Buying a place

[Lockhouse]

My argument against buying cheap properties is that there's not much difference in the cost of maintenance between cheap property and expensive property.

If you are only collecting £400-£500pcm in rent, a few major repairs can screw your profit for the whole year, whilst if you've got £1500pcm coming in similar bills will not be three times as large (generally). The same goes for the cost of decorating.

For me, I could never make cheap properties pay (on paper at any rate).

[shaunbhoy]

My argument against buying cheap properties is that there's not much difference in the cost of maintenance between cheap property and expensive property.

If you are only collecting £400-£500pcm in rent, a few major repairs can screw your profit for the whole year, whilst if you've got £1500pcm coming in similar bills will not be three times as large (generally). The same goes for the cost of decorating.

Sensible advice. Are you sure you are in the right place?

[Old Hack]

My argument against buying cheap properties is that there's not much difference in the cost of maintenance between cheap property and expensive property.

If you are only collecting £400-£500pcm in rent, a few major repairs can screw your profit for the whole year, whilst if you've got £1500pcm coming similar bills will not be three times as large (generally). The same goes for the cost of decorating.

For me, I could never make cheap properties pay (on paper at any rate).

I must admit to not thinking about this, but surely, in a £1500 pcm house, the bathroom(s) and kitchen are going to me more than a cheap jobbie from B&Q? The fixtures and fittings will cost more? Painting and decorating is part and parcel of any letting business, but it's not onerous I'd venture?

The plan was to buy repos (25-30k), spend 10-15k, and then letting them. If you put hard wearing carpets in, or even laminate, that's going to last 10 years, and in that time, you've pretty much got the invetsment back.

It obviously something I need to look at more, but the more we discuss it, the more it seems a good area to put money, given there's no other place I can guarantee 10%

[MarillionFan]

My argument against buying cheap properties is that there's not much difference in the cost of maintenance between cheap property and expensive property.

If you are only collecting £400-£500pcm in rent, a few major repairs can screw your profit for the whole year, whilst if you've got £1500pcm coming in similar bills will not be three times as large (generally). The same goes for the cost of decorating.

For me, I could never make cheap properties pay (on paper at any rate).

I must admit to not thinking about this, but surely, in a £1500 pcm house, the bathroom(s) and kitchen are going to me more than a cheap jobbie from B&Q? The fixtures and fittings will cost more? Painting and decorating is part and parcel of any letting business, but not much more I'd venture?

The plan was to buy repos (25-30k), spend 10-15k, and then letting them. If you put hard wearing carpets in, or even laminate, that's going to last 10 years, and in that time, you've pretty much got the invetsment back.

It obviously something I need to look at more, but the more we discuss it, the more it seems a good area to put money, given there's no other place I can guarantee 10%

Back on track.

I think you have to factor in capital growth / gains on properties as well. A number of smaller properties purchased as opposed to one larger property, should in theory yield similar results when let out. Risks are, being able to always let out larger properties versus smaller. I've always believed that smaller is better. You're more likely to get them rented.

But with smaller properties, you're normally looking at cheaper fixtures & fittings, so wear and tear should be more.

The benefit of smaller over larger is around capital gains. To dispose of assets on smaller houses, owned between a couple allows you your £20k per year. Buying and then in 10 years disposing of 2,3,4 smaller houses would gain more over a number of years, then selling the larger house with a smilar capital gains growth.

Also location is key, unless you have a fully managed property. Being 100s of miles away from your rental property as opposed to being around the corner would be better.

[Lockhouse]

I must admit to not thinking about this, but surely, in a £1500 pcm house, the bathroom(s) and kitchen are going to me more than a cheap jobbie from B&Q? The fixtures and fittings will cost more? Painting and decorating is part and parcel of any letting business, but it's not onerous I'd venture?

The plan was to buy repos (25-30k), spend 10-15k, and then letting them. If you put hard wearing carpets in, or even laminate, that's going to last 10 years, and in that time, you've pretty much got the invetsment back.

It obviously something I need to look at more, but the more we discuss it, the more it seems a good area to put money, given there's no other place I can guarantee 10%

A £1500pcm house may cost 1.5x as much to repair but not 3x. Factor in the renovation and how long will it take to recoup your 10% and I doubt you will be seeing anything like that return.

I wouldn't go near it as I couldn't be sure of making a decent profit. Much better to make 7%-8% on one larger, more expensive property. Less hassle than multiples too - you only need one tenant.

[Lockhouse]

p.s. My experience is that to get higher yields on larger\more expensive properties is possible but you need to go the HMO route - that might be an option for you if you can put up with the management hassle and higher tenant turnover.

[Old Hack]

Back on track.

I think you have to factor in capital growth / gains on properties as well. A number of smaller properties purchased as opposed to one larger property, should in theory yield similar results when let out. Risks are, being able to always let out larger properties versus smaller. I've always believed that smaller is better. You're more likely to get them rented.

But with smaller properties, you're normally looking at cheaper fixtures & fittings, so wear and tear should be more.

The benefit of smaller over larger is around capital gains. To dispose of assets on smaller houses, owned between a couple allows you your £20k per year. Buying and then in 10 years disposing of 2,3,4 smaller houses would gain more over a number of years, then selling the larger house with a smilar capital gains growth.

Also location is key, unless you have a fully managed property. Being 100s of miles away from your rental property as opposed to being around the corner would be better.

We've (my friend) has approached local housing associations who can't (apparently) get enough houses. He's fairly local, although, obviously, I am not. This wasn't meant to be a plan B, and the friend is getting slightly carried away on numbers, but I thought buying 5 would minimise risk, given if the money was paid up front, you could either recoup the money, or reinvest to mitigate the risk. I simply cannot imagine the houses getting cheaper. However, on a larger property, I can; I dont see how that end of the market, in that location, could marginalise more than a larger house in the area could, if that makes sense.

A £1500pcm house may cost 1.5x as much to repair but not 3x. Factor in the renovation and how long will it take to recoup your 10% and I doubt you will be seeing anything like that return.

I wouldn't go near it as I couldn't be sure of making a decent profit. Much better to make 7%-8% on one larger, more expensive property. Less hassle than multiples too - you only need one tenant.

The housing association angle makes this attractive though, if you can get it. I read that the councils are light of houses too, which is leading to this. If you rent your houses through the YMCA, they also guarantee damages and the deposit, so there are angle. I can see the point of multiple tenants being an arse, but not if they are managed outside of your remit.

I still think the bottom end of the market there, has less wriggle room than the top.

[formant]

My argument against buying cheap properties is that there's not much difference in the cost of maintenance between cheap property and expensive property.

If you are only collecting £400-£500pcm in rent, a few major repairs can screw your profit for the whole year, whilst if you've got £1500pcm coming in similar bills will not be three times as large (generally). The same goes for the cost of decorating.

For me, I could never make cheap properties pay (on paper at any rate).

How cheap or how expensive though?

Well if you're comparing 50k properties (400-500 pcm in rent in the less wealthy regions of the country) with 300k properties (I guess in order to get 1500 pcm it'll have to either be in London or extremely large), I'm pretty sure those 6 cheap rentals that you could get instead of the one expensive one are going to throw off a lot more cash (on paper, at any rate).

[Old Hack]

p.s. My experience is that to get higher yields on larger\more expensive properties is possible but you need to go the HMO route - that might be an option for you if you can put up with the management hassle and higher tenant turnover.

I have a 2 bed bungalow in Surrey that is worth, around, £325k. The rental is £1100 and couldn't get more. Extrapolating that, the reward in Stoke would be much higher, for I could return, up to, £2700 a month, for the same money.

I'm talking myself into this. Maybe take a breather.

[formant]

p.s. My experience is that to get higher yields on larger\more expensive properties is possible but you need to go the HMO route - that might be an option for you if you can put up with the management hassle and higher tenant turnover.

The HMO route will generally make you appeal to students. Student flats also tend to come with higher maintenance and administration cost than a larger family rental. Just something to consider.
Student flats can be very lucrative nonetheless.