Buy to let property, a simple guide
The first step to make is to do your homework, and research thoroughly. It is important to investigate the area or areas that you are thinking of buying your investment property in. Use the local newspapers and property websites to check the availability and demand for rental property, taking note of the rental amounts being asked and the open market value of the properties.
It is also important to think ahead a look at factors that could influence the future demand for rental property in the area. For example property that are close to industrial areas are usually a good option because people like to live close to work. Therefore with regards to future demand is it an area where new businesses are starting up or an area where there is a decline in industry.
You could also talk to local letting agents to obtain more information about the demand for rental property and other factors that may be important.
By doing your research you should be able to form an idea about where you think it would be best to buy your investment property, and how much the ideal property is likely to cost.
The next big step is sorting out the finances. You will need to know how much money you have available to fund your investment project. The chances are you are going to require a buy to let mortgage to help fund the purchase of your investment property. Therefore you will need to know how much money you wish to put into the purchase and how much you will require on a buy to let mortgage facility.
The best deals are available up to 60 percent loan to value, although there isn’t a huge difference when compared to the buy to let mortgage deals that go up to 75 percent loan to value. If at all possible avoid the 80 to 85 percent deals as these are limited and therefore not very competitive.
When calculating how much money you are putting in, remember to take into consideration any other costs, such as any repairs you may need to make to the property, servicing the central heating and any other appliances, decoration and any other work or purchases that maybe required. Also allow for legal fees, stamp duty if applicable, and any mortgage payments that you may have to make before you start receiving rental income.
The biggest concern most people have with regards to obtaining a buy to let mortgage is their income and do they have enough. With buy to let mortgages the lenders are more concerned in the potential rental income of the property and will this income, allowing for a reserve, be sufficient to pay the monthly interest payments.