Is it worth having a 2nd house 2 rent out with an interest only mortgage which is close to the rental value?

Question

I'm not planning to "pay off" the mortgage, but purely to sit on the property for 3-5 years before selling at a hopefuly profit. I can safely get £500-£525 rent per month, but my interestet only payments on my mortgage are £450 per month.

Answer 1

Well, its always good to invest in real estate. If your planning to purchase a second house, you need to weigh your risks and benefits.

If you live in a state where real estate vaule is increasing. Then you can build equity, so rental income is only important to pay the mortgage. It will be a good investment to purchase a rental home, if your tenant will pay every month. If not, you have to carry that load! If you can't afford the risk, its not worth it. If you can that it is.

If you live in a state where real estate value is unsure, or not increasing, than I don't believe its worth the risk. You might have to sell and pay closing fee's, real estate fee's, ect... If things don't work out.

However, if home sales are at an all time low, Its considered a buyers market. Its sometimes the best time to get a good deal. Buy low, sell high. If you think, the future will be better, and you can get a great deal. Go ahead, take the risk.

I am also a real estate agent if this is helpful.

Answer 2

No at this time.
The fed will increase short term interest rates and that means higher interest rates on everything including mortgages. When interest rates are low houses get sold really fast and thus appreciate in value really fast. As interest rate goes up, the housing market cools and things flatten out for a time until rates drop again.

So no. In fact, you should get rid of your 2nd house soon before rates goes up again. Because your mortgage is interest only you don't have an equity in your home. Thus you don't slowly own the home like traditional mortgages. Sooner or later you'll have to start paying into the principal of the house and that will cause your monthly payment to go up above the rental value. Unless you have cash to do both mortgages get rid of your 2nd house fast.

Good luck.

Answer 3

Yes. Depending on the location of the property and the growth of real estate values in that area, you will build equity and home value for future re sale. By using an interest only loan, you pay a lower mortgage than you would if you had a traditional fixed mortgage rate and that is usually the best choice for investment properties specifically.

Answer 4

Go for it, you can get a 95% buy to let self cert mortgage and be £50-£75 per month in proft, landlords now have to have a licence (or will do very shortly) the income is taxable as is the profit you make on the property (only your main residence is not taxable) but its still an investment and one which I am sure will make you money overall - need any help let me know. K

Answer 5

It really depends on what you believe the market is going to do. If you are in a market the is growing or that you believe will begin to grow it is a very smart thing. Just make sure you have enough reserve in the bank where you can make it through maintenance on the home and a couple months lost rent if need be.

Keep in mind that real estate is going to go up, just a matter of how long. Right now we are in a dip and if you can hold on until it peeks again you'll be in a good spot.

Answer 6

Sure. The point is to have real estate which will increase in value over time. Even if the rental isn't making you income, at least you are covering your payments. In a few years, you hopefully will be able to sell the house for a profit. However, if your goal is to have a house "paid off" by renting it out over years, you are better off with a fixed loan.

Answer 7

I dont see the point in this as the property market is slow and has been for the last couple of years with no sign of any great improvement.. It would be different if you wanted to acquire the property for the future, and rented at the cost of the full mortgage repayment, it would be a painless long term investment. In todays climate, my advice would be to avoid it. With legal costs both ends, you'd gain nothing.

Answer 8

You will have additional costs in maintaining the 2nd property - yearly gas checks etc. repairs. You will also have agents fees if rent is collected for you. Only real gain will be if house increases in value, but if you plan to sell within a few years, gain will have to be more than expense of buying and selling. Think carefully before going ahead, costs could outweigh gain.

Answer 9

not sure what you mean, but if you can make a buck after paying taxes and insurance and upkeep and whatnot and pay off the mortgage, well yes then you are building equity in a property and not losing anything except some time and hair from the hassle. if you got a good price on it sell it in several years for a profit.

Answer 10

Having someone else pay for a house for you that you can later sell for a profit is a great thing. It's worked wonders for one of my friends. As soon as I pull my head out of my a*ss financially, I will do the same.