In this video I talk about how to make money with Buy to Let. I set out the step by step process to calculate how much is put into the deal, how much is taken out, how much profit is made on a monthly basis and how a small change in the value of the property market can make a large difference to the profit generated.
The Property - 00:28 - 02:24
You can buy a ready to rent property, which involves more cash up front. You could also buy a property in need of refurbishment which needs less cash up front and you can force some appreciation and even take cash out of the deal by buying the gap.
How much is put into the deal - 02:24 - 04:58
You will firstly need a deposit and also incur legal fees, buildings insurance, business insurance, loan fees, loan interest, refurb costs. You also don't have to factor in some costs as these are likely to be covered by the rent such as council tax, water and other utilities.
How much is taken out - 04:58 - 07:20
You can then refinance the property, the cash from the refinance will be used to repay the previous mortgage/loan you had on the property and will go towards paying off your initial deposit and refurbishment costs. There will be much left in the deal with a property in need of refurbishment compared to a new build property.
How much profit is made on a monthly basis - 07:20 - 09:56
You'll start by taking the amount received by rent (whether council tax, bills & utilities are included or not), deduct off the mortgage costs and other costs and also factor in vacancy/repairs costs. If renting out to a lodger the rental income is likely to be less but you will also be living in the property and they will effectively be paying your fees too!
Impacts of small changes in the property market - 09:56 - 11:10
If the market appreciates by 1% it will have a good impact on profit generated. If the market appreciates by 3-5% (average rate over 30 years) then a much greater impact can be seen.
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