In a time of low rates and stock market volatility many investors have turned to "buy-to-let" as both attractive and secure income investment.
However, if you are considering investing in property - or as an existing owner/landlord wanting to improve your returns on an existing buy-to-let - it's good practice to practice good housekeeping.
The property market has seen highs and lows.
"Boom years" and the prices now are not what they once were and many question if they will reach the heady heights of the past. It's true that that Buy-to-let may not be quite the hot property of the boom years, but it has seen a resurgence in recent times and when linked to a growing rental market - the figures speak for themselves - a combination of a steady growth on property prices and an increasing rental market all points to a sector that makes real sense.
"You need to know that your investment can stand the test of time"
Many investors who bought in the boom years prior to 2007 struggled as the economy slowed and mortgage rates rose, a number of investors were thrown a lifeline when the base rate was slashed to 0.5 percent. However, some investors who purchased multiple investment properties with promises of using multiple consolidation as a means of finance were caught out by the increased rate resulting in loss of asset and invested sums.
Rates have stuck there since 2008, but remember they will rise again.
"Lower house prices, more tenants in the market, rising rents and improving mortgage deals provide the perfect ingredients for a secure investment"
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. Contact us today for more information.
Are you new to buy-to-let?
"Property investing has paid off handsomely for many people, both in terms of income and capital gains"
Remember - The more knowledge you have and research you do, the better the chance of your investment paying off.
A "Promising area" does not necessarily mean the 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 is there that something special of interest?
- If you are in a commuter belt,
- Is there good transport?
- Where are the good schools for young families?
- Where do the students want to live?
- Who are the tenants you wish to market to?
It is important to have a budget in mind and 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.
In the most part, people tend to invest in property close to where they live and this offers the benefit of local knowledge. However, it's worth bearing in mind that if you already own a property then you are already exposed to the market in that locality - and looking for a different type of home in a different area might be a good move.
Buying a property is just purchasing an asset on a larger scale. However, many people forget to fix a budget so before you think about looking around properties its worthwhile stepping back and sitting 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. Not doing so, may result in you buying an asset which provides an income that provides a return which is less than what you expected or possibly require.
It's important to shop around for the best deal on a mortgage. It sounds obvious, but some people trust their banks and just take them at their word and fail to look at what is on offer from the various providers.
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.
As with point 2, before making your decision to buy, put yourself in the shoes of your target tenant. After all, they are going to be the end user of your property.
A point to consider - although you as a landlord will own the property, it is the tenants home and by 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 ensures an secure income for you as the landlord.
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.
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%
Tax, maintenance costs and other landlord expenses will eat into that return.
"So experts say invest for income not short-term capital growth"
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