennent that removes quite a chunk of cost as you won’t have to pay estate agent fees and won’t have an initial empty period.

do you mind me asking if you are doing it as a interest only or repayment? And what do the monthly figures look like?
Wadda27/05/2020 14:00

I was speaking to my solicitor a few days ago. He was telling me that …I was speaking to my solicitor a few days ago. He was telling me that sales are still going through and have been during the lock down but mainly on empty houses and new builds. what I would say Is a btl is a long term investment if you can make the figures work go. Then long term you should be fine. If you are taking it in with a sitting tennent that removes quite a chunk of cost as you won’t have to pay estate agent fees and won’t have an initial empty period.do you mind me asking if you are doing it as a interest only or repayment? And what do the monthly figures look like?


Potentially, sitting tenants. Potentially though.

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mas9927/05/2020 13:48

How do the numbers stack up?look at this as a business purchase - what are …How do the numbers stack up?look at this as a business purchase - what are your estimates for maintenance costs, interest, etc what sort of return are you expecting?


Currently tenants are paying £650 PCM.

That’s without any bills for utilities or broadband, tv etc.

That’s also unfurnished with no white goods at all.
It would be a repayment mortgage, not interest only.
Is that a btl mortgage quote? Can you handle an interest rate hike?

Is it a flat? freehold/leasehold? insurance costs?
Have you considered that you will need to pay 20% tax on the rental income?

gas and electric (Needed from July 1st) certificates will cost Around £150 a year.

buildings insurance £200ish

then consider the cost to clean carpets/redecorate when tenants move out.

also if letting through an agent in future the fees they charge.

is this the only property you own? If it’s not you will be facing a bill of £6150 just for the stamp duty to buy it.
mas9927/05/2020 14:09

Is that a btl mortgage quote? Can you handle an interest rate hike?Is it …Is that a btl mortgage quote? Can you handle an interest rate hike?Is it a flat? freehold/leasehold? insurance costs?


BTL mortgage quote

Fixed rate 5 years

Freehold

Insurance £179 approx.

All put into a profit & loss account sheet.
Wadda27/05/2020 14:44

Have you considered that you will need to pay 20% tax on the rental …Have you considered that you will need to pay 20% tax on the rental income?gas and electric (Needed from July 1st) certificates will cost Around £150 a year. buildings insurance £200ishthen consider the cost to clean carpets/redecorate when tenants move out.also if letting through an agent in future the fees they charge. is this the only property you own? If it’s not you will be facing a bill of £6150 just for the stamp duty to buy it.


Yes this would potentially be my 3rd property on BTL so I’m well aware of costings and tax brackets.

I’ve taken the stamp duty into account. Cheers.
What’s the loss per year assuming constant tenancy? Can you cover it without struggling financially?

i did a quick search on money supermarket gives a lower mortgage payment per month. Assuming 25% deposit. Ten year fixed with TSB of £579.

i don’t know where you are in the U.K. but in Yorkshire you can buy a house for around £120k that potentially haS a £650 a month rental income.
Edited by: "Wadda" 27th May
Brill. Thank you for the info. Appreciate it.

Yes, I can cover loss of income for at least 12 months.

The property I’m looking at is in Birmingham.
britlad27/05/2020 12:24

Be aware that you'll pay ground rent, maintenance and council tax …Be aware that you'll pay ground rent, maintenance and council tax regardless of whether you have tenants or not.



No you won't. Where have you got that from?.

Houses that are freehold have no ground rent costs and the tenants pa the council tax.
Yes, I agree. Buyer had not confirmed that building was freehold at the time, so there aren't any fees associated with leasehold or maintenance charges. I had incorrectly jumped to conclusions that £160k wouldn't buy a house. The joys of living in the SE.
They will, however, be liable for council tax if the property is empty.
Edited by: "britlad" 27th May
Yes the property is freehold. But I have sufficient back up fund for any other factors.
Even if the property wasn’t tenanted, I would be able to pay the council tax for at least 12 months if the property was empty.

But it’s in an affluent area of Birmingham so its well sought after.

I have put an offer in today. Wish me luck!
Hennah27/05/2020 14:51

Yes this would potentially be my 3rd property on BTL so I’m well aware of c …Yes this would potentially be my 3rd property on BTL so I’m well aware of costings and tax brackets. I’ve taken the stamp duty into account. Cheers.



Your figures don't add up to a profitable income assuming you are paying out all you should be.

Why are you going for a repayment mortgage when the property whould bring in more yield at an interest only rate and should increase with value in the future.

Your insurance should also come with payment protection and to pay for legal fees to remove a non paying tenant.
Boiler cover should come with a yearly gas saftey certificate
markvirgo27/05/2020 20:24

Your figures don't add up to a profitable income assuming you are paying …Your figures don't add up to a profitable income assuming you are paying out all you should be.Why are you going for a repayment mortgage when the property whould bring in more yield at an interest only rate and should increase with value in the future. Your insurance should also come with payment protection and to pay for legal fees to remove a non paying tenant. Boiler cover should come with a yearly gas saftey certificate


They definitely do add up to a profitable income or I wouldn’t even be entertaining the idea. But thank you.
I don’t think they do add up to profit. With my rough estimations.

rent in £650
mortgage out -£579
Income tax -£130
safety certificates -£15
building insurance -£15

i work it out as an £89 a month loss. That’s assuming you are a lower rate tax payer (Being a third btl you will probably be a higher rate) and the property is tenanted constantly with no estate agents fees.

I am not a fan of interest only mortgage for but to let. But making even a very small Monthly profit on a repayment btl is very Hard these days. Unless you put down 35% plus deposit. Plus rights are mainly in the tenants favour.
Edited by: "Wadda" 28th May
Hennah27/05/2020 13:08

Thank you very much to all who took time to answer. There are tenants in …Thank you very much to all who took time to answer. There are tenants in the property at the moment who I met yesterday. They were very transparent with the whole situation and said they would prefer to stay in the property for another 12-24 months if the new owner was to rent it out. They said they had been given first refusal for purchase but they said their long term plans were for a bigger family hence a bigger house. The 2 bedrooms works for them currently with a baby. So potentially, could keep same tenants if all is “okay” with new tenancy agreement etc etc. Otherwise I have back up funds for the council tax, maintenance as well as for the important legislation (gas & electricity certificates etc etc) I’m genuinely interested in the property and it’s a good investment for me due to location; schools hospitals shopping centres etc. The asking price is £173k for a 2 bedroom. The house next to it is a 3 bedroom and sold at £193k last week but was advertised at £210k. Any other thoughts please? Really value all your opinions as it’s a huge decision for me.


Where there are freehold properties at a just little more, I would never buy a flat/leasehold property nor shared ownership property of any kind.

Freehold property allows for more control over property use, occupancy, future changes, maintenance costs (e.g charged by external bodies for communal areas in flats). And houses reduce the potential problems of noisy occupants of rooms up/downstairs, as well as the risk of floods from bathrooms + kitchens above or you flooding those below.

Houses also offer more options for future letting area creation, inc' loft and/or basement conversion, side/rear extensions, as well as off-street parking and/or electric vehicle charging points (all assuming no restrictive covenants in the Deeds).

Oh, and after the appalling Grenfell disaster: if it has external cladding: check if a fire risk survey has been done, and if it needs changing that the freeholder will foot the bill for upgrades.... Major works to leasehold flats are never cheap because of all the fingers in the pie during the contracting/works process. Could add tens of thousands in one year!

Fewer restrictions/more options make for an easier life and better business planning with freehold.
Edited by: "c_1st" 28th May
shelliebish27/05/2020 13:34

We’re selling a 3 bed mid terrace to buy a 4 bed detached... I’m too imp …We’re selling a 3 bed mid terrace to buy a 4 bed detached... I’m too impatient to play games so I just put it on at a price that made sense without being greedy & wouldn’t put us in competition with newer houses or those in a better catchment area... seems to have worked, it was originally sold in Feb before it even went on Rightmove (damn corona!) and we had our current offer in the midst of lockdown because they were desperate not to miss out when lockdown was lifted. Zoopla is a funny old thing, it says my current house is worth less than we’re selling for... but for the house we’re buying it’s put the value at £58,000 more than we’re paying! The most recent sold price is £35k more than we’re paying too.


Wow, very unusual to see one party win at both ends - well done, and of course congratulations too .

Which area are you in/moving to?
Edited by: "c_1st" 28th May
c_1st28/05/2020 01:23

Wow, very unusual to see one party win at both ends - well done, and of …Wow, very unusual to see one party win at both ends - well done, and of course congratulations too . Which area are you in/moving to?


Thank you... I’m so excited, my mind is literally working at 100 miles an hour with ideas of how to make the house amazing! It’s a do-er upper which is exactly what I wanted, I never wanted to pay a premium for someone else’s taste when I’d rip it out anyway! It already has brand new oak flooring and carpets which saves us so much before we start... but still has 2x pink bathrooms and a really dated kitchen. Even if we spend £20k on the house it’s still less than its original asking price (& still £15k less than the most recent sold price) so I think we’re incredibly lucky, especially as the vendor agreed to wait for us when our first buyer got cold feet (I think he just wants his inheritance now).
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