Points To Remember When Buying Buy To Let Property
There are many landlords who are finding it difficult to get the rent that outstrips their mortgage payment
. Recession is forcing them to accept lower rents and deposits from their tenants. Lenders have also made changes in their buy to let policies to make it easier for landlords to let their property. Some of the changes that lenders have made include accepting lower mortgage-to-rent ratios and giving loans on a lower down payment.
People who intend to buy to let property must carefully analyse the risk-reward ratio before they invest in a property. Investments made without careful analysis may not yield expected returns. Here are a few points that you must remember before buying an investment property.
a) The property prices in the UK are on the rise and the average price of property is increasing by the day. Also, the rate of interest on mortgages is higher than it was a few years ago. All this is having an impact on the returns that landlords get on their investment. Most landlords got a rental income that is 125 per cent of their monthly mortgage repayment. However, with rise in property prices and interest rates it has become difficult to meet these restrictions.
Most landlords have eased these restrictions and are looking at rent as a steady source of income. They are expecting a rise in property prices to deliver the returns they are expecting from the property. However, many analysts believe that property prices are unlikely to rise and landlords should stick to the 125 percent rule.
b) There are many people who buy investment property using their heart and not their head. They buy property that they think is their ideal home and not what the rental audience demand. Avoid paying for luxurious or done-up properties as you are unlikely to receive the returns that you are expecting. Instead, you can buy a bargain property that requires some renovation. This will not require a huge investment as the prices of these properties are lower than buying done-up properties.
c) It is important that you research the area and find out the likely rent and probability of price rises in the area. You must also check the people who would want to live in the area. If you have a good university, school or Business Park in the area then the demand for rental property is likely to be high. Therefore it is important that you explore the area before you buy an investment property.
d) Check the rental demand in the area before you buy a property. If there are many vacant rental properties, tenants may turn down your property for minor reasons. Also if you are planning to let out the property to a student or young professionals, make sure there are good pubs and restaurants close to the property.
e) You need to consider the expenses you incur in maintaining a buy to let property. You may have to incur expenses to maintain the fridge, washing machine and furniture. You will also have to account for the charges that you pay to the agent who can help you in letting out the property.
by: Lawrence White
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