Buy to let do’s and don’ts:

Much has been written about the fortunes that people have made over the last decade through buy to let investment. With increasing fears over pension provision; concerns over the returns that the stock market will provide and a booming property market it is no wonder that investing in property has proven attractive. The value of buy to let mortgages has increased dramatically from L73.4 billion at the end of 2005 to L94.8 billion in February 2007. According to the Council of Mortgage Lenders the number of landlords falling into arrears continued to fall during 2006.

Despite this back drop of success for many landlords, buying to let is not a “get rich quick scheme” and given the current climate in which house prices are cooling in many areas you really do need to research any potential investment carefully. Below we have outlined some of the things that we feel set successful buy to let landlords apart from those that fail:

The property- It seems that to the UK population there is something comforting about investing in bricks and mortar. However picking the wrong property can be an expensive mistake.

Offplan/New-Build?

A great deal of money has been made in the last decade by individuals who have invested “off-plan”. This means that in most cases these people have paid a deposit and exchanged contracts on a property based on the developer’s plans before (or during) construction of the property. The following may be considered as benefits of buying off-plan:

1. A discount will generally be offered by the developer to reward early investors who are purchasing without seeing “the finished article”. If a number of properties in a proposed development are already sold based on the plans it can help the developer to secure the best funding to complete the development.
2. By investing early you may be able to benefit from increases in the property’s value during the build phase thus locking in profit for only the cost of the deposit.
3. Newly built properties can be an attractive proposition to tenants and often come with the option of furnishings.

There are however risks associated with buying off-plan which merit consideration as follows:

1. Newly built properties often attract a premium price which is immediately eroded as soon as it has been lived in. This can mitigate the benefits described above.
2. Property clubs may buy up large chunks of a development for their members, such that on completion of the development there is an influx of property to let which drives down rental yields.
3. An off-plan property is only worth as much as the market value at completion (unless it can be disposed of via an assignable contract). If a number of other developments spring up during the build this increase in supply could adversely affect prices within an area.

One of the keys to finding the right property is to look for qualities that will make it easy and profitable to let. These include:

Investment- Look for locations that are attracting inward investment from business and areas that are being regenerated.

Infrastructure- Areas with good rail and road networks will generally be more appealing to prospective tenants (this is especially important if you are looking outside of city centres).

The finance- Most buy to let investors will take a mortgage to help fund the purchase of an investment property to benefit from leveraging their capital investment. In many cases an investor’s aim will be to borrow the maximum amount possible. Given that the mortgage will probably be the biggest cost associated with a buy to let property, it makes sense to ensure that you get the very best advice to meet your investment objectives. At Fee-Saver Mortgages our advisers are experienced in helping investors to formulate strategic financial objectives from property investment, and to ensure that the right funding is in place to meet these objectives.

Think about what it is that you are looking to achieve from buying to let- for example are you looking for long term capital gains from a limited number of properties or to buy as much property as possible within a given time frame? Our buy to let specialists will be able to discuss the benefits and drawbacks of buy to let mortgages from the whole market to ensure that the funding that you take fits with your investment plan. If you’re not sure exactly what you want, don’t worry- we can look at flexible mortgage options that will leave you light on your feet in case your plans change! What’s more we will not charge you for the advice that we give you, and won’t charge you a broker fee for arranging the mortgage for you either. Get in touch today..