Investing in Property
Why invest in residential property to let?
There are many positive factors that make buying a property to rent an
attractive proposition.
Becoming a landlord or landlady has never been easier
thanks to the Buy to Let initiative devised by the Association of Residential
Letting Agents.
Are you looking for a relatively stress-free investment over the
middle to long term? Have you ever considered investing in a property or
properties to let?
High Demand for Property
The aftermath of the recession,
changing working practices and a general desire for flexibility, have brought
renting back into fashion. Around two million households now rent their homes
through the private sector, and more and more investors are being drawn to the
returns on offer. These can be as much as 10 - 12% (gross) in some areas,
although this is not guaranteed.
Back to Top ^
What is Buy to Let?
Buy to Let is designed to
stimulate growth in the Private Rented Sector by encouraging private investors
to take the opportunities given by low, highly competitive interest rates, and
the reasonable certainty of sustained capital growth over the coming years.
Lenders viewed borrowing money to purchase property as a commercial venture and
as a result, many Investors found it difficult to take advantage of the
investment opportunities available. However, since the launch of the Buy to Let
scheme in September 1996 by A.R.L.A. (Residential Letting Agents), this has
become a favoured and easily available investment.
So why the change of heart?
Increased confidence in the housing market has helped, as has the surge in
demand for rented property. The 1988 Housing Act de-regulated the market and
created a legal framework that is fair to both landlords and tenants. Lenders
have also been willing to amend their lending criteria and lower the interest
rates they charge, because of the presence of professional letting and property
management agents to guide landlords through the complexities of the rental
market.
Back to Top ^
Removing Obstacles
In the past, anyone who tried to rent their property
faced a surcharge from their mortgage lender, and could find themselves paying
as much as two or three percent over the standard variable rate. They would also
have to have substantial income behind them, because lenders were unlikely to
take potential rental income into account when assessing suitability for a loan.
Investment mortgages makes investing in property a real possibility for many
people, by giving them access to specifically designed mortgages at realistic
interest rates.
Alvechurch Investments, BPL's financial partner, can help you with a flexible
financing package for your property.
Back to Top ^
Capital Growth
By investing in the Residential Property Market, you could
experience gross yields of between 6 - 9% on rental returns, as well as the
prospect of future capital growth.
The average gross return in the UK at the
present is about 8 - 9%. Like all good investments, the key to success is buying
the right property at the right time. Do that, and you can easily achieve the
high yields we mention.
With the expectation of the UK Rental Market growing in
the next ten years from 11% to over 20%, there is a strong demand for more
Investment Landlords. The incentives to buy have seldom been better. Interest
rates are lower than they have been for many years, and there is little
indication of any sharp rises.
The latest figures have revealed that property
prices in England and Wales grew between 15 - 25% during 2001 and 2002, as the
lowest mortgage rates for thirty years has fuelled the house-buying public into
action.
Back to Top ^
Good News from the Tax Man
There is a major tax benefit for individuals
renting out properties. All income from UK property is treated as the profit of
a Schedule A Business. This means that landlords can add up all their rental
income, deduct their property expenses and pay tax only on the surplus. In
addition, if losses arise, they can normally be carried forward and set against
future Schedule A income.
Naturally, if you are thinking of becoming a landlord,
you should take expert advice on the tax consequences and on how to keep
accounts.
Please note that income derived from letting your property is subject
to UK tax whether you are resident in the UK or overseas, and must be reported
in your Self Assessment Return.
Back to Top ^
Choosing Your Property
Before you apply for an
Investment Mortgage to buy your property (which in many cases will be a second
mortgage), you will need to consider the type of property you are looking for
and how easy it will be to let; e.g. Studio / Flat / House, number of bedrooms
and primarily, the area.
It is important to remember that for an Investment
Mortgage, you will require at least 20 - 25% deposit and a minimum of fifteen
years before your retirement (this will ensure that your mortgage repayment is
no greater than your rental income). As an example - to purchase a property
worth £80,000 you will need a deposit of £12,000 to £20,000.
Also an
important factor, once you have decided to invest in a Buy to Let property,
treat the investment as you would any other investment medium to long term.
Birmingham property letting ltd will be pleased to offer sound advice as to
which properties are in short supply.
Back to Top ^
What Income can I Expect?
This will depend
on size and location - although recent times have seen substantial growth, a
realistic expectation could be 12% of the capital value of the property. Gross
rents should be between 125 - 150% of the monthly mortgage repayments (for
example: if your mortgage is £300 per month, you should be looking to receive a
rental of approximately £400 - £450 per calendar month). Please also bear in
mind the costs that you will incur, such as insurances, agent's fees,
maintenance costs and mortgage protection should you decide to contribute.
Back to Top ^
Why use BPL
If you would like to generate extra income with total peace of
mind, Buy to Lets with Bpl provides the ideal solution. Our experienced staff
will identify the most lucrative properties in the locality, and provide
professional, sound advice and support. Finance can be arranged through our
mortgage advisor. Please telephone 0121 458 7512 to arrange an appointment.
Your home is at risk if you do not keep up with repayments on a mortgage or
other loans secured on it.
Back to Top ^
|
