Investing in a buy-to-let property can create a good return on your money, enlarges your property portfolio and can prove a valuable commodity in the future. Buying property is seen as a moderately safe investment, which can make you a lot of money if done correctly. Getting professional advice is invaluable before you make any purchases and there are many companies willing to help you get your feet on the buy-to-let market easily. Investing in a buy-to-let property is a long term commitment not to be taken lightly and although the majority of the time things do work in your favour there are instances when problems can arise unfortunately.

Why invest in a buy-to-let property

With rental prices at an all time high investing in a buy-to-let property can give you another income which could be useful in the current economic climate or even serve as a way of saving for the future. Even when property values may fall there should be an income generated from a buy-to-let property that will tide you over until property prices rise again. Worldwide there is a steady demand for rental properties so becoming a buy-to-let landlord is an extremely viable option for those who can get a buy-to-let mortgage or have funding to purchase a property suitable as a rental.

Do your research before committing to a buy-to-let property

The first thing to think about when considering a buy-to-let property is the area in which you wish to buy in. Not all cheap properties on the market today are suitable as private rentals and finding an area where the amenities such as schools and transport links are good can make the letting process easier. In run down areas there may be a wider choice of properties for sale but less people may want to live there and an empty buy-to-let property is not going to make you any money. Take into account the standards of other properties and rental prices in your chosen area when you are hoping to get onto the buy-to-let ladder and make note of any pitfalls or problems that could arise.

What does a buy-to-let mortgage entail

A buy-to-let mortgage is not only worked out on your current financial status and income but also includes any expected rental from the property you are planning to buy. There are now specialized lenders that deal only in mortgages for buy-to-let properties as well as many major banks and traditional mortgage providers. Buy-to-let mortgages are now comparable to standard mortgages and offer fixed rates, trackers, discount and also flexible rate mortgages so it is advisable to shop around to try and find the best deal. You will be asked to raise a deposit of between 15 and 25% for a standard buy-to-let mortgage and tax will also be payable on any rental income you make from a buy-to-let property after expenses such as property maintenance fees or rental insurance is paid. Having a second or even third property that generates an income and pays a buy-to-let mortgage is a worthwhile long term investment that many people are now using to supplement their finances.

Rite mortgages has made a list of all things that you should consider before investing in a buy-to-let property. Make sure to answer all of the following questions first:

  • “How to choose the right property.
  • How to calculate a return on your investment.
  • How to get the best price and rent and so increase your potential return on your investment.
  • How to arrange your investment in the most tax efficient way.
  • How to use gearing to substantially increase your portfolio.
  • How to best protect your income from the risk of default or voids.
  • What are your obligations as a landlord.
  • What rights does your tenant have.
  • How to manage ongoing repair and maintenance.”

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