Thanks for sharing your knowledge Jamie. I’m an experienced landlord also with a significant portfolio. I started with IO mortgages but have now changed to repayment mortgage as part of my 5-10 year strategy. It’s important to factor in the tax changes to how profit is calculated and think about ‘yield on debt’. There comes a point where even a small hike in interest rates is enough to topple over a property portfolio. So if your highly leveraged go ahead and calculate the interest rate it would take to kill your cash flow - you may decide it’s better to repay debt and consolidate your portfolio. I hope this makes sense.
Great video, the first time I’ve seen this channel. Also on the interest only, another plus point is inflation. You’ll still owe £100k in 25 years time but £100k in the year 2046 could be the average salary. Like a loaf of bread may be £5
My first investment with Mrs Jane gave me profit of over $24,000 us dollars and ever since then she has never failed to deliver and I can even say she's the most sincere broker I have known
Most people remain poor only because friends and relatives discouraged and advise them against investing and trading forex while the wise ones kept investing and growing higher financially
Investment in Bitcoin has been the best decision and made this year, I wish I know about it earlier that now I would have been a millionaire buy now, but it's better late than never right
As something that I have been really thinking of doing in the future, your presentation skills and knowledge have been superb in helping me. Made it so much easier to comprehend. Thank you
Great prognosis Jamie, first one of your vids I’ve seen. Got 3 buy to let’s now remortgaged them in interest only last year, all the profits I used to invest in my stocks shares isa which springboarded it right up. Setting up a ltd company shortly. Keeping these on interest only in my name for 5 years to help grow the ltd which will consist of HMO’s etc. Those 3 will gradually get paid off then as a kind of security for me. But the ltd company gonna leverage it to heck with these rates being so good still, interest only all the way. Reinvest in more property and stocks shares. Can’t wait mate, got an illness which is MS and I’m 42 now, so gonna be hitting it hard for next 13 years and retire at 55 and finally take it easy. I’ll settle for 5 HMO’s, 5 rent to buys and half a dozen flats. Should be enough for a pension lol. Hope you get to your 1000 that’s a big goal 👍👌
@@risenshine2783 thanks, its a strange illness been good for 6 years. Just had a big relapse attacked optical nerve coming round taking a while. So glad I've invested been off work since September, but so lucky not to be financially worried. Repayment not a bad thing really, just there's so many different business models you can create. At least you've invested which a lot of people are afraid of, so 10 steps ahead already.
You clearly know your stuff and for that I admire you. I went repayment mortgage and overpay on the basis that eventually the property will be 100% mine, but moreover...I just like to keep things simple. :)
Jamie, your knowledge is insane. I haven’t yet bought my first buy to let property or “let to buy to let”. But you have provided me with several eureka moments. I am building my network of people and knowledge. I’m in a good position for a successful run. Thank you so much for your advice and explanations. Fingers crossed I can pack a punch! Thanks dude!!
Oh wow....one of the best you are truly. I have learnt so much from you. Found your channel today and have being watching many of your very amazing lectures. Thank you brother for sharing. I am about venturing into real estate investment as I will like to retire very early in Medicine.
Great video as per Jamie. I wondered if you would do a video on the process of refurbishing a property. How you can go about predicting the cost, how to design it, how to manage it, snagging issues that come up, etc
The whole assumption underlying this strategy is that capital growth in real estate will continue to occur at the same rate across all locations, however this is not true as residential property is very location dependent. If you buy a good property to let in a bad area, this will likely still turn out be a poor investment. Another thing to consider is the underlying data in an area. For example, if you buy in an area which already has a very high proportion of existing investment properties there is more competition for tenants, and you run the risk of vacany if ecomonic conditions suddenly worsen (interest rates go up, house prices drop etc. etc.) If a large number of investment properties suddenly come on the market for sale because landlords suddenly find they cannot afford to keep them you may well find yourself holding a property worth less than what you paid for it. As always these videos are interesting for general information but everyone's circumstances are different and always seek proper financial advice before making a decision.
Great video Jamie, really like your channel. Warning to some though, I have several properties in good areas and NONE have doubled in value over 10 years, not even close. I know the graph is designed as a visualisation but it’s an ideal world situation.
Really interesting Jamie - thanks! Do these principles still apply in the UK in 2023, what with the rise in interest rates and the Govt policies which are essentially causing so many landlords to sell up en-masse?
This is incorrect because they're different mortgages, 1, being a residential mortgage (For you to live in) and 2, being a Buy-to-let mortgage. You can get a repayment mortgage for both :)
Great information. However, surely one big risk with refinancing and taking on a higher LTV mortgage is that if you can't get the rental income in then you are left with a much larger debt to pay?
Loving the content Jamie. Subscribed! Pure information and I watched happily without you trying to sell me a property course. 😅 I'd be very greatful if you'd do a video on the differences between buying a property as an individual and buying as a LTD company. Pros and cons of each etc. Having done a quick bit of research individual mortgages appear to be considerably cheaper, allowing for more monthly cashflow. Love to know your thoughts on which route to take. Cheers. 👍🏻
I want to pay off some of my BTL mortgages with interest rates going up, plus the mortgage fees for limited company are in the region of £2k. It will ultimately help with cash flow with the coming hike in interest rates …
Thanks mate, really good video! First time I've watched you, summed it up really well. I'll be watching your Buy to Let Basics video next 😊. Youve got my subscription!
Brilliant-I have always had the mentality of ‘got to pay off my mortgage’ (on my house that I live in-interested to hear your opinions on whether you would choose a different mortgage on a house that you’re living in?). But this video has really enlightened me!!
The thing with exponential growth of the property market is it'll happen to the properties you want to buy as well as those you want to own. So while yes, your house has doubled in value you can still only buy a house of relative worth.
Where has this bloke been all my life? He explains everything in layman's terms, even for a former polytechnic turn university grad for me to understand. Thanks Jamie
Question - in Jamie's example, he's paying off 6000 per year. Part of that 6000 is interest and the other part is repayment. Where does he get the 6000 from in the first place?
Simple way of explaining this strategy is you are borrowing money today when that money is valuable, then paying it back later when it's not worth as much.
I watched this video two months ago and I reacted emotionally. I got scared and I didn't go through with buying a property on a buy-to-let (interest- only) mortgage and I just did nothing. I've read 'Rich Dad, Poor Dad' and I recommend it to anyone who is scared about investing. Now I've come back and I really listened to what Jamie explained in this video. I will buy my first property on a buy-to- let (interest- only) mortgage next week. 🙂
@@AdaptedStudiosSure. I put an offer down on an apartment in Manchester a few weeks ago and the buyer accepted. I will get a mortgage with Vida Homeloans. I have just passed all of their checks and they will inspect the property I will buy next week. It is going well but it takes a long time. What would you like to know?
@@miagallagher6371 Are you going for an interest only mortgage? If so, have you done your numbers and calculated what your rent income will be per month (after all expenses)? Also what was your deposit? I’m not in Manchester but I’m based in Scotland
@@AdaptedStudios I have gone for an interest- only mortgage. I have a 5 year fixed mortgage at 5.39%. I'm a first- time buyer/ first- time landlord and I have a low income so it was very hard to find a mortgage. They usually expect a buyer to have an income of at least £24,000 a year. I won't make any rental income for the first year- I will pretty much break even because the current tennant is only paying £750 a month, which is low for a 1 bed property in the centre of Manchester. However, I estimate that if I sell the apartment in five years time, I should make capital gains- which is a lot better than just leaving the money sitting in the bank. The property I am buying is worth £170,000 but it will probably be worth about £216,000 in five years time. My mortgage is £127,000. £216,000- £127,000 is £88,500. So, I have invested £50,000 and it will most likely turn into £88,500 over the next five years, which is a profit of £38,500 over five years. It is hard to predict these things, but I know I will see a return on my investment if I wait long enough. Also, in five years time, my income will probably increase and I will find it easier to find a mortgage with a lower interest rate, so I should find it easier to have a rental income in the future.
Thanks so much for the content Jamie! I've just got 2 questions, firstly what do you mean by having to repay the initial 75k mortgage and then get a new one of 150k? Would the bank not just give you another 75k? And secondly, where did the 75k cash in pocket come from exactly? Thanks again Jamie!
Even if it’s with the same bank, the new debt pays off the old debt. The £75k come from the £150k which is the new mortgage based on the new value. £75 of the new mortgage pays off the old, and £75k comes to you. Hopefully that makes sense ( this video was a while ago and I don’t have the time to watch it back)
You sound like a great guy and do a great presentation, and from what I see online you seem to have great knowledge but what your explaining is just not that straightforward. I’ve been an estate agent, landlord, investor, developer for over 30 years. Your mum is my age, so she will have seen interest rates at 15%. Having 1000 houses at 50% LTV is sustainable with interest rates of 3%, but the average interest rate since records began is 6.25%, which would stress most portfolios. 10 years of super low interest rates doesn’t mean that will continue. This model is based on capital appreciation, but equity doesn’t pay the mortgage. Refinancing against increased values assumes that rents will keep increasing, but rents are already unsustainable for most people. That leads to multiple occupancy and lower housing standards and so on, which is not good for anyone. Interest only investing does work though, with specific market conditions, but it is not a continuous business model. Followed and subbed tho, u should be on the one show 😂
Appreciate the compliments :) There's always risk with building a successful portfolio for sure and I always like to diversify and spread the risk. I buy with a minimum of 8% net return in so I'm not so worried about the interest for now. I also soo at fixing for as long as possible at these historic lows. I'd be shocked if 50% ltv would be put under too much stress dependant on locations though, a majority of mine around £120-150k end values
Of course the other point is that when we see some normalisation in rates we're likely to see pressure on asset values. I made another comment on one of these videos too. Risk management. It's essential to understand your exposure. Exposure to rate increases Exposure to the market...especially when levered. I keep in my spreadsheet 1%, 2%, 5% interest rate bumps so that I see in black and white whats happens if rates rise. I also highlight -10% and -25% drops in the housing market so as not to be fooled by the leverage. Definitely focuses the mind. Obviously some of these are extreme scenarios but it's still better to have considered them than not.
This is what I was thinking. From what I've heard in the real world, being a landlord isn't as lucrative as is being made out most of the time for people starting out. For starters, the banks aren't just going to give you a mortgage deal that let's you have a majority of the capital appreciation, so alot of the times the interest rates are set high enough so that your margins for profit are very very tight (you don't think they've already worked the sums out and not put everything in their favour????). So tight in fact will your profit margins be that the minute something goes wrong at a property, you're then looking at taking some drawdown. If you get to that stage in 10 years where the property value doubles then great, but the chances of you getting there before some new crisis happens and you are forced into foreclosure as a new landlord, is slim. Also, as a new landlord, if you haven't got anywhere to live basically rent free or very very low rent, you're money is squeezed even more because you'll need to pay for somewhere to live yourself, which is going to be on the same market and the same rates you're trying to box from the market to make your money! So the big thing that is being missed out here in my view is that most landlords who made it, either started with an inherited property, or are somehow living somewhere virtually rent free during the purchase of their first buy to let. Neither scenario is typical for the average person. I can't see how it's done any other way?
@@Longlostpuss It is definitely achievable from scratch, just like any other business, but it’s not easy as easy as some say, and it’s not for everyone. You have to see the margin in the deal and know it’s worth the risk. If you don’t see it, it’s probably not for you, and that’s the point. Don’t risk your money in something unless you are confident about how it works.
@@thinkFishcatchFish So say you have £25,000 in the bank right now and you have no inheritance and nowhere of your own technically to live, how do you make money from buy to let? Bearing in mind, the average rent now in the UK is like £1,000 per month or something. Where is this cash flow coming from when you have to find £1,000 pcm yourself to live somewhere?
Bright guy and great content! I can relate to alot (not just this video) of what he's saying - I'm 1 property into my journey so far and there are some really pertinent points raised across all your content - Keep up the great work 👍🏻
That’s not correct. The scenario is yearly calculated mortgage which is from the 90’s. Nowadays interest is calculated daily so that line is more straight
About to complete on our 2nd property, converting our first to a BTL. These videos have been so helpful to understand the whole process as a newbie. Cheers
Jamie, I have 1BTL on interest only £285 however I overpay £500 ever month cos I am thinking of owning it outright one day. I give back the whole rent cos I have a good job. After listening to this I am stopping the overpayment to focus on 2nd but to let. And planning to cashout and invest.
Excellent video Jamie! Your goals and ambitions are almost identical to myself! I too want to grow to 1,000 properties one day and focus on philanthropy, and Buy to Lets is CASHFLOW first, equity second 😁
The only problem is that it’s all contingent on the the property’s value going up in line with what your model predicts. Property inflation is already in the hyper zone yet wage increases are virtually non existent. Sooner or later we will see a massive downward correction to these overvalued properties. The government can only control so much - bringing in new schemes, making it difficult to obtain land, restricting planning permission - all of which has the effect of starving off the supply side to keep prices hiked. Couple that with the banking of land by the seven largest property builders who only release land in small amounts and build houses in the higher prices bracket, and it’s not difficult to realise the fragility of the situation.
Great content 👍🏼 I was just wondering when u do an interest only type of mortgage, after 25 years can u actually sell the house and give the bank their 100k back ?? Please help…
You NEVER keep a mortgage for 25 years. You arrange a 25 year mortgage with a fixed rate deal of 2, 3, or 5 years. After the deal ends, remortgage for another 25 years with a fixed rate deal of 2, 3, or 5 years. After the deal ends, remortgage for another 25 years with a fixed rate deal of 2, 3, or 5 years. Keep doing that. The length of the fixed-rate deal you choose depends on the interest rates. Currently, the rates are dropping so you choose a 2 year. When rates are low, choose a 5 year.
@@JamieYork key word there being likely. Respectfully, i had six flats at one point, I cleared all the mortgages and sold them so I've been here before and know the difference between the truth, the hopes and the fantasy. I sold them all 2008 by way of reference.
Fortunate enough to have just bought second house. Will definitely be switching to interest only on my apartment next year. So blessed to be able to get into property investment.. We Out here living life on easy mode when there's so many poor buggers not able to muster together a single deposit
Great informative video. I'm interested to know if I can use the equity I have in my house? Was thinking of remortgaging to get those funds out of my property?
Thanks Jamie this was exactly what I was after, really appreciate it! Also as ever your videos are packed full of sensible and easy to follow information 👍🏻
Great explanation. It’s good how you use 5% as a stress test precautionary interest rate, but I feel the house price doubling in value every decade is maybe the other way, a little optimistic, 50% value increase could be used and still be attractive.
Thanks! Yeah just for illustrative purposes although it is the long term average. I prefer 5% a year as a conservative average in my area. Glad you’re enjoying the content 😊
When I start a portfolio, my idea was to do a repayment btl's over the longest period i.e 25-30years so this will let me pay the lowest amount. As interest only you have to pay something, myt as well pay off some of the mortgage, so you always have money in the property. If you do interest only you do run the risk of the property going into negative equity.
From my own experience, repayment BTL reduces the profit margins significantly. Mostly due to not being able to offset the mortgage payment from your tax allowance.
Very unlikely to go into negative equity I’ve the long term. Remember you can always pay down at your will. Up to 10% a year with no cost impact to you
really great videos.. got introduced to your channel only today.. I am new to UK property market and have a question as to whether this video is intended only for people who is looking for passive incomes from property. Do you have any video which explains what people should consider about buying a house for living i.e buying a home vs living in rented house.
@@JamieYork thankyou for your reply... I am confused about taking this decision as I see some of the newer flats( near Heathrow) are as expensive as houses and anyway this add much to our liability listmore than asset. So thinking whether to continue in rented apartment instead of buying a new house or flat for living
Great video, but what about the tax implications? Landlords are about to get properly shagged in the next budget less than a month away, and it’s only going to get worse over time.
HAha, turns out it wasn't so bad at all for landlords! Not as shagged as we thought eh. Also, there's ALWAYS ways to mitigate tax my man. I focus on what I'm making and mitigate what I'm spending! 😊
@@JamieYork it wasn’t as bad as I expected it would be, but if you’re a higher rate tax payer with only a couple of properties outside of a company structure there’s very little you can do to mitigate the tax you pay.
I never understood the point of interest only ( I hadn’t really researched into it properly) but now I totally get it ! Definitely an advantage to it! Thank you sharing!🙂👌
Great video Jamie... question, when you look at buy to let mortgages what term are you usually looking at and why would that change with different properties and also how long would you fix your rate for given the extremely low interest rate
Good question! I like predictability so I might look at 5 year fixed if the rate is good. I also don't really mind with the length of the mortgage as it interest only and I'll more than likely re=finance a property before the end of the loan
I'm in the process of re-mortgaging a BTL property. The brokers are taking a bit too long on it. Its going to be a 5 year fixed and there's no product fee with it. Usually they can be anything from £995-1999. Although you do get a lower interest rate by paying the product fee, the advisor I had said it wouldn't make sense. Hopefully I should hear back from them next week, as the sooner I get on it the better, plus I am borrowing more which should leave me with 40K excess. Current rate is 4.44% compared to the newer rate of 2.14% which is more than half. Should have re-mortgaged near when I was coming to end with the current provider.
At the moment interest rates are low but once they rise to 6 per cent any profit would be lost. Wouldn’t this mean interest only wouldn’t work anymore. (If it’s unlikely to increase in value much)
Hi What about the discounted variable rate thar are on offer by lenders at the moment? they are about 2% less for then standard variable rate, and are to be discounted for the fix periord of time. What are your thoughts about it? Representative example: A repayment mortgage of £114,340 payable over 22 years, on a discounted rate of 2.74% for 5 years, and then on a variable rate of 4.85% for the remaining 17 years. You would be required to make 60 payments of £577.16 and 204 payments of £677.72. The total amount payable would be £173,734.00 made up of the loan amount plus interest (£58,544.00) and fees (£850). The overall cost for comparison is 4.1% representative.
