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Investing in BtL near quality primary schools

Covering Market, Trends, and Practical (but see LEMON-AID for Building & DIY)
mak111
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Investing in BtL near quality primary schools

#413475

Postby mak111 » May 20th, 2021, 11:04 am

Hello,

I've got 100k-150k in cash to invest, already own principal residence so no first-time buyer advantage. Fully employed so limited (to non-existent) capability to improve/upgrade property. Considering a real-estate investment via the buy-to-let route and searching for 2/3 bed houses within catchment areas of state schools that are consistently ranked 'Outstanding' by Ofsted. Current focus is in areas in and around Derby and Nottingham. Having been through a house move recently (to ensure my kids can attend a quality school), I was wondering if there is an opportunity to benefit from this basic need that young parents have.

Not looking to realise gains through capital appreciation. Just ensure a steady stream of revenue whilst maintaining my full-time employment. Will not manage the property myself. Keen to hear views on this, and any experiences others may have. Thanks in advance!

richlist
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Re: Investing in BtL near quality primary schools

#413695

Postby richlist » May 20th, 2021, 9:53 pm

* You will need to pay a 3% SDLT surcharge on the purchase price.
* Not sure if you intend to raise a mortgage but you cannot offset the cost against income going forward.
* Having an agent manage the property will reduce your profits significantly. Pick an agent only by recommendation.
* You will need an electrical safety certificate .....bear that in mind when buying......you may need to do lots of expensive upgrades before you can let.
* Ensure you get rent guarantee insurance or a home owning guarantor for each new let.
* The most important thing a landlord can do is pick the tenants very, very carefully.
* Spend time doing your own research.....lots of it.
Good luck.

Spet0789
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Re: Investing in BtL near quality primary schools

#413699

Postby Spet0789 » May 20th, 2021, 10:19 pm

mak111 wrote:Hello,

I've got 100k-150k in cash to invest, already own principal residence so no first-time buyer advantage. Fully employed so limited (to non-existent) capability to improve/upgrade property. Considering a real-estate investment via the buy-to-let route and searching for 2/3 bed houses within catchment areas of state schools that are consistently ranked 'Outstanding' by Ofsted. Current focus is in areas in and around Derby and Nottingham. Having been through a house move recently (to ensure my kids can attend a quality school), I was wondering if there is an opportunity to benefit from this basic need that young parents have.

Not looking to realise gains through capital appreciation. Just ensure a steady stream of revenue whilst maintaining my full-time employment. Will not manage the property myself. Keen to hear views on this, and any experiences others may have. Thanks in advance!


This is going to sound harsh...

It’s lovely that you were able to move so that your kids can attend a quality school. I am happy for you. Why not allow another family the same opportunity? Don’t outbid them on a home near the school they want for their children so you can earn a few quid.

Rather than trying to freeload off public investment in education and exploit another family’s demand for it (or “benefit from this basic need” as you put it) why not invest your money elsewhere.

Plenty of U.K. investment trusts which will pay just as good a yield as BTL with zero work and more liquidity.

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Re: Investing in BtL near quality primary schools

#413720

Postby Mike4 » May 20th, 2021, 11:21 pm

mak111 wrote:Will not manage the property myself.


This suggests to me you will make diddly squat out of it then. You agent will top-cream off all the profit.

Letting is a 'people business' as they say. If you are not willing to roll your sleeves up and mix it with your tenants, I predict failure.

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Re: Investing in BtL near quality primary schools

#413745

Postby dealtn » May 21st, 2021, 7:42 am

Spet0789 wrote:
mak111 wrote:Hello,

I've got 100k-150k in cash to invest, already own principal residence so no first-time buyer advantage. Fully employed so limited (to non-existent) capability to improve/upgrade property. Considering a real-estate investment via the buy-to-let route and searching for 2/3 bed houses within catchment areas of state schools that are consistently ranked 'Outstanding' by Ofsted. Current focus is in areas in and around Derby and Nottingham. Having been through a house move recently (to ensure my kids can attend a quality school), I was wondering if there is an opportunity to benefit from this basic need that young parents have.

Not looking to realise gains through capital appreciation. Just ensure a steady stream of revenue whilst maintaining my full-time employment. Will not manage the property myself. Keen to hear views on this, and any experiences others may have. Thanks in advance!


This is going to sound harsh...

It’s lovely that you were able to move so that your kids can attend a quality school. I am happy for you. Why not allow another family the same opportunity? Don’t outbid them on a home near the school they want for their children so you can earn a few quid.

Rather than trying to freeload off public investment in education and exploit another family’s demand for it (or “benefit from this basic need” as you put it) why not invest your money elsewhere.

Plenty of U.K. investment trusts which will pay just as good a yield as BTL with zero work and more liquidity.


Having a house available for rent in the area is precisely allowing a family the opportunity to live near the school of their choice. Indeed with the often lengthy delays in buying/selling and the fixed nature of a school academic year, renting is often a more seamless way of timing residency with that school year as "leavers" are replaced by "joiners" at broadly the "right time".

Furthermore I would imagine the percentage of families able to put down a rental deposit would exceed those able to put down the necessary purchase deposit. Homes available for rent probably reduce exclusivity rather than add to it.

mak111
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Re: Investing in BtL near quality primary schools

#413772

Postby mak111 » May 21st, 2021, 9:15 am

Spet0789 wrote:
This is going to sound harsh...

It’s lovely that you were able to move so that your kids can attend a quality school. I am happy for you. Why not allow another family the same opportunity? Don’t outbid them on a home near the school they want for their children so you can earn a few quid.

Rather than trying to freeload off public investment in education and exploit another family’s demand for it (or “benefit from this basic need” as you put it) why not invest your money elsewhere.

Plenty of U.K. investment trusts which will pay just as good a yield as BTL with zero work and more liquidity.


Thank you for the brutally honest assessment. As you can surmise, I am new to this and have based my hypothesis on my own experience. Most families targeting schools are 'in transit' given the age of their children and where they are in their professional careers. My own research revealed a majority of parents in the same boat as myself, i.e., renting a house to meet this 'need'. I certainly do not have a first mover's advantage with this approach as there are enough 'freeloaders off public investment' who are already 'exploiting' this.

That being said, I am intrigued by your recommendations on UK Investment Trusts and will follow up on that. Thanks once again!

Spet0789
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Re: Investing in BtL near quality primary schools

#414039

Postby Spet0789 » May 21st, 2021, 11:17 pm

mak111 wrote:
Spet0789 wrote:
This is going to sound harsh...

It’s lovely that you were able to move so that your kids can attend a quality school. I am happy for you. Why not allow another family the same opportunity? Don’t outbid them on a home near the school they want for their children so you can earn a few quid.

Rather than trying to freeload off public investment in education and exploit another family’s demand for it (or “benefit from this basic need” as you put it) why not invest your money elsewhere.

Plenty of U.K. investment trusts which will pay just as good a yield as BTL with zero work and more liquidity.


Thank you for the brutally honest assessment. As you can surmise, I am new to this and have based my hypothesis on my own experience. Most families targeting schools are 'in transit' given the age of their children and where they are in their professional careers. My own research revealed a majority of parents in the same boat as myself, i.e., renting a house to meet this 'need'. I certainly do not have a first mover's advantage with this approach as there are enough 'freeloaders off public investment' who are already 'exploiting' this.

That being said, I am intrigued by your recommendations on UK Investment Trusts and will follow up on that. Thanks once again!


You’re welcome. As you can probably tell, I have something of a moral objection to buy to let! That said, there are lots of good landlords who treat their clients fairly.

A few investment trust suggestions, all of which I own.

Regional REIT (RGL) - owns office properties outside London. Yield around 7%.

Greencoat U.K. wind (UKW) - owns wind farms. Yield around 5.5%.

Merchants Trust (MRCH) - U.K. equities. Yield around 5.2%.

Buy 30:30:40 of these, earn around 6% yield. No hassle. Completely liquid. Good prospects for income growth. Fewer tax issues. Much more diversified than BTL. No moral worries!

Lanark
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Re: Investing in BtL near quality primary schools

#414044

Postby Lanark » May 21st, 2021, 11:26 pm

dealtn wrote:Having a house available for rent in the area is precisely allowing a family the opportunity to live near the school of their choice. Indeed with the often lengthy delays in buying/selling and the fixed nature of a school academic year, renting is often a more seamless way of timing residency with that school year as "leavers" are replaced by "joiners" at broadly the "right time".

Furthermore I would imagine the percentage of families able to put down a rental deposit would exceed those able to put down the necessary purchase deposit. Homes available for rent probably reduce exclusivity rather than add to it.

This is true, but the largest factor which determines a schools raking is the quality of intake, if enough landlords move into the area there will be fewer wealthy families and the ranking of the school will fall causing property prices to plummet.

The smart move is to buy somewhere with less than stellar school ranking, but which you predict is going to improve. That requires a lot of research e.g. knowing about a quality employer about to move into the area.

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Re: Investing in BtL near quality primary schools

#414086

Postby dealtn » May 22nd, 2021, 9:27 am

Lanark wrote:
dealtn wrote:Having a house available for rent in the area is precisely allowing a family the opportunity to live near the school of their choice. Indeed with the often lengthy delays in buying/selling and the fixed nature of a school academic year, renting is often a more seamless way of timing residency with that school year as "leavers" are replaced by "joiners" at broadly the "right time".

Furthermore I would imagine the percentage of families able to put down a rental deposit would exceed those able to put down the necessary purchase deposit. Homes available for rent probably reduce exclusivity rather than add to it.

This is true, but the largest factor which determines a schools raking is the quality of intake, if enough landlords move into the area there will be fewer wealthy families and the ranking of the school will fall causing property prices to plummet.

The smart move is to buy somewhere with less than stellar school ranking, but which you predict is going to improve. That requires a lot of research e.g. knowing about a quality employer about to move into the area.


I'm not sure I agree. The earlier poster made the observation landlords bidding out potential homeowners drove property prices upwards. Not obvious how that mechanism drives "property prices to plummet".

Although generally I agree, were ones motivation to make capital gains, seeking areas with potential to improve is a good idea. The OP in this case has a different motivation though.

mak111 wrote:Not looking to realise gains through capital appreciation.

ReallyVeryFoolish
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Re: Investing in BtL near quality primary schools

#414089

Postby ReallyVeryFoolish » May 22nd, 2021, 9:43 am

Don't bother. If you want a property portfolio paying income, invest in one or more real estate investment trusts (REITs). Plenty to choose from. Invest your money through an ISA and the income will be tax free. This option is going to give you at least as much income after tax and expenses as a BTL. It will be completely hands off and not subject to rental voids or someone trashing your property. I wouldn't touch a BTL with a barge pole over a REIT investment.

RVF

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Re: Investing in BtL near quality primary schools

#414093

Postby TopOfDaMornin » May 22nd, 2021, 10:11 am

richlist wrote:* You will need to pay a 3% SDLT surcharge on the purchase price.
* Not sure if you intend to raise a mortgage but you cannot offset the cost against income going forward.
* Having an agent manage the property will reduce your profits significantly. Pick an agent only by recommendation.
* You will need an electrical safety certificate .....bear that in mind when buying......you may need to do lots of expensive upgrades before you can let.
* Ensure you get rent guarantee insurance or a home owning guarantor for each new let.
* The most important thing a landlord can do is pick the tenants very, very carefully.
* Spend time doing your own research.....lots of it.
Good luck.


Good points. With any business there are steps that one has to go thru to keep legal etc. As long as you are aware of these and comply then half the battle is won. These can be borne in mind when the property is purchased.

TDM

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Re: Investing in BtL near quality primary schools

#414095

Postby TopOfDaMornin » May 22nd, 2021, 10:14 am

ReallyVeryFoolish wrote:Don't bother. If you want a property portfolio paying income, invest in one or more real estate investment trusts (REITs). Plenty to choose from. Invest your money through an ISA and the income will be tax free. This option is going to give you at least as much income after tax and expenses as a BTL. It will be completely hands off and not subject to rental voids or someone trashing your property. I wouldn't touch a BTL with a barge pole over a REIT investment.

RVF


I agree to a point. The big difference is that one can gear up with property i.e. £100k investment could get you a £400k property.
With investment trusts £100k gets you £100k of investment trusts.

Hence, the property 'may' over the years produce a substantial capital gain.

TDM

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Re: Investing in BtL near quality primary schools

#414097

Postby ReallyVeryFoolish » May 22nd, 2021, 10:25 am

TopOfDaMornin wrote:
ReallyVeryFoolish wrote:Don't bother. If you want a property portfolio paying income, invest in one or more real estate investment trusts (REITs). Plenty to choose from. Invest your money through an ISA and the income will be tax free. This option is going to give you at least as much income after tax and expenses as a BTL. It will be completely hands off and not subject to rental voids or someone trashing your property. I wouldn't touch a BTL with a barge pole over a REIT investment.

RVF


I agree to a point. The big difference is that one can gear up with property i.e. £100k investment could get you a £400k property.
With investment trusts £100k gets you £100k of investment trusts.

Hence, the property 'may' over the years produce a substantial capital gain.

TDM

Indeed you are correct. But not everyone, me included, likes borrowing money. I suspect that now, with many BTLers paying 40% tax on the BTL income and unable to offset the loan interest, the gearing is more of a liability than anything. I just wouldn't do it. Others, obviously, will take a different view.

RVF

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Re: Investing in BtL near quality primary schools

#414183

Postby Gerry557 » May 22nd, 2021, 4:44 pm

The rules are changing constantly and most recent ones seem to be at the detrement of the landlord.

It was better when you could put down a small deposit, offset the mortgage and any residual tax was not that much. You got an income stream, growing with inflation.

The advantages were leveraged growth, cost nothing as rent paid mortgage. The differential grew over time. This assumed you got good tenants and no voids.

The downsides were voids, no rent unless you had insurance but still a mortgage to pay. Bad tenants. This was probably the worst scenario. I've heard lots of terrible tales. Not paying was the least of the issues. Willful destruction, sub lettings etc.

I experienced having pets (against agreement ) that rip up carpets. They also complained to environmental health! One tenant of seven years turned bad. Was eventually evicted but became quite stressful situation even with an agent. Its much better when you just get rent payments and no other communication.

You also have repairs and ware and tear to pay for and depending on the condition and age of property new bathrooms and kitchens to budget for. It's more cost effective to do this yourself, more difficult if you are some distance or in another country.

It seems to be more of a multi let situation now probably not worth the hassle with just one property. Can you get 10? Are you a higher rate tax payer? Are you going to leverage?

Personally unless you are going to leverage I can't see the benefits these days unless you have multiple let's with no mortgages. When it's works it's great but it can be time consuming or expensive, which Sods Law says it will happen at the worst time for you. Plus if you need some cash, you can't sell just a bit of your house.

I think most of the other disadvantages have been covered above. If you are serious why not talk to some agents to see what is happening in the rental market and what offers the best yields. As for the school thing, the head could retire or move downgrading the school. Also a new estate might get built or HS2 gets run through your garden etc so the advantage you see now might disappear. Starter homes will always be starter homes and the cheaper prices might result in better yields although might result in a more down market renter and associated risks. Then again during covid even more upmarket people struggled to pay rents.

Don't think you can specify no DSS anymore and you don't get paid directly as it enables them to learn to manage their money. Let's hope that your rent is more important than fags, scratch cards and sky sports!

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Re: Investing in BtL near quality primary schools

#414184

Postby Gerry557 » May 22nd, 2021, 4:46 pm

Oh and keep records of everything as your tax will need to be sorted every year and plan for CGT when you sell.

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Re: Investing in BtL near quality primary schools

#414239

Postby Mike88 » May 22nd, 2021, 9:16 pm

I suggest your budget is too small as properties close to outstanding schools normally sell at a huge premium.

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Re: Investing in BtL near quality primary schools

#414271

Postby Mike4 » May 23rd, 2021, 12:52 am

Mike88 wrote:I suggest your budget is too small as properties close to outstanding schools normally sell at a huge premium.


Brutal but true.

I sold a 4-bed house in the catchment of an outstanding school in Berkshire a couple of years ago, for just shy of £1m.

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Re: Investing in BtL near quality primary schools

#422639

Postby brightncheerful » June 26th, 2021, 5:14 pm

Spet0789 wrote:
mak111 wrote:
Spet0789 wrote:
This is going to sound harsh...

It’s lovely that you were able to move so that your kids can attend a quality school. I am happy for you. Why not allow another family the same opportunity? Don’t outbid them on a home near the school they want for their children so you can earn a few quid.

Rather than trying to freeload off public investment in education and exploit another family’s demand for it (or “benefit from this basic need” as you put it) why not invest your money elsewhere.

Plenty of U.K. investment trusts which will pay just as good a yield as BTL with zero work and more liquidity.


Thank you for the brutally honest assessment. As you can surmise, I am new to this and have based my hypothesis on my own experience. Most families targeting schools are 'in transit' given the age of their children and where they are in their professional careers. My own research revealed a majority of parents in the same boat as myself, i.e., renting a house to meet this 'need'. I certainly do not have a first mover's advantage with this approach as there are enough 'freeloaders off public investment' who are already 'exploiting' this.

That being said, I am intrigued by your recommendations on UK Investment Trusts and will follow up on that. Thanks once again!


You’re welcome. As you can probably tell, I have something of a moral objection to buy to let! That said, there are lots of good landlords who treat their clients fairly.

A few investment trust suggestions, all of which I own.

Regional REIT (RGL) - owns office properties outside London. Yield around 7%.

Greencoat U.K. wind (UKW) - owns wind farms. Yield around 5.5%.

Merchants Trust (MRCH) - U.K. equities. Yield around 5.2%.

Buy 30:30:40 of these, earn around 6% yield. No hassle. Completely liquid. Good prospects for income growth. Fewer tax issues. Much more diversified than BTL. No moral worries!


No moral worries? Are you privy to the relationship between the companies (you suggest) and their tenants? How do you know whether all the tenants are happy to have as their landlords the companies concerned?

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Re: Investing in BtL near quality primary schools

#429407

Postby justfisk » July 21st, 2021, 6:06 pm

A few investment trust suggestions, all of which I own.

Regional REIT (RGL) - owns office properties outside London. Yield around 7%.

Greencoat U.K. wind (UKW) - owns wind farms. Yield around 5.5%.

Merchants Trust (MRCH) - U.K. equities. Yield around 5.2%.

Buy 30:30:40 of these, earn around 6% yield. No hassle. Completely liquid. Good prospects for income growth. Fewer tax issues. Much more diversified than BTL. No moral worries!



No moral worries? Since when have corporations had better morals than small time Businesses. How about the Moral worry of Wind Farms destroying landscapes and killing birds whilst producing costly sub-optimal uneven energy?
Perhaps supporting local small Businesses like your local landlord may be morally better than cold corporate entities.

Ethics of Business is not as simplistic as it may appear without deeper analysis, and maligning small time landlords who provide the service of residential accommodation to people is not morally virtuous.
Since when has ethics been dictated by how Huge a corporation is rather than simply good service provided to a local population?


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