Buy-to-let is often seen by private investors as an interesting alternative way to make their money grow. Certainly it offers the chance of double benefits for the owner. There is the income from letting the property and the hopeful increase in the value of the property.
Unlike the mortgage which you raise when you buy your home, which is based upon your earnings, a buy-to-let mortgage is normally based on the income which can be generated from the letting of the property. There are many specialists in buy-to-let mortgages and a good broker will be aware of the prerequisites and terms which apply to them and will guide you to the right lender for your own circumstances.
The right property in the correct location is all-important. If your main aim is for growth in the value of the property then obviously you need to look at where you think the next "value-spurt" is going to be. Something like the Commonwealth games in London will pull up an area with all the developments and if you can get in early on this type of area there should be strong potential for property value growth. If income is your main aim, then University towns and cities are good hunting-grounds and you're assured of a regular, although changing, stream of tenants, over the years.
Lenders like to see where their repayments are coming from and should be happy if you could produce some projected figures showing a gross income of around 135% of the property's mortgage costs. This should cover the costs if things don't go quite as smoothly as planned.
Costs over and above the mortgage repayments will include the upkeep of the property, any renovation work, furnishings if these are included in the contract and the cost of testing (for safety regulations) appliances and maintaining them. If the property is leasehold there could be ground rent and then there are possible service charges. Add to this any letting agent's fees, typically 10% of the monthly rent and another 5% if you go for a management service. Don't forget buildings insurance.
As far as a letting agent is concerned, they will earn their fees by searching for and vetting suitable tenants and collecting the rental. This could be valuable if you're not renting in your own area, but is something many small landlords manage for themselves. Remember to allow for the time when there is no income from the property, between lettings, for example. At one time students use to pay rental on a per term basis, but nowadays it's become more usual to pay for an annual occupancy.
Whilst everything goes well for the vast majority of private landlords, things can go wrong and it's possible to find the whole project is more time consuming than you first thought. House prices have doubled in the past ten years or so, who knows how long this will continue?
In the event of bumps in the market, a landlord would still have the income from letting to cushion the blow and the property would still be there as a long term investment.
For all the advice and information that you need, the best approach is to find an on-line mortgage broker. They have access to all the latest mortgages from a range of lenders. As soon as they have your information they'll scour the market for the best possible deal, on the most favourable terms.
Got a Question? Ask.
Ask the community a question about this article:
Frequently Asked Questions
I want to invest instock who is the best for ...
By: Domine | 19-08-2008
I want to invest instock who is the best for beginners.
Pirates ofthe carribean dead ma'n chest pillow ...
By: shirley | 19-08-2008
pirates ofthe carribean dead ma'n chest pillow sham please help me find it thanks alot
Inflation is eating my savings!
By: hernan | 18-08-2008
My bank is giving me 3.5% for a Money Market account. Inflation is around 6% annual. I AM LOOSING MONEY!! Where can I put my money that is safe and I don't loose with inflation?
Ferret
By: GuitarHeroNintendog | 18-08-2008
We are getting a ferret soon and i was wondering if anyone would help me find a ferret cheap.And does anyone have any suggestions of names,and what i need to take care of a ferret.
If a bank goes belly-up and you have to accounts ...
By: dollardan4 | 18-08-2008
if a bank goes belly-up and you have to accounts for 100,000.each,does fdic cover each one ?
Anyone out there know where someone described ...
By: Nanney | 18-08-2008
Anyone out there know where someone described above can get a re-fi loan on a rental property with good credit? Been told that there are no more stated loans..is this true...?
Q&A Powered by:
Latest Finance Articles
The History of the Global Forex Market
By: Orlando Thompson | 07/10/2008
In this article we explain what the global forex market is and how it came to be this is very insightful information that will help you in your forex trading system choices.
How To Go About Improving Your Credit Score
By: MIKE SELVON | 07/10/2008
While it'd be nice to live a "credit-free existence," it can be difficult to do so in today's world.
Self Directed IRA Possibilities With A Small Business
By: Jerry Glynn | 07/10/2008
It is normally not possible to set up a self directed IRA with a small business. This article describes a little known strategy that can be used in conjunction with a small business.
Understanding Debt Consolidation Loans
By: Richard Greenwood | 07/10/2008
It can be all too easy to end up in debt and especially during the current times of financial uncertainty you may find yourself unable to make repayments. Consolidating your debt can make your debts easier to manage and lower your interest charges meaning you become debt free faster.
Credit Card Comparison
By: Richard Greenwood | 07/10/2008
Credit card offers are everywhere and all claim to out do each other. How do you cut through the marketing talk and understand the key features you need to compare to make an informed decision. Find out with this informative article on credit card comparison.
Shopping For Auto Insurance
By: Brenda Williams | 07/10/2008
When you get your license for the first time before you begin driving you need to get car insurance as it's mandatory to have car insurance while driving. Car insurance can be rather expensive, especially for new drivers which is why you'll need to ensure that you're getting the best...
Taking 100% Responsibility - the Prerequisite for Creating Money & Marriage Success
By: Leslie Cunningham | 07/10/2008
It's a simple concept, to refrain from blaming and complaining, and yet it's a challenge to change a habit, especially one that everyone else has. Like sticking to your diet, when everyone else around you is enjoying chocolate cake. Keep reading and you'll find out how this relates to your marriage and finances. Then I'll share some action steps to help you become 100% responsible for your life.
Retirement Income Investing and Your Portfolio
By: Steve Selengut | 07/10/2008
Brokerage firm monthly statements are designed to promote either fear or greed, depending on the current market environment. Nowhere on your statement can you find numbers that report your net investment, your total working capital, or your true asset allocation. Current and projected income numbers are given little attention
More from Michael Challiner
Life Insurance - What Price Privacy?
By: Michael Challiner | 15/03/2007 | Finance
There was a time when people were entitled to their privacy, unless they had committed a criminal offence. Sadly those days are long gone and most unlikely to return. It may have started with the Government authorising the taxman to enter your home, and denying you any right of refusal.
It...
Endowment Policy - Careful Cancellation Essential
By: Michael Challiner | 15/03/2007 | Finance
Back in the 1980s word went around that there was a wonderful new way to pay your mortgage. In those days the process of getting and running a mortgage was almost sacrosanct, and little variation was available. A fairly common route to take was to open an account at the...
Life Insurance – What Price Privacy?
By: Michael Challiner | 05/03/2007 | Insurance
Insurance companies are trying to push back the boundaries on private information to which they believe they should have free access.
Endowment Policy – Careful Cancellation Essential
By: Michael Challiner | 05/03/2007 | Insurance
You may be better off keeping your endowment policy. If you want to sell, get expert help to ensure the best price.
Incautious Borrowing
By: Michael Challiner | 05/03/2007 | Loans
Debt is climbing in the UK at an alarming rate. Before you enter into a loan agreement make sure that you have complete information, to ensure a pain free exit if the need arises.
Find a Great Remortgage Deal
By: Michael Challiner | 05/03/2007 | Mortgage
Could you be paying over the odds for your mortgage? Maybe you’re not aware of the fact that there may be better deals around? For most people, there are big savings, check them out.
Mortgages - Ad Infinitum
By: Michael Challiner | 05/03/2007 | Mortgage
The Japanese do it. The Swiss do it. Now it’s the turn of the UK. Find out more about the inter-generational mortgage.
Life Insurance - When You Are Gone
By: Michael Challiner | 27/02/2007 | Finance
Immortality is no big deal. Just imagine getting up on a Monday morning 52 times a year for the rest of eternity. Really only two advantages of eternal life spring to mind - you could start reading 'War & Peace' and know that you would have time to finish...
Finance 
