10 Minute ReadHow Much Deposit For a Buy To Let?
Getting a buy-to-let property is a dream for many, it allows you to invest your hard earned money into something that gains value over a longer period of time as well as generating healthy cashflow on a monthly basis.
If you’re just here for the top line figure I’ll give it you upfront and if you want to stick around to get the lower level detail then you can do that.
Similar to buying your own home, a buy-to-let only requires around a 25% deposit with the rest being financed by the bank, and with properties up north between £60k to £100k you can get a buy-to-let with as little as £15,000 on a £60,000 purchase.
Obviously you’ll need extra bits for the 3% stamp duty charge, legal fees, lender fees and a small pot for repairs. I’ve also attached a free easy to use spreadsheet in the description where you can put the numbers in and it’ll give you rough costs.
If you’re trying to figure out how much you need for your first buy to let property, then this video will help dispel the myths and clear up what it takes to get started in property investing.
I always recommend in a lot of my videos, that if you haven’t thought about owning your own home first, then you should look at saving enough money to buy your home, do it up and benefit from the tax free value increase.
But, if you have your own home and you have some spare cash in the bank, property investing is a great way to build up a pot for retirement, slowly replace your salary or just have some extra money on the side to afford things on a rainy day.
Rather than spending £15k on a car in cash, you could instead buy a property then use the profit from the rental payments to pay for a lease or finance car, or keep on investing and saving it into the next property. Either way, your money still gains value over time in the property price, but gives you options on what to do with the extra cashflow.
I always recommend in a lot of my videos, that if you haven’t thought about owning your own home first, then you should look at saving enough money to buy your home, do it up and benefit from the tax free value increase.
But, if you have your own home and you have some spare cash in the bank, property investing is a great way to build up a pot for retirement, slowly replace your salary or just have some extra money on the side to afford things on a rainy day.
Rather than spending £15k on a car in cash, you could instead buy a property then use the profit from the rental payments to pay for a lease or finance car, or keep on investing and saving it into the next property. Either way, your money still gains value over time in the property price, but gives you options on what to do with the extra cashflow.
But, there’s lots to learn, compliance might be on your mind for making sure tenants are safe or that there’s a lot of contracts and paperwork to sort. It can be confusing but feel free to have a look around my videos where I explore all aspects of property investing in the UK.
It can be daunting but with the right power team around you anything is possible. I also recommend listening to property podcasts like the property hub, reading magazines, books and immersing yourself in the world.
Here’s a quick view of costs from another great YouTuber, Justin Wilkins – I recommend checking out his channel as he breaks down perfectly what he did for his first property deal.
How Much Can You Borrow - Case Study
By doing this you can be fully and well informed by the time you’re ready to go into auction or doing viewings to make offers on houses. It also means you’ll have a basic understanding of red flags to look out for, understanding how to roughly cost up the refurbishment of a house and trusting your numbers.
By doing this you can be fully and well informed by the time you’re ready to go into auction or doing viewings to make offers on houses. It also means you’ll have a basic understanding of red flags to look out for, understanding how to roughly cost up the refurbishment of a house and trusting your numbers.
So, once you’ve up skilled your knowledge, all you have to do is run your numbers on properties, you’ll often find with cheaper ones in areas where rent is strong, typically in northern towns, you can get a good return.
Typically if you go for a vanilla buy to let, tenants can often stay there for years so once they’re in, your managing agent, or yourself can collect the rent, pay off the mortgage, put some costs aside for emergencies and use the remainder on whatever you want.
There are some darker sides to investing in property, you might get tenants who trash the place, or stop paying their rent all together and refuse to leave. This can often mean going down a lengthy legal battle to get them evicted from the flat.
By which point you’re owed thousands of pounds and you’re struggling to keep up with the mortgage repayments. Some people can be selfish and this really comes down to the type of tenant you’re looking to let out to. If you do only have £15k then typically you’ll be buying a property in a lower socio-demographic area. By not vetting tenants properly with references and credit checks, you open yourself up to the greatest risk. So make sure you always reference them and take a deposit.
There are some darker sides to investing in property, you might get tenants who trash the place, or stop paying their rent all together and refuse to leave. This can often mean going down a lengthy legal battle to get them evicted from the flat.
By which point you’re owed thousands of pounds and you’re struggling to keep up with the mortgage repayments. Some people can be selfish and this really comes down to the type of tenant you’re looking to let out to. If you do only have £15k then typically you’ll be buying a property in a lower socio-demographic area. By not vetting tenants properly with references and credit checks, you open yourself up to the greatest risk. So make sure you always reference them and take a deposit.
Within a few years, you’ll realise property can gain serious value over time, and especially in 2020 with property prices going up almost 5% that’s incredible when you factor in the fact that you benefit from the value of the mortgage, so you’d benefit from the full £60k house price rather than just your £15k deposit.
This allows you to refinance or sell properties to then buy more in the future and that snowball effect begins to take shape.
How Does a Buy To Let Mortgage Work?
A buy to let mortgage is very similar to having your own mortgage on your own home.
You can either get a mortgage through your own name or buy it through a limited company.
Typically you can get 75% Loan to Value on your buy to let mortgage. Interest rates vary all the time depending on the bank of england, bank rate.
You should always consider speaking to a mortgage broker to help you with buy to let, especially if you’re investing using a limited company. This is because they can help get specialist lending for you, with lenders that are not available through the high street.
Certain banks and lenders only with with ‘intermediaries’ which are brokers meaning you HAVE to use a broker to get those mortgages and access to those lenders, an example of this is Kent Reliance who I used for my first buy-to-let.
My Buy to Let Mortgage Deposit & Figures
My recent buy to let was £106k, I borrowed a 75% LTV mortgage for my buy to let and then put in a 25% deposit of £26k.
Check out the full figures on the video
