Buy To Let Opportunity
There probably has never been a better time to purchase a buy to let property if you have sufficient funds to invest. The housing market as a whole is generally stagnant throughout the UK at the moment. This is mainly due to the ongoing recession in the UK, the financial instability of countries in Europe and around the world and the banks not wanting to lend money. It’s a buyers market for anyone with cash that is looking to get involved in the lucrative buy to let market and reap the high return
Europeans Investing In Buy To Let Properties In the UK
There are areas within the UK where you would find it hard to believe that the United Kingdom was in a recession. London has not shown any signs of a downturn in the property market or the cost of renting a house in the capital. In fact many of the investors in London at the moment are wealthy Greece and Spanish investors looking for financial security and good return on there money.
So it seems that foreigners find our capital city of London a great property investment opportunity and so should anyone living in the UK that has some spare money to invest in buy to let properties. After all the banks and building societies are paying investors a pittance on their money. Buy to let investors are realising record levels of rental income from their buy to let properties. Statistics suggest that the average buy to let rental income has increased this September by 2.1%, this is good news for anyone looking to become a buy to let landlord.
Meanwhile the average house price in the UK is now £163,376 as reported by The Land Registry and in London they say the average house price is £364,059 and here they have seen the largest house price increase of 5% in the last 12 months. The property experts reckon that the forecast for the next couple of years is a decline of two to three percent on property prices. Whilst the average cost of renting a home in the UK has now increased to £806 per month, according to the Rental index.
Points To Consider When Buying A Buy To Let Property
So you have now realised that a buy to let property might be an attractive investment providing you with an exceptional return on your money invested. There are a few key points to consider when purchasing any buy to let properties for rent.
Investigate The Buy To Let Market Place
Your first consideration should be where to purchase a buy to let property. Here you should consider your market for example: who is going to rent your property, are you looking for professional people, single, married, families looking for a home, or are you looking at a studio apartment, flat, two, three or four bedroom house?
You should consider areas close to hospitals, airports or universities as they are normally a good place as they offer employment to large numbers of people. Also consider your own location as you know the area and it would be easy for you to keep an eye on the property. Believe it or not 77% of buy to let landlords invest in their own locality.
Go and talk to a local estate agent and ask them about the local rental property market. Ask them some of the following questions like: where are the good areas to purchase a buy to let house; are there any up and coming areas, do they know of any new developments or houses that need to be sold urgently?
Consider the Cost of Buying A Buy To Let Property
Unless you are buying for cash you will need to find yourself a mortgage broker that can search the ‘whole of market’ as they will find you the best mortgage to suit your requirements from every available buy to let mortgage lender and not the best mortgage from a panel of buy to let mortgage lenders.
As a rule of thumb you will need to have at least a 25% deposit and sufficient additional funds to pay for your solicitor’s costs, mortgage lenders arrangement fee for securing a mortgage rate, broker’s fees, valuation fees, etc.
A buy to let mortgage lender will be looking for a rental income of 125% of the mortgage repayment costs of an interest only mortgage.
You need to seriously consider how you would pay the mortgage repayments if the property was left empty for a few months or longer as the mortgage still needs to be paid.
Beware that mortgage interest rates can and do rise and fall and if past historical information is to be considered then back in the early 1980’s interest rates did rise to more than 16%. To put this into perspective, if a mortgage of £100,000 was to rise by just 1% then you would be paying another £1,000 in interest payments a year. Therefore a 10% increase would cost you a further £10,000 more a year. Most buy to let landlords say that this is not a problem because they will just put up their rents to cover this cost. Remember you can only increase your rent while tenants are prepared to pay you, there comes a time where tenants will walk and you could be left with to pay the mortgage in full or partially.
When purchasing a buy to let property you will need landlord insurance to protect your investment against flooding, storm damage, accidental damage, loss of rental income and property owners’ liability. This will be an annual cost and needs to be considered with all other operating costs. If you have a buy to let mortgage on your property then you will find that the mortgage lender will insist on a minimum of buildings insurance to protect the property.
Finally, you should remember that you will have ongoing costs towards the maintenance and upkeep of your buy to let investment property.