Buying to Let

[Supernick]

I can't think in the office for people constantly telling me that at 25 I should be entering the property market. The problem is like with many first time buyers, I can't afford property in my area -Berkhamsted, etc. They keep telling me that even if I can't buy a house for myself then it would be a wise move to buy to let, and get a house further North that i could rent out. I'm fairly naive but what are the major pitfalls and things to think about before I discuss things like mortgages with the bank and start examining this idea more closely?

[Miss Zippy]

Thousands of people are in your position and I wouldn't feel pressured to buy a property by other people.  It's a major commitment and buy-to-let shouldn't be seen as the 'soft option' of property ownership. Buy to let mortgages typically expect that you put down a 15% or 20% deposit, unlike a standard owner-occupier mortgage where you might only have to put down a 5% deposit or even nothing at all.  So, firstly, do you have enough cash to use as a deposit?  Secondly, you need to make sure you have enough cash put by to act as a cushion in times when you do not have a tenant (I have rented out a property for 3 years and during that time it was unlet for a 4 month period, so I had to cover the monthly mortgage payments myself) or simply when the property requires maintenance work, which  you will be responsible for (the tenant isn't). If you do decide to go for it, unless you're aiming at the very high end of the market (e.g. executive apartments) where mod cons and expensive furnishings are expected, then I would rent out a property unfurnished.  You will command a little less rent but you won't have the additional burden of having to replace things that break or become worn. Personally, I think you are probably better simply saving as much money as you can ready to use as a deposit when you are ready to buy a property that you will live in.

[Grimalkin]

I sympathise Supernick.  My boyfriend was a clever clogs and bought a house when he was 18 he is now 26 and has a nice chunk of equity, a bit of which we want to cash in and use for a 'trip of a lifetime'.  However every time we explain this there are frowns, gasps and shaking heads as we are apparently breaking the cardinal 'rule' of property ownership. People are weird about buying property so, although it's proved an excellent way to build up capital during a boom period in the market, don't be brow beaten into doing something you don't want to do.  We are stuck in the house 3 months after we wanted to leave the UK as no one wants to buy the damn thing...

[Octavius]

Everyone will have a better opinion than you of what you should do with your money, buy now, sell now, don't buy here, buy there, thats an up and coming area, thats a bad investment etc etc.

The best thing for you to do is decide whether you actually want to take the first step on the property ladder (i.e. potentially make the biggest financial commitment of your life).  Then, if so, make an appointment with a few mortgage advisors at your high street banks and ask them all the questions, get quotes on various options (how much can you borrow, how much will you pay back) get opinions from people in the business and those who will potentially lend you the money.  Then look into the other benefits and pitfalls of owning a property, getting it occupied, paying council tax, bills and insurances etc etc.

Armed with all this information, you will have a better opinion of what you are able to do with your money and how you want to spend it.

[Octavius]

I should add that you are not obligated to take up any offer from a bank or building society, so visiting them and getting a feel for what they can do for you and how much it will cost is the best way forward if you want start.