Buying to Let
Buy to let mortgages have been with us since 1996. Over the last decade the market has ballooned to such an extent that an estimated 700,000 properties are now financed in this way. If you are considering joining the buy-to-let revolution it’s worth spending a bit of time doing your homework first.
Buying a property to let should be a calculated financial investment. Let’s start with the basics. There are two ways in which you can make money from buying a property to let, one of which can be calculated and one is in the lap of the Gods. Lets start with the one you can calculate; the yield.
The gross yield is the rental income as a percentage of the property’s value. This is the best measure for comparing investment properties. If you are comparing a rental investment to another type of investment you will need to factor in all your purchase and running costs but as you are reading this article we will assume that you’ve decided a property is the best investment for you.
The other way in which you can make money is with an increase in the value of your investment property known as capital growth. Capital growth is impossible to predict. Some of the sharpest property minds in the country try to predict the year ahead each December and invariably get it wrong. What we do know is that in recent times (by that I mean the last 15 years or so) the value of property has consistently increased so it is worth considering capital growth.
Luckily for buy-to-let investors the properties that tend to be popular with tenants are the also the ones that are most likely to experience the greatest capital growth. Look for properties in safe areas with good transport links and you won’t go far wrong. Looking for the next property hot spot is probably a pointless exercise as even if you do get it right do you really want to own an investment which is possibly at the other end of the country? Your capital growth will be eaten up in agent’s management fees.
Look for properties that will let quickly. There is generally a greater demand for flats than houses and if you’re buying a 2 bedroom flat look for 2 double bedrooms as this will make it more attractive to sharers. Decorate your property neutrally but robustly; tenants will never look after it as well as you would so expect some wear and tear. Most young single tenants aren’t bothered about a garden but are concerned about security so an upper floor flat in a low rise block could be ideal.