Mortgage Auction
How do I buy to let when the rent won’t cover the Mortgage payments?
It is looking increasingly like none of us will get a pension in years to come, so I have been toying with the idea of buying to let for some time. However, even the cheaper houses, reposessions and buying at auction cost so much now that any feasible rents wouldn’t cover the mortgage payments. So, is it really wise to buy to let now, or have we missed the boat?
Let me start by saying that we (myself, my brother and my father) currently own 37 single family rental properties.
The best way to overcome the issue you are talking about is to buy rundown properties for below market value and fix them up yourself. This takes cash and usually a lot of it. It’s not uncommon for us to spend 10-15K(and in some cases much more) refurbishing a property after we buy it (new siding, roof, carpeting, appliances, etc).
The second problem you will run into is actually finding the properties to buy. We spend hours just driving around and looking for investment properties. We have also developed relationships with local real estate agents and property managers so that we get a phone call when something interesting comes on the market.
The third problem is that it is extremely difficult to make any money owning just one or 2 properties.
If you only have one then if it goes empty for 3 or 4 months you have a cash flow problem. If you have 10 that is not so much of an issue as you can leverage the money from the other units.
Your fourth problem is going to be time. Remember that everytime a pipe breaks or a sewer overflows, you get a phone call from the renter. If you know how to fix it (and can afford to take the day off work) great. If you don’t, thats your entire month’s rent shot on the plumber.
If you are interested in this business for the long term and want to grow, it’s a great business and it’s still very viable to get into.
If all you are looking for is to own one or 2 and stay small, I would strongly suggest looking at a different investment.
John’s tips for *buying at auction* How to buy at auction *Calculate how much rent or mortgage*
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