Don’t Miss Out on Attractive Stamp Duty Rates For Buy-To-Let

George Osborne’s recent announcement that stamp duty on buy-to-let properties and second homes is to rise by 3% in April 2016 looks set to spark a rush of buyers trying to complete before the changes take place. The move, which was put forward by the chancellor in his autumn budget statement recently, has been widely criticised, and many believe that its introduction could see rents rise and new-build developments stalled.

Higher rents, fewer properties

The Institute for Fiscal Studies condemned the move and stated that the “disproportionate” rise will depress the property market in the long term. The IFS, an independent research institute, went on to say that they believed that the move would not only lower house prices, it would also cause problems for future developments as well.

Don't Miss Out on Attractive Stamp Duty Rates For Buy-To-Let Aspen Woolf

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The introduction of higher stamp duty charges will devalue properties as prospective landlords and homeowners will be less willing to pay premium prices when they will also be hit with increased fees. This means that property developers will be less incentivised to build new homes, as their returns will be far lower and the properties more difficult to sell.

Loopholes are already being explored

As many as 50,000 people could try to complete property purchases before the new charges come into force in April next year, and there are also concerns that prospective landlords will get ‘creative’ in order to avoid the charges altogether. Many couples are already considering splitting the ownership of their properties, while others will undoubtedly be looking at the prospect of living in their new property for a short period before placing them on the rental market.

Don't Miss Out on Attractive Stamp Duty Rates For Buy-To-Let Aspen Woolf

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Help for first time buyers

Despite the criticism to the new proposals, the chancellor remains confident that the 3% increase will bring in an additional £1 billion to the Treasury by 2021. It has also been announced that up to £60 million of the funds raised by the proposed stamp duty tax increases will go towards helping those who are struggling to get onto the property ladder.

Areas where second homes are most popular have seen property prices soar out of the reach of ordinary, local people and any additional help from the Treasury will be welcomed by those affected. The Government’s Help to Buy scheme is also to be extended to 2021 in England, an additional 12 months longer than planned.

Don't Miss Out on Attractive Stamp Duty Rates For Buy-To-Let Aspen Woolf

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In the capital, buyers will be able to obtain loans worth up to 40% of the properties’ value providing they can get a 5% deposit together for the purchase. Across the rest of the country, loans of up to 20% of the overall property value will be made available to those who meet the necessary criteria. All of these loans will be kept interest free for five years.
This means an extra £6.9 billion for housing from the Government in total, £2.3 billion of which will be allocated to the starter homes programme. Another £4 billion is to be made available to local authorities and housing associations in the hope that more homes will be built for those who wish to gain access to the property market via shared ownership.

If you enjoyed this blog post then perhaps you would like to read “What Is A Buy To Let Mortgage and Is It Right for Me?

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What Is A Buy To Let Mortgage and Is It Right for Me?

buy to let property investment

The property market is big news these days, and reports on second homes and the state of the rental market are go-to stories for many of the major networks and newspapers. However, if you are not in the know, some of the terms banded around can be a little confusing. One such term is ‘buy-to-let mortgage’.

So, what exactly is a buy-to-let mortgage?

Buy-to-let mortgages are specifically aimed at landlords who wish to invest in the property market and provide rental accommodation at the same time. While they are generally more expensive than a standard mortgage, they are often the only way for prospective investors to start their property portfolios.

Can anyone get a buy-to-let mortgage?

What Is A Buy To Let Mortgage and Is It Right for Me? Aspen Woolf

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In essence, yes, anyone can get a buy-to-let mortgage, but there are one or two things that may prove to be a stumbling block for some. The first factor is whether or not you already own your own home. This can mean owning the property outright or with an existing mortgage.

As you would expect, a good credit rating is another basic requirement when obtaining a buy-to-let mortgage. Not only that, your current spending habits must be in control too. If you are maxed out on every card you own and have lots of other outgoings each month then the chances are good that your application will not be approved.

The final factor is age. The vast majority of lenders will have an upper age limit on when your mortgage will end. Should that be 70, then a 45-year old would only be able to get a 25-year mortgage, not 30. There was, however, a recent case won by a couple challenging this ruling, so things could change in the future.

How do buy-to-let mortgages differ?

What Is A Buy To Let Mortgage and Is It Right for Me? Aspen Woolf

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Whilst similar to standard mortgages, buy-to-lets do differ in some ways. Firstly, the deposit needed to take out a buy-to-let mortgage is generally higher than that of a regular mortgage. As a general rule, lenders will want to see at least a 25% deposit for buy-to-let properties. This can fluctuate from one lender to the next, but as a rule of thumb 25% should be your aim.

As with the deposit, the fees that you can expect to pay will be higher too and the trend continues with the rates of interest that you will need to pay each month. Therefore, doing your sums before taking on a buy-to-let mortgage is absolutely vital if you want to become a successful landlord.

Is there a limit on what you can borrow?

The amount that you can borrow from a lender is directly linked to the amount of rental income you predict that the property will generate. Most mortgage lenders will want to see around 25 – 30% more rent coming in from the property than is going out in payments.

What Is A Buy To Let Mortgage and Is It Right for Me? Aspen Woolf

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When making your calculations it is important to factor in the cost of obtaining the mortgage too as failing to do so can skew your figures somewhat.

Who offers buy-to-let mortgages?

As buy-to-let has increased in popularity, so have the amount of lenders willing to offer mortgages to support the demand. The vast majority of high street banks now have specific buy-to-let mortgage offers available and there are quite a few companies that specialise solely in this type of lending.

Doing your homework is important at this stage, but a reputable and reliable mortgage broker can help if you prefer to have someone else do the legwork for you.

Other considerations

Reports in the media concentrate mainly on the people making vast sums of money through buy-to-let, but as with any investment there are risks associated with the property market.

What Is A Buy To Let Mortgage and Is It Right for Me? Aspen Woolf

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Plan for the future as much as possible. Take into consideration times where the property may be without tenants. How will you meet the repayments and other costs associated with owning a property without the regular rental income?

Selling the property in times of financial distress is not always a solution either. If there has been a correction in the market when you need to draw your money out then you could be left with negative equity, a difference that you will be expected to make up.

Buy-to-let is an interesting proposition for many, and if you go into the property market with your eyes open it can be a fantastic vehicle for growth. Do your research, make the basic calculations, and follow your gut. If it feels right to you and the figures are in agreement, buy-to-let could be the ideal investment opportunity for you.

If you enjoyed this blog post then perhaps you’d like to read “Ways to Increase Buy-To-Let Profits“?

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A Guide To Buy-To-Let Investments

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More and more people are looking towards the property market for a way to diversify their investment portfolios, and for many buy-to-let is the obvious choice. If you are someone who is thinking about investing in a buy-to-let property then you’re in the right place.

Our guide aims to explain all you need to know about creating your own property portfolio and give you the advice you need to get things right first time. So, without further ado, let’s get started:

What is buy-to-let?

Firstly, it’s important to understand exactly what buy-to-let means. Buy-to-let is a type of property investment where an individual purchases a residential property not to live in, but to rent out to others. By undertaking this investment, the purchaser becomes a landlord and they collect rent from their tenants for the duration of their contract.

Who are buy-to-let investments suitable for?

A Guide To Buy-To-Let Investments Aspen Woolf

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Investing in property may seem like the easy way to untold riches but the truth is it’s not always that simple. Buy-to-let investments are not for everyone, and the main issue that you must address is whether or not you can afford to take the risks associated with dabbling in the property market. Despite the media hype surrounding buy-to-let investments, the risks are very real and you should only take on a BTL mortgage if you can manage those risks sufficiently.

You must also have a decent credit record in place before attempting to get a mortgage for a buy-to-let property and it is highly likely that the lender will only consider you if you already own your own home. This can either be held outright or with an existing mortgage, but it is very rare that mortgage providers will supply a buy-to-let mortgage to someone who doesn’t already have a property in their name.

Your age will also be taken into consideration and this can potentially be a stumbling block for those looking to take on a BTL mortgage for retirement. Many people leave the decision too late only to find that lenders are reluctant to take them on if they are over a certain age.

While there has been a recent discriminatory court hearing on this very subject, it will still be more difficult to get a BTL mortgage if that loan is set to end after you are 75. So, if you are looking to get a 25-year mortgage, the latest you should apply for one is 50-years of age.

Where do the profits come from?

A Guide To Buy-To-Let Investments Aspen Woolf

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As with any investment, the main aim is to make money and the way that this happens with buy-to-let is twofold. In the short-term, money can be accrued from the rent received from the tenant. This is sometimes referred to as rental yield.

The rent you charge should always cover your mortgage payments and more, so that you can build up a reserve fund just in case any repairs or maintenance needs to be undertaken on the property.

The second way that profit can be made is when the property is sold. After holding the property for a period of time the hope is that the market will have moved upwards and the property can then be sold at a profit. This profit is commonly referred to as capital growth.

When considering a buy-to-let investment it is important to look toward the medium to long-term as opposed to hoping for any short-term gains.

Selecting a property

A Guide To Buy-To-Let Investments Aspen Woolf

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The key to a successful property portfolio is in the selection of the properties that you place within it. Making the right choices at the start will stand you in good stead for the future. But how do you make the right choices? Following these key points will get you off on the right foot:

  • Research – Ask around your local estate agents about the types of property that are hot at the moment. Find out the areas that are mentioned frequently and look for a pattern. Enquire about what kind of rent these properties are fetching and who the tenants are; i.e. young professionals, students, retired etc.

Once you have this information you can then research the specific area further. Find out about the local amenities such as transport links and schools to see how they fit in with your prospective tenants.

  • Target – Make a list of the types of properties you wish to target. Bear in mind all that you have found out and work this into your equation. Location, tenant and property type should all fit together.
  • Calculate – Now you can start to work out the financial aspect of your investment. Look at the property types that you are targeting in the area you wish to make your purchase, and begin to calculate yields and whether or not you can obtain a mortgage for these properties.

Calculating rental yields

A Guide To Buy-To-Let Investments Aspen Woolf

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Rental yields can be calculated to give you an idea of your returns over the course of a year. This is important to know, as a cheaper property may not always be the best investment.

Thankfully, the equation is simple and you only need to have two figures to hand – your projected monthly rental return and the amount of money spent on the property. Let’s take a look at a couple of examples:

Property A

Monthly rent = £1050

Investment made = £250,000

£1,050 * 12 = £12,600

£12,600 / £250,000 = 0.0504

0.0504 * 100 = 5.04% yield

Property B

Monthly rent = £900

Investment made = £225,000

£900 * 12 = £10,800

£10800 / £225,000 = 0.048

0.048 * 100 = 4.8% yield

As you can see, Property B cost £25,000 less than Property A, but Property A has a higher yield than Property B. This makes Property A the better investment of the two in the medium/long-term.

Financing your investment

A Guide To Buy-To-Let Investments Aspen Woolf

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Buy-to-let mortgages differ somewhat from normal residential mortgages. With a residential mortgage, the amount that you can borrow is normally calculated based on your income and outgoings. Buy-to-let mortgages, however, are worked out by taking into account the amount of rental income your property is likely to generate.

The base figure for most lenders is 125% of the mortgage payments that you will make each month. So, if your mortgage repayments are £950, your prospective rental income will need to be at least £1,187.50 for the mortgage provider to consider lending.

You will also need to be able to put down a fair size deposit on the property you wish to buy, typically around 25%. Some lenders may accept lower but this is a good guide figure to make your calculations around. It will also be expected that you have a personal income of £20,000pa or more on top of what you anticipate you will earn from the rent that you will receive.

What are the risks?

A Guide To Buy-To-Let Investments Aspen Woolf

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No investment is entirely without risk and buy-to-let is no different. Property markets can fluctuate and this can affect both the amount of rent that you can command and the overall value of the property should you wish to sell.

Structural problems too can take their toll on investors. If you are sailing close to wind in terms of what you are receiving in rent compared to what your mortgage repayments are you could find yourself having to delve into your own savings to repair a roof or deal with burst pipes.

Smaller problems such as broken appliances also cost money to repair and replace, and general wear and tear will eventually have to be taken care of too. As a landlord you have a duty of care to your tenants so you will need to fix any problems that may arise while they are renting your property.

Unsurprisingly, these issues never happen at a good time, and they can catch you unawares if you haven’t made the necessary provisions to deal with them.

Can you insure against the risk?

A Guide To Buy-To-Let Investments Aspen Woolf

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There are certain things that you can insure yourself for, but not all. Things like moves in the property market are not insurable but damage to your property can be safeguarded against. Similarly, you should have insurance for public liability too. This will cover you should a tenant or service provider be injured in your property.

Loss of rent can also be insured and there are other elements that can be protected as well depending on how much you wish to spend on insurance each month. Do your research and make an informed decision upon the level of cover you wish to take out.

As for contents insurance, tenants should be encouraged to take out their own contents insurance should they wish to cover their own personal belongings while they are renting your property.

How about tax?

When you take on a buy-to-let investment you are effectively running a business as a landlord. Therefore there are tax implications to take into account. These include:

  • Stamp duty land tax (SDLT) – Charged when you first buy the property
  • Income tax – Charged against the rental income
  • Inheritance tax – Charged if you should die whilst holding property
  • Capital gains tax – Charged when you sell the property
  • VAT – Charged whenever you make purchases or pay for services related to the property

Are there any additional fees to pay?

A Guide To Buy-To-Let Investments Aspen Woolf

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Other than your insurance costs and the expense of maintaining the property to a standard fit for someone to live in, there can be other costs associated with owning a buy-to-let property.

The main one would be if you choose to have a letting agent manage your property for you. Doing so can relieve a lot of the headaches that come with being a landlord, but that stress relief doesn’t come for free.

Ask around your local letting agents to see what sort of charges they make for managing the type of property you are looking to rent out.

Interviewing prospective tenants

If you are not using a letting agent you will need to interview and assess your prospective tenants yourself. In order to avoid future problems, you will need to find out as much as you can about them before you rent your property out.

The five main things you must obtain are:

  • Proof of identity
  • Proof of credit rating
  • Proof of current address
  • Employer’s reference
  • Reference from their previous landlord

Are there any other obligations?

A Guide To Buy-To-Let Investments Aspen Woolf

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As a landlord you will need to meet certain obligations in order to legally rent out your property. These are:

  • Mortgage consent to let – You must have permission from the mortgage lender to rent out your property. For the majority of buy-to-let investors this will not be a problem, as you will probably have a specific mortgage for the purpose. However, if you already own a property and are considering renting it out you must inform your mortgage provider and obtain consent to do so.
  • Hold an up-to-date gas safety certificate – If you have gas appliances fitted in your property it is part of your duty of care to have a current gas safety certificate.  These need to be carried out annually and by a Gas Safe registered engineer.
  • Have a current electrical safety check – Although it is not a legal requirement to have annual checks performed like the above gas safety check, you will need to comply with the Electrical Equipment (Safety) Regulations 1994 and the Plugs and Sockets etc. (Safety) Regulations 1994. This is an obligation of all landlords and the Health and Safety Executive enforce these regulations.
  • If you are supplying furnishings for your property they must comply with the Furniture and Furnishings (Fire) (Safety) Regulations 1988 which extends the scope of the Consumer Protection Act 1987 (CPA).
  • Energy performance certificate – Failing to produce a valid energy performance certificate can result in a £200 fine from your local TSO (Trading Standards Officer).
  • Fire safety measure need to be put in place too. Any building built after 1992 must have a mains operated interconnected smoke alarm fitted on the entry level to the property. Older properties should have battery operated smoke alarms fitted.
  • General safety is also an obligation that must be fulfilled by the landlord. Renting out a property that is hazardous could result in a £5000.00 fine, 6 month’s imprisonment, and it could invalidate your insurance policy.

Becoming a landlord involves a great deal of work and it is not an entirely hands-off investment. However, the rewards can be great, so if you feel you have what it takes to go through with purchasing a buy-to-let property why not begin your journey today – it could be the best investment you’ll ever make.

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If you enjoyed this blog post then perhaps you’d like to read “Ways to Increase Buy-To-Let Profits“?

Buy-To-Let Market Buoyed By Low Rates And More

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The latest facts and figures on buy-to-let properties show that things are once again on the up for this ever-popular investment option. With recent changes to mortgage legislation and remarkably low rates, many experts are speculating that this is a great time to get into the buy-to-let market.

So, with this in mind, let’s take a closer look at a few of the reasons why buy-to-let looks set to boom yet again.

Lower Fixed Rate Buy-to-Let Mortgages

Buy-To-Let Market Buoyed By Low Rates And More Aspen Woolf

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There has never been a better opportunity to get into the market with a fixed low rate mortgage. Lower rates have recently become more tempting for new investors, with five-year fixed rate buy-to-let mortgages available for as low as 3.29%. Two-year fixed rates are even lower; the best offers at present starting at just 2.09%.

It is worth looking out for the best available deals on a fixed rate buy-to-let mortgage as the number of offers for this type of mortgage has shot up rapidly in the past couple of years. According to Moneyfacts, there are now 83 different fixed-rate deals available for buy-to-let, compared to only 5 that were available just two years ago.

Higher Returns on Property Investment

Buy-To-Let Market Buoyed By Low Rates And More Aspen Woolf

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Another good reason to invest is that the average rented property is now producing almost as much annual return as the average salary in the UK. The average buy-to-let property is returning £24,221 in capital gains and annual income, while the average British salary is around £25,000.

Return on investment in UK property is still on the rise too. Last year the total value of owned property in the UK stood at £990.7 billion, with an estimated total of annual return on property investments standing at £111.5 billion. This is an increase of 12.2% from 2000 and it means that the value of the property retail sector is now equal to almost half the value of the UK stock market.

In the longer term, there has been no better investment than property. Every £1,000 invested in 1996 was worth £14,897 by the end of 2014. This means that some landlords have seen a return of around 1400% in less than 20 years.

More Lenient Mortgage Lenders

Buy-To-Let Market Buoyed By Low Rates And More Aspen Woolf

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The Financial Ombudsman found HSBC guilty of discrimination in a recent case after the bank turned down a mortgage application solely because of the applicant’s age.

The bank refused the application because one partner would have reached the age of 65 before the end of the mortgage term, but the FOS ruled that their decision relied upon untested assumptions, stereotypes and generalizations.

Lenders are therefore more willing now to accept mortgage applicants at any reasonable age. The maximum mortgage term is 35 years, but that length of term is still only likely to be offered to younger applicants.

Greater Demand Means Higher Rents

Buy-To-Let Market Buoyed By Low Rates And More Aspen Woolf

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There have always been good reasons to become a landlord, but there are even more now due to the significant growth in demand for properties to rent across the UK. Over the past year, 150,000 more households entered the private rental sector, increasing the market by £5.8 billion.

At present there are around 4.8 million properties being rented out, and it has been estimated that by 2020 the number of households living in rented accommodation will be 5.5 million.

As the demand for rented property has increased over the past 5 years, rents have also gone up rapidly. There was a rise of 3.7% between May 2014 and April 2015 with an overall increase of 15% since May 2010.

With demand and yields in the private rental sector being driven up by current economic conditions and banks becoming more lenient, it is easy to see why so many are choosing to enter into the property market with a low fixed rate buy-to-let mortgage.

If you liked this blog post then perhaps you would like to read our guide on how to buy a home?

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Ten Tips For Buy-To-Let

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The Essential Advice for Property Investors

Continuously inhabited for over 2,000 years, Leicester truly is the beating heart of England. It’s a unique Bricks and mortar: Buy-to-let is a popular option for those who would rather grow their wealth through property than shares or cash

For many buy-to-let looks an attractive income investment at a time of low rates and stockmarket volatility. But if you are considering investing in property – or improving your returns on a buy-to-let you already own – it’s important to do things right. Read these top ten buy-to-let tips – the essential guide to successful property investing.

Buy-to-let may not be quite the hot property of the boom years, but it has seen a resurgence in recent times.

As an income investment for those with enough money to raise a big deposit buy-to-let looks attractive, especially compared to low savings rates and stock market volatility.

Meanwhile, the property market bouncing back has encouraged more investors to snap up property in the hope of its value rising.

Mortgage rates at record lows are helping buy-to-let investors make deals stack up – you could fix a mortgage for five years at just over 3 per cent at the biggest deposit level.

But beware low rates. One day they must rise and you need to know your investment can stand that test.

Recent history provides an important lesson in that. Many investors who bought in the boom years before 2007 struggled as mortgage rates rose. A sizeable number were thrown a lifeline when the base rate was slashed to 0.5 per cent.

Rates have stuck there since 2008, but remember they will rise again.

Despite the potential for costs to rise, more tenants in the market, rising rents and improving mortgage deals have tempted 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 below are This is Money’s top ten tips.

Buy-to-let Mortgage Rates Tumble, But Beware The Big Fees

Buy-to-let rates have followed residential deals down, but remain slightly more expensive than mortgages offered to owner occupiers.

Landlords need to beware fees, which can substantially push up the cost of a mortgage, especially if they are only fixing or tracking for a short deal period.

The biggest fees are typically those charged as a percentage of the loan but even flat fees can run to £2,000. The good news is that you should be able to claim these back against tax, speak to an accountant if you need help with this.

Natwest offers the lowest fixed rate buy-to-let mortgage on the market at 2.25 per cent with a £1,995 fee, but you will need to have 40 per cent to put down.

A slightly higher two-year fixed rate for landlords is 2.34 per cent from Virgin Money, this requires a £1,995 fee but comes with £500 cashback.

For a longer term five-year deal, Abbey for Intermediaries has a rate of 3.29 per cent with a £1,500 fee. A slightly higher five-year fix is also from Virgin Money at 3.19 per cent. It also has a £1,995 fee and £500 cashback.

Both these loans require a 40 per cent deposit.Typically buy-to-let borrowers must put down a deposit of at least 25 per cent. The best two year fix at this level is from Abbey for Intermediaries with a two-year fixed rate at 2.79 per cent with a £1,995 fee for a 25 per cent deposit.

You could fix for five years with Metro Bankat 3.79 per cent with a £1,999 fee.

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 from an income-based investment fund, or 3 per cent on a fixed rate savings account.

Remember that the return from an investment in funds, shares or an investment trust through an Isa will see you escape tax on income and get capital growth tax free. You will also have the ability to sell up quickly if you want.

The flip-side is that you cannot buy an unloved investment fund and set about renovating it and adding value yourself.

Investing in buy-to-let involves committing tens of thousands of pounds to a property and typically taking out a mortgage. When house prices rise, this means it is possible to make big leveraged gains above your mortgage debt, but when they fall your deposit gets hit and the mortgage stays the same.

Property investing has paid off handsomely for many people, both in terms of income and capital gains but it is essential that you go into it with your eyes wide open, acknowledging the potential advantages and disadvantages.

If you know someone who has invested in buy-to-let or let a property before, ask them about their experiences – warts and all.

The more knowledge you have and the more research you do, the better the chance of your investment paying off.

Ten Tips For Buy-To-Let Aspen Woolf
Rising demand: Levels of home ownership are falling, particularly among young people, meaning more renters

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?

You need to match the kind of property you can afford and want to buy with locations that people who would want to live in those homes would choose.

These questions might sound overly simplistic, but they are probably the most important aspect of a successful buy-to-let investment

In most cases people tend to invest in property close to where they live. On the plus side, they are likely to know this market better than anywhere else and can spot the kind of property and location that will do well. They also have a much better chance of keeping tabs on the property.

Yet it is also worth bearing in mind that if you are a homeowner then you are already exposed to property where you live – and looking for a different type of home in a different area might be a good move.

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.

Buy-to-let lenders typically want rent to cover 125% of the mortgage repayments and many 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 and likely rent sorted then you must be clinical in deciding whether your investment work out?

Don’t forget to factor in maintenance costs.

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.

4. Shop around and get the best mortgage

Do not just walk into your bank and building society and ask for a mortgage. It sounds obvious, but people who do this when they need a financial product are one of the reasons why banks make billions in profit.

Read This is Money’s buy-to-let section for details of latest buy-to-let mortgage deals highlighted and check lenders’ websites, Skipton BS, BM Solutions, NatWest, Woolwich, Coventry BS, Platform (part of Co-op Bank) and Accord (part of Yorkshire BS) have been consistent in recent years.

It pays to speak to a good independent broker when looking for a buy-to-let mortgage. They can not only talk you through what deals are available but they can also help you weigh up which one is right for you and whether to fix or track.

You should still do your own research though, so that you can go into the conversation armed with the knowledge of what sort of mortgages you should be offered.

Can You Still Get Into Buy-to-let?

Many long-term existing buy-to-let investors are sitting comfortably on low mortgage rates, having seen standard variable rates fall as base rate was slashed down to 0.5%.

Some buy-to-let deals before the financial crisis did not have typical SVRs but a revert rate that tracks the bank rate. Long-term landlords are benefiting from that still.

However, new buy-to-let mortgage deals remain more expensive than residential deals and require a big deposit.

If investors are willing to accept that they may find the value of their property slides in the short term, and can ensure their property meets the criteria of 75% loan-to-value and returning 125% of monthly mortgage payments then it can be a good long-term investment.

The key is to think long-term though.

5. Think about your target tenant

Instead of imagining whether you would like to live in your investment property, put yourself in the shoes of your target tenant.

Who are they and what do they want? If they are students, it needs to be easy to clean and comfortable but not luxurious.

If they are young professionals it should be modern and stylish but not overbearing.

If it is a family they will have plenty of their own belongings and need a blank canvas.

Remember that allowing tenants to make their mark on a property, such as by decorating, or adding pictures, or you taking out unwanted furniture makes it feel more like home.

These tenants will stay for longer, which is great news for a landlord.

It is also possible to take out an insurance policy against your tenant failing to pay the rent, usually known as rent guarantee insurance. This can cost as little as £50, and is available as a standalone product from a specialist provider, or as part of a wider landlord insurance policy.

Ten Tips For Buy-To-Let Aspen Woolf
Starting to sink? When compared on a month-by-month basis prices are actually falling, Nationwide found

6. Don’t be over ambitious – go for rental yield and remember costs

We have all read the stories about buy-to-let millionaires and their huge portfolios.

But while you may expect long-term house price rises, experts say invest for income not short-term capital growth.

To compare different property’s values use their yield: that is annual rent received as a percentage of the purchase price.

For example, a property delivering £10,000 worth of rent that costs £200,000 has a 5% yield.

Rent should be the key return for buy-to-let.

How To Work Out The Return On Your Investment

Remember, if you are buying with a mortgage, rent-to-property price yield will not be the return you get.

To work out your annual return on investment subtract your annual mortgage cost from your annual rent and then work this sum out as a percentage of the deposit you put down.

For a £100,000 property that could rent for £500 per month, you would need a £25k deposit and roughly £2,000 in buying costs.

£75k mortgage at 5% interest rate = £312.50
£500 rental income x 12 = £6,000
Difference = £2,250
Deposit + buying costs = £27k
Annual return = 8.3%

Don’t forget tax, maintenance costs and other landlord expenses will eat into that return.

Most buy-to-let mortgages are done on an interest-only basis, so the amount borrowed will not be paid off over time.

This is tax efficient, as you can offset mortgage payments against your tax bill.

If you can get a rental return substantially over the mortgage payments, then once you have built up a good emergency fund, you can start saving or investing any extra cash.

Remember though, people rarely buy a home outright and they come with running costs, so mortgage costs, maintenance and agents fees must be worked out and they will eat into your return.

You may want to consider whether buy-to-let still beats an investment fund or trust once these costs are taken into account.

Once mortgage, costs and tax are considered, you will want the rent to build up over time and then potentially be able to use it as a deposit for further investments, or to pay off the mortgage at the end of its term.

This means you will have benefited from the income from rent, paid off the mortgage and hold the property’s full capital value.

7. Consider looking further afield or doing a property up

Most buy-to-let investors look for properties near where they live.

But your town may not be the best investment.

The advantage of a property close by is being able to keep an eye on it, but if you will be employing an agent anyway they should do that for you.

Cast your net wider and look at towns with good commuting links, that are popular with familes or have a sizeable university.

It is also worth looking at properties that need improvement as a way of boosting the value of your investment. Tired properties or those in need of renovation can be negotiated hard on to get at a better price and then spruced up to add value.

This is one way that it is still possible to see a solid and swift return on your capital invested. If you can add some value to a home straight away then it gives you a greater margin of safety on your investment

However, remember to ensure that the price is low enough to cover refurbishment and some profit and that you allow for the inevitable over-run on costs.

A good rule to follow is the property developers’ rough calculation, whereby you want the final value of a refurbished property to be at least the purchase price, plus cost of work, plus 20 per cent.

Ten Tips For Buy-To-Let Aspen Woolf
Pricey: On Nationwide’s measure which uses average earnings across the board, property is far more expensive than it was at the end of the 1980s boom – this is driving more people to rent, but may also limit capital gains on property

8. Haggle over price

As a buy-to-let investor you have the same advantage as a first-time buyer when it comes to negotiating a discount.

If you are not reliant on selling a property to buy another, then you are not part of a chain and represent less of a risk of a sale falling through.

This can be a major asset when negotiating a discount. Make low offers and do not get talked into overpaying.

It pays to know your market when negotiating. For example, if the market is softer and homes are taking longer to sell you will be better able to negotiate. It is also useful to find out why someone is selling and how long they have owned the property.

An existing landlord who has owned a property for a long time – and is cashing in their capital gains -may be more willing to accept a lower offer for a quick sale than a family that needs the best possible price in order to afford a move.

9. Know the pitfalls

Before you make any investment you should always investigate the negative aspects as well as the positive.

House prices are on the up right now but growth has slowed and they could fall again. If property prices dip will you be able to continue holding your investment?

Meanwhile, rates are low at the moment and that is encouraging people to invest with rent comfortable covering the mortgage, but what will you do when rates rise?

Consider too the standard variable rate you may move to after a fixed rate period. What will happen if you can’t remortgage?

Even in popular areas properties can sit empty. One rule of thumb many buy-to-let investors apply is to factor in the property sitting empty for two months of the year – this gives a substantial buffer.

Homes often need repairing and things can go wrong. If you do not have enough in the bank to cover a major repair to your property, such as a new boiler, do not invest yet.

10. Consider how hands-on you want to be

Buying a property is only the first step. Will you rent it out yourself or get an agent to do so.

Agents will charge you a management fee, but will deal with any problems and have a good network of plumbers, electricians and other workers if things go wrong.

You can make more money by renting the property out yourself but be prepared to give up weekends and evenings on viewings, advertising and repairs.

If you choose an agent you do not have to go for a High Street presence, many independent agents offer an excellent and personal service.

Select a shortlist of agents big and small and ask them what they can offer you.

If you are considering going it alone look at where you will advertise your property and where you will get documents, such as tenancy agreements from.

It really pays to look after your tenants. Do this and they will look after you.

The biggest drag on many buy-to-let landlord’s investment returns is the void period. A time when you don’t have anyone in the property. Good tenants who want to stay help avoid this – and if they move on they may even recommend your property to someone they know.

Keep up with maintenance, make sure your property is a nice place to live and try and build a good personal relationship with your tenants.

Original Article By Simon Lambert for Updated: 08:34, 22 April 2015

Why Are Investors Now Looking Outside London?

real estate investment london

According to, Investors are bidding farewell to London. Today investors are turning to the cheaper alternative, the UK regional markets, due to their property investment deals. The property portal’s latest Investment Watch report shows that the UK’s regional cities made up 4 out of 10 most popular listings on the portal in March.

In September 2014, London dominated activity on, thanks to an affordable property fund offering a fixed return of 32% on real estate. Just 6 months later, the Investment Watch chart is filled with regional hotspots, as buyers turn away from the cooling capital.

Budget continues to be a major factor in investments: 9 of March’s Top 10 listings were all priced under £100,000. Car parks proved popular, thanks to advertised high returns, great locations, and entry costs of less than £35,000. Director Dan Johnson comments: “The UK property market has enjoyed strong, rapid growth in the past 18 months. While a lack of supply is hindering traditional buyers, conditions within the private rented sector are ideal for landlords, thanks to low mortgage rates and high demand from tenants.

“Away from London, where high prices reduce the potential rental yield, buy to let is now a major driver of activity on, with hotspots such as Liverpool and Manchester already delivering on the promise of a northern powerhouse ahead of HS2 and HS3. Hotels are enjoying the benefits of strong demand and an improving regional economy too and their hands-off management make them particularly attractive to investors.”

Lifestyle buyers also continued their return to European markets in March, focusing primarily on Spain: Spanish property made up two of the month’s Top 10 listings, including the La Manga resort in Murcia (third most popular) and repossessed homes across the country (ninth most popular).

Johnson adds: “With low prices, sunny weather and the pound at a seven-year high against the euro, Spanish property has rarely been more popular. It is testament to the appeal of Spain’s housing market that it is one of the few countries outside of the UK to appear in’s Top 10 March listings.”

Original Article written by Ivan Radford from