The rental market is booming. With growth in the sector partly down to the global financial crisis and the subsequent reduction in first time buyer mortgages, many are stuck in the rental market; with 16.5% of households now living in the private rental sector.
Some renters on the other hand view it more as a lifestyle choice, preferring the freedom that renting offers.
Either way, for those looking to buy-to-let, there is definitely a market worth breaking into. For example, investing your capital in buy-to-let whilst there is such a high demand will often offer higher returns than earning interest in a savings account.
So, to make sure you make a success of your buy-to-let investment, follow this tips brought to you by Virgin Money.
Understanding buy to let mortgage rates and the different features such as the repayment method and repayment term can be daunting. At this stage it’s recommended you seek the advice of a mortgage specialist from Virgin money mortgages. Buy to let mortgages come in a variety of options suitable to different situations. A mortgage specialist will walk you through the lending criteria and the different products, which can come with varying fee options. They will assess which option best suits your circumstances.
Get to know the area
The first question you need to ask yourself is who your target market is and whether a specific area meets their needs. For example if you are targeting young families they’ll be looking for somewhere with good schools, whilst young professionals will want good commuter links and local amenities like cafes and restaurants.
If you’re a little unsure of about a certain area speak to the local estate agents as they’ll be able to advise on what the average rent is and how easy it is to find tenants.
Think about size
Renters may look at flats initially, but it’s likely they’ll want to move on within six months leaving you searching for new tenants. Purchasing a two or three bedroom house is ideal as couples may envisage being there for the long haul. There’s also little demand for four bedroom houses, so try and avoid buying too big.
Understand the numbers
When crunching the numbers you need to ask yourself two important questions:
– Whether the rent you receive will cover the mortgage payment
– Whether you’ll be able to afford the property if it’s left vacant for a period of time or if the tenant fails to pay the rent
Use your money wisely
Your budget always plays a huge part in the decision making process, so think wisely with what you have. If for example you have £200,000 to invest it is worthwhile thinking tactically and leveraging your money across two properties. If you were to invest half in each covering the rest with your mortgage it could be a viable option.
Buy new or as close as you can
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When you buy your first buy-to-let property, you don’t necessarily want to deal with the added costs of repairs and the time doing DIY. Remember, you’re not buying a property you want to live in yourself; you’re buying something that is appealing to others. Not only are professional people in the rental market likely to opt for a new build; there’s also the added security of them coming with NHBC warranty, boiler guarantees and double glazing.