Buy-to-let is Still a Good Option

Housing market
Added on June 19th 2016

Buy-to-let is Still a Good Option
Buy-to-let has had some bad press recently, with changes to tax and Stamp Duty coming in earlier this year. These changes, as well as the ever-rising cost of property, may make some people feel that BTL isn’t right for them.

It can still be a good option, however, if you take your time to think before you leap.

Buy in an up-and-coming area
This doesn’t mean expensive or cheap, it means that people want to live there for a number of reasons. Does the town have good transport links, good schools, a vibrant nightlife culture? Is it a student area?

Look at the area’s “draws” and match your property to them. For students you’ll want multiple-occupancy, for commuters you can choose from a one-bed flat upwards as long as it’s handy for the trains and the motorway.

Do your sums
You need to fix your budget before you even look at listings! Remember that BTL lenders want rents that’ll cover 125% of your monthly mortgage. Many lenders also want deposits of at least 25% now. You’ll also pay higher interest than most residential mortgages, unless you want to pay a hefty arrangement fee for a better rate.

Then there’s maintenance, insurance, the dreaded voids and incidental costs – if your figures don’t work out, consider another investment vehicle.

Shop around
It’s tempting to go to your own bank for a BTL mortgage, but you could find better elsewhere, so spend some time looking around and talking to independent brokers first.

Think about your dream tenant
Don’t decorate and fit out your rental property for you, but for your ideal tenant. Students want clean, safe and comfortable, young professionals want well-equipped and well-decorated but neutral and families want unfurnished and well-equipped.

Spread your net
Don’t just look in your area as it may not be ideal – if you’re using a letting agent you don’t need to be nearby. Look instead at towns with good transport links and universities or at areas that young families settle in.

Tired-looking properties can be good investments – you can get good deals and then do some work, which immediately boosts the value. You should aim for a market value of the purchase price, plus your renovation costs, plus a further 20%.

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