This week I’ve been asked this question: Which type of property should be my first one and where in terms of location? I’ve got £30,000 to spare
I thought that you may find my answer useful, so here it is:
I feel ya! Having that much money in your back pocket and not knowing what to do with it is stressful! You don’t want to make a mistake and end up with £0, or better yet tonnes of debt that you’re trying to dig yourself out of a whole with.
Also, you’ve been saving up for a while or done a pretty damned good deal to get that money, so you don’t want to make the decision lightly.
£30k is a decent sum of money to start with.
Now, I don’t know the goal. So, I’m assuming you want to continue to grow over time… but may be hesitant to start with so looking for something that’s less risky and then change up your risk as your grow in confidence and knowledge over time.
(PLEASE NOTE: Speak to your accountant first about how to hold the property, whether in your own name or Ltd Company, they’ll help you to decide)
Next up… the strategy.
You want to be looking in an area where values are growing, similar to what’s been seen in Stoke or Sheffield over the last 18 months. That’s going to enable to you use your capital to buy the next.
£30k will get you roughly an £100,000 property (25% deposit + SDLT and costs), with that you also want to be looking for rental income of £750pcm as a single let (you can always branch out into HMO’s / Serviced Accommodation) AND you want to speak to your mortgage broker about getting a BTL mortgage at a rate of 3.5% or lower.
Worst case scenario, considering 2 months voids, maintenance and management / letting fees plus an additional contingency (for anything else that goes wrong) your net profit before tax would be £200 per month.
Best case scenario, you let it immediately and you never need to touch that contingency you’ll be looking at circa £400 net profit per month (or higher if you manage it yourself).
Location is dependent on you and your research, I gave two examples above…
but you’ve also got to learn to do the research yourself. Here’s how:
Next step is either rinse and repeat. Save your profit rent, plus use the increase in value to do the same again (this is great for lower risk investors) or spice it up… the choice is yours.
Got a question, hit comments and let me know I may answer it in another blog, also remember to tell me your risk profile… here I’ve assumed low risk, slow growth!
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