The Buy To Let Guide
Introduction to buy-to-let mortgages
For many people, buy to let is becoming a mainstream alternative to traditional investments such as pensions and the stock market. Mintel reports that 3% of homeowners are considering buying another property to let by 2010, doubling the number of current landlords.
The growth of the market has exceeded all expectations, on average and since 2000, BTL has grown by nearly 50 per cent every year, including a 57 per cent growth between 2005 and 2006.
In 2006, buy-to-let lending accounted for 11% of all mortgage lending figures and the Council of Mortgage Lenders (CML) revealed that turnover in the buy-to-let sector amounted to £38.4 billion of all mortgages processed.
Historically low interest rates and less restrictive tenancy agreements have all helped fuel the buy-to-let market. Mortgage lenders have grown more confident in the buy-to-let sector and they are currently offering more attractive buy-to-let mortgage deals. Ying Tan, Managing Director comments “Investors are seeing the benefits of investing in bricks and mortar and good returns in the buy-to-let market continue to be achieved by the astute investor, as long as you manage your risks, and conduct thorough due diligence.”
Buy-to-let: The essentials
Please follow this guide before making a buy-to-let investment
1. Finding the right mortgage
This is the single most important thing to get right once you have found a potential property. Today more lenders offer buy-to-let loans and the interest rates on them are often lower than a residential mortgage.
It is advisable to contact a Buy-to-let Mortgage specialist, they have the experience to offer a variety of finance options and can advise you and help put a plan together to guide you when building a portfolio of properties.
Most buy-to-let mortgages are available only to people with at least 15 per cent of the property purchase price to put down as a deposit.
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2: Research the market
Speak to an expert for advice or research areas where there is a good rental market.
If you do your own research you may want to consider contacting your local authority or housing department and ask if there is a demand for rented accommodation.
If new companies are establishing businesses and moving into the area then this is a good sign. Also, if there are universities and colleges nearby then the student population is a good source for potential tenants.
Speak to estate agents, letting agents and research on the internet and find out what areas get the highest yields?
3: Location
It is worth checking out the market in different areas.
Families will want good schools, young professionals may need to commute to the work so proximity to rail stations and major motorways could be important. Additionally remember the golden rule; do not let your personal taste affect the type of property you buy. Remember property investment is a business, try to make sure you tailor your property for your future tenants and not for your tastes.
Will there be any new development nearby? Are the transport links being improved? Are new companies moving into the area?
4. The Right Tenanats
It is important to choose your tenants with care, while most are honest and reliable, there is a tiny minority who can cause problems.
Consider whether you want students, professionals or families as your ideal tenants. Property investment is a business so ensure the furnishings in the property suit your preferred target market.
Advertise your property in local publications and online with well known websites. Ask a lot of questions when tenants call and ask for employment, bank, previous landlord and even personal references. Make sure you contact the references provided and follow through before handing over keys to the property. Take one month’s rent as a security deposit and set up the monthly rent payments as a direct debit.
Make sure the tenants sign up for the utility bills and council tax and prepare a proper inventory to check off when they move in.
5: Finance and the future
Can ordinary people make money by investing in property ? Yes – in the same way wealthy people have done for generations. However property is a long-term investment – the average value of a UK property doubles every 10 – 15 years. Therefore do not expect a fast return within a couple of years.
It is important however to look to the future when you buy a property and research thoroughly what type of property has the potential to achieve greater returns . Look out for local knowledge, for example, will there be any new development nearby? Are transport links being improved? Are new companies moving into the area?
