Updating post from Reddit.
Hi all,
I’m running the numbers on my buy-to-let property and would love to hear your opinions, experiences, and anything I might have overlooked.
My situation:
I want to compare three different management approaches and see the net profit after tax for each.
I’m mainly trying to understand what makes most sense financially. Selling isn't an option at the moment, as the property is more of an insurance policy.
Option 1 – Fully ManagedWhat’s included:
Fees:
Fees:
What I’m asking the community:
Thanks in advance — keen to hear from landlords who’ve been through this decision before and can share anything crucial I'm missing?
Would anyone also happen to have a recommendation for a BTL calculator so I can get accurate numbers?
What net profit are you expecting, really? You are barely covering the mortgage interest after applying tax and the tax credit.
I'm not really expecting profit in this case; retaining the property is the key, even if it's at a loss.
Why? It doesn't make sense.
The situation is I'll be moving into my girlfriends place so if that doesn't work out I have the property as back up.
I'm aware the smartest solution financially is to just sell the property and stick the money into a S&S ISA but I'm simply exploring potential options.
I get this OP, I would personally do the same even if it made me a tiny loss, especially if I really liked the place.
In answer to your question, I do OpenRent/DIY and have no issues. I rent in a ‘nice’ area to nice people and I enjoy diy, home maintenance and I’m also a professional so very capable of being professional with my tenants and doing a good job of being a landlord.
If you don’t mind that you could give it a go.
Personally I would never ever ever let an agency choose my tenants, no way
Yeah I think OpenRent will be the way to go. I'll live very close by for management of the property anyway so not an issue for me.
Keep in mind that they just said they are a tradesman so have the skills of an electrician, plumber and engineer.
Do you?
Yes, I'm a systems engineer.
On houses/property/real estate?
Not a tradesman, when I said professional I mean in my corporate role so good at working with people.
Contrast to a colleague who uses an agent as a tenant once hit him so he’s been too nervous to self manage ever since.
I’m saying depends on how capable you are of being generally professional.
I do like DIY so eg fitted the new kitchen and tiling myself, but I don’t think that’s necessary, I have. Couple of trusted trades that fix washing machines etc, even if I could do this part myself I wouldn’t as tenants don’t want me there really
I would sell.
Why?
Educate yourself on the compliance rules. If you live near the property and are willing to put in some work (if you know what you’re doing it’s not too much. Services like safe2 and hello neighbour (better than openrent IMO) are my go to. Combine with rent guarantee insurance. Most importantly if you do decide to self manage don’t skimp to tough referencing - some questionable tenants find going direct to amateur landlords the easiest way to sneak through their disastrous credit history and proceed to not pay anything!
On these numbers you have no choice but to go Openrent. Plus if you are organised and prepared to put some effort in to remaining on top of legislation and prepared to undertake viewings yourself then it’s pretty easy to be fair.
Any additional income you make will be taxed at 40%. It’s almost impossible to make BTL work for higher rate taxpayers nowadays. If you use a company or are a basic rate taxpayer there is more of a chance but even then the numbers are pretty grim.
Personally I self-manage because I don’t really trust agents, they look to screw you as much as they can and I like to know my tenants and keep an eye on my property. And it’s cheaper.
Your ideal. Every buy to let portfolio is backed by a good career salary. All the other numbers don’t matter.
I don't think the first two options are financially viable.
There's another option where you use an online agent for help with tenant finding. I think openrent offer accompanied viewings amd other extras like that.
There are loads of BTL calculators online. There's even a gov.uk one. I recommend you use any of them.
Also your almost certainly better to run it though a Ltd company. If your not confident with this consider something like getground or provestor
My experience is fully managed has been a nightmare and it's far less hassle to self manage. So option where agent just finds a tenant at 90% of one months rent would be attractive to me.
Other costs not taken into account is insurance, service of boiler and GSC and costs of maintenance such as gardening or repairs.
Future potential costs could be new EPC rules and upgrades to property if not already 'C' or above. Future renovation costs like a new bathroom or kitchen / boiler.
Redecoration costs after tenancies.
Have you approached your mortgage company for permission to change mortgage to BTL and is the interest rate for that known?
I do get why you want to keep your property as a backup home and your realistic that its not going to make you much if any money which is good. Best of luck.
You'll need to get a new mortgage if the current one is for you as the owner-occupier. It will be more expensive.
Any capital gains you might make on a final sale will be subject to CGT, reduced in proportion of time you lived in it as your principal residence.
Only a fraction of your financing costs will be allowable as an expense when computing your net income for tax purposes. You can get around this by setting up a limited company, and selling the property to it, but then you'll have a lot of other costs.
Also, if you buy another house to live in, you'll be subject to a lot more SDLT on the purchase.
Basically, the government is giving you a massive incentive to sell.