Updating post from Reddit.
So right now I don’t own a home because I live with my parents and was looking to go down the buy to let route in a few years? Is this something you would recommend?
Or should i look into another route into it?
Started saving at 24, bought my first place at 28. Put aside £500/month and you could be on the property ladder before 30. Of the £500 put £200 into a first time buyers LISA, you will get 25% return. The other £300 put into an isa for interest free tax at around 4.5%. Doesn’t seem much but after 4 years the LISA would grow to £9600, upon selling the government gives you a 25% return to help with the deposit (an extra £2400 free money). The ISA would grow by £3600 a year of which you will get around £162 tax free every year, at the same rate it will double so at the end of the 2nd year it would grow to £7200 which would give £324 tax free cash.
For quick math after 4 years:
LISA: £9600 Cash interest: £2400
ISA: £14,400 Cash interest at 4.5% accumulated: £1620
That’s £28,200 for a deposit.
I achieved this when I was making £28000 a year, lived in a room share paying £550 a month.
Bought my first property worth £220,000. I’m now selling it for £280,000 4 years later.
I wouldn’t have done anything differently apart from starting earlier.
Edit: just noticed you live with your parents. You could probably save enough within two years or further increase that initial deposit following my steps. The maximum you could contribute to the LISA/ISA is £20k per year so that would split as £4000 in LISA and £16000 in ISA. The more you could put in the better and I would highly recommend it.
Aren’t LISA’s exclusively for residential purchases?
Correct, I didn’t read the full post correctly.
Yes it’s used for your first home that you intend to live in. However if he buys it, lives in it for a few months/years, he can then move to renting it.
Guess it would be worth adding my two cents, being a landlord isn’t as profitable as it use to be. I was one for a few years and the tax you need to pay per year + Cgt on selling has led to huge sell offs in the industry, me including.
My advice would be to buy a fixer upper. Rent a room out at £500 a month to a friend and then sell after a few years. He will be allowed a lodger and be able to gain £7000 a year tax free.
Focus on buying your own place to live before considering a BTL. If you're ever going to be a 40% tax payer then BTL is unlikely to be a good investment.
Can I ask the reason why please? The only thing is that I live with my parents and I’m unlikely to move out so I feel like it’s just best to get a buy to let
Some mortgage providers will insist that you have your own place before having a BTL.
BTL generally has poorer returns than the stock market and is less tax efficient.
The income tax situation is easy for you to look up if you don't know that already.
Wrong, the sooner you start compounding the better.
Also, your tax bracket is irrelevant, property is owned by your company nowadays.
Nothing I've stated is wrong.
They can be compounding their investments outside of property, and then when they buy their own place they'll have the compounding increase of their homes value and the reduced cost from not renting.
Some mortgage providers want you to have your own place before giving out a BTL mortgage.
Having a single property in a LTD company is likely to be too expensive, and therefore they'll own it in their own name, so their income tax band does matter.
The only way in which BTL outperforms the stock market is because of gearing. But this gearing makes the investment inherently more risky.
It is really difficult to get a Ltd btl loan if you don't have significant money to put down, high salary and/or have your own residential property. Not to mention the impact of sdlt and higher interest in finding a truly profitable property.
Differently - it's an adverb.