Don't think too big too soon: You sometimes read success stories of buy-to-let investors who have managed to make a huge profit and build a large portfolios of properties. These days are gone, so invest for income rather than short-term profit. Your buy-to-let returns should come from the rent of your property. As most buy-to-let mortgages are interest only, the amount of your loan will not be repaid. Make sure that your rent covers more than your repayment so that you can build up a fund to deal with emergencies. Once you have covered all your costs, tax, and mortgage repayments, the money left can be used as a deposit for other buy-to-let properties, or maybe pay off the mortgage at the end of the term. Do not limit yourself to your local area: buy-to-let landlords typically invest in properties in their local area. Bear in mind that your town may not be the best place to invest. The advantage of a local buy-to-let property is that you can manage it yourself, but don't forget that you can use the services of an agent to do that for you if you decide to invest further away from your area. Is there a town near you that has got commuting links, or a university? This might be a better option for your buy-to-let investment.
A Buy to Let Mortgage: What Is It?, buy to let mortgage rates, buy to let mortgagesBuy-to-let mortgages have become available in the United Kingdom in the late nineties. A buy-to-let mortgage is a mortgage used by landlords to borrow funds for buying a property with a view to let it out it to tenants. For regular mortgages, mortgage brokers figure out the amount a customer can borrow based on their annual income. It is not so for buy-to-let mortgages.
As a general rule interest rates offered for buy-to-let mortgages are relatively similar to owner-occupied mortgages, but are usually higher and with a higher arrangement fee. lenders believe that a buy-to-let investment carries a much higher risk than a owner-occupied mortgage. This risk is reflected in the higher rates on offer and fees.
House prices have hugely increased in the UK in the last 10 years. This has resulted in an explosion of the letting market as many families can't afford the deposit required for a mortgage. This has made buy-to-let very popular with property investors.
Tax benefits is another reason for the success of buy-to-let. The income a landlord earns from the rent of a buy-to-let property is treated as salary (22%, 40% or 50% tax depending on the bands). There are however several costs investors can deduct from their tax bill: interest on mortgage repayments and maintenance costs for example.
Buy-to-let has been given a bad name in the last 5 years. Many say that buy-to-let is one of the key factors for the exploding house prices in the United Kingdom. A good example is London, where it has been estimated that more than 30% of the properties are bought with a view of renting them to tenants.
Does buy-to-let remain an interesting investment for property investors? It is hard to say.