landlords reveal how they built buy-to-let empires
Buy-to-let has had its ups and downs for Rachel Smith.
After moving in with her partner in 2016, Ms Smith sold her three-bedroom semi-detached house in Bristol. She and her partner, Stuart Smith, 38, spent £120,000 on a three-bedroom terrace in Somerset. With money left over they invested in a £12,000 holiday chalet in Devon, which they planned to use themselves when it was not rented out.
But the site’s £5,000-a-year ground rent wiped out potential profits. “Also, now the children are at school we can use it only in the holidays, which is when we need it to be rented,” said Ms Smith, who runs a jewellery business, iamrachel.co.uk. The couple sold the chalet for £20,000 earlier this year.
Their next purchase was much more successful – a fire-damaged two-bedroom house in Neath, South Wales, which they bought at auction for £30,000. Mr Smith renovated the property himself, working around his job as a paramedic; the work cost around £10,000. The house is now rented out at £450 a month for a yield of about 12pc. It is now valued at about £100,000.
Since then the couple have invested in two more run-down properties: a two-bedroom townhouse in Tonypandy, South Wales, which cost £30,000 at auction in 2018, and a two-bedroom flat in the coastal village of Brean, Somerset, which cost £70,000 in 2020. To keep costs to a minimum Mr Smith renovated both houses.
Initially the Tonypandy house was rented out the conventional way but, after trying and failing to sell it last year for £120,000 to free up some cash, they decided to try Airbnb instead.
The house sleeps up to nine people and even though they charge only £60 to £70 a night – “it is not luxury accommodation,” said Ms Smith – it is so far earning them more than it did as a conventional let.
On this basis they chose their Brean flat to rent out as a holiday let. The couple said that if they rented it out full-time it would go for around £500 to £600 a month. As a holiday let it raises £70 to £80 a night and they have the added benefit of being able to use it as a weekend getaway between bookings. The bonus of a holiday let is more favourable mortgage tax relief than with a buy-to-let.
Running two holiday homes and a rental house is hard work, with repairs, bookings to arrange, cleaning and changeovers. Ms Smith said half her working week was spent looking after the properties.
The couple have no immediate plans to buy more properties and are playing things by ear. “Prices might rocket in Wales and then we might sell one of them,” said Ms Smith. “We re-evaluate all the time.”