Ten tips for buy to let property investors

Ten tips for buy to let property investors

For many buy to let is an attractive income investment in a time of low rates and stock market volatility. Read This is Money’s top ten buy to let Property Investment tips – the essential guide to successful property investing.

Poor old buy to let. Once upon a time it was David Beckham, Wayne Rooney and Kate Moss all rolled into one – making headlines on a daily basis with every move endlessly analysed.

But while buy to let may no longer be the hot property it once was, as an income investment for those with enough money to raise a big deposit it looks attractive, especially compared to low savings rates and stock market volatility.

But beware, many investors who bought in the boom struggled as mortgage rates rose before the base rate was slashed to 0.5 per cent – and one day interest rates must rise again.

Lower house prices, rising rents and improving mortgage deals are tempting investors once more.

If you are planning on investing, or just want to know more, we tell you the ten essential things to consider for a successful buy to let investment.

Like any investment, buy to let comes with no guarantees, but for those who have more faith in bricks and mortar than stocks and shares here are This is Money’s top ten tips:

1. Research the market

If you are new to buy to let, what do you know about the market? Do you know the risks, as well as the benefits.

Make sure buy to let is the investment you want. Your money might be able to perform better elsewhere. In recent years a high-rate savings account would beat most investments. Now rates are lower, but investing in buy to let means tying up capital in a property that may fall in value. This compares to the possibility of a 5% annual return on a fixed rate savings account.

You could also get a similar return from an investment in funds, shares or an investment trust – paying just 10 per cent tax on income and getting tax-free capital growth through an Isa – with the ability to sell up quickly if you want.

If you know someone who has entered the buy to let market, ask them about their experiences.

2. Choose a promising area

Promising does not mean most expensive or cheapest. Promising means a place where people would like to live and this can be for a variety of reasons.

Where in your town has a special appeal? If you are in a commuter belt, where has good transport? Where are the good schools for young families? Where do the students want to live? Asking yourself these questions might sound over simplistic, but they are probably the most important aspect of a successful buy to let investment

3. Do the maths

Before you think about looking around properties sit down with a pen and paper and write down the cost of houses you are looking at and the rent you are likely to get.

Traditionally buy to let lenders wanted rent to cover 125% of the mortgage repayments, although many had relaxed this in the tail-end of the boom years. Most also looked for a 15% deposit, which protects against falling prices.

After the financial crisis, many are now demanding 25% deposits, or even larger, for rates considerably above residential mortgage deals. The best rate buy to let mortgages also come with large arrangement fees.

Once you have the mortgage rate sorted – and remember to allow yourself leeway for rate rises in years to come, be clinical in deciding will your investment work out?

What will happen if the property sits empty for a month or two? These are all things to consider. Make sure you know how much the mortgage repayments will be and if it is a tracker allow for rates to rise.

via Ten tips for buy-to-let | This is Money.

6:49 pm - Posted by Mark

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