Tuesday, 10 June 2014

Part Two Money’s Top Ten Buy To Let Tips




6. Don't be over ambitious - go for rental yield and remember costs

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.


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. Most buy-to-let mortgages are done on an interest-only basis, so the amount borrowed will not be paid off over time. 
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, agents fees must be worked out and they will eat into your return.
Once mortgage, costs and tax are taken into account, 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.
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.

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.
Make low offers and do not get talked into overpaying.

9. Know the pitfalls
Before you make any investment you should always investigate the negative aspects as well as the positive. House prices are falling and if this continues, will you be able to continue holding your investment? What will happen if you can't re-mortgage? 
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. 


- Essential Guide: Tenants rights and deposit protection

Tuesday, 20 May 2014

Ten tips for buy-to-let:


Part One (Tips 1-5)


For many buy-to-let looks an attractive income investment in a time of low rates and stock market volatility. 

But if you are considering investing in property in 2014 - or improving your returns on a buy-to-let you already own - it's important to do things right.

This is Money's top ten buy-to-let tips - the essential guide to successful property investing. (Part One)

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.




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 paying just 10 per cent tax on income and getting capital growth tax free. You will also have the ability to sell up quickly if you want.
If you know someone who has entered the buy-to-let market, ask them about their experiences.


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? 
Asking yourself these questions might sound over simplistic, but they are probably the most important aspect of a successful buy-to-let investment


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 be clinical in deciding will your investment work out? 
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.

If you are looking for advice consider using a specialist buy-to-let mortgage broker. Remember asking them for information means you are under no obligation to use them.


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 painting, or adding pictures or taking out unwanted furniture makes it feel more like home - these tenants will stay for longer, which is great news for a landlord.



Ten tips for buy-to-let: the essential advice for property investors and pick of the top mortgage rates Read more: http://www.thisismoney.co.uk/money/mortgageshome/article-1596759/Ten-tips-buy-let.html#ixzz32GpdMNjX Follow us: @MailOnline on Twitter | DailyMail on Facebook