Are buy to let properties a good investment? A buy to let property investment is right for you if you prefer investments that are more tangible than stocks and shares.
- Are willing to tie up your money for a long period of time
- You accept that property prices can go down as well as up
- You are willing to take the risk that you may not earn a profit on your investment
- Understand and accept the additional risks that go along with borrowing money to buy a property
- You understand and accept the costs and time involved in owning and running a property and the impact that this will have on your potential return.
When you become a landlord, you’re effectively running a small business and this comes with important legal responsibilities.
What is a landlord property inspection
How does buy-to-let property investment work?
To buy a residential property, you can pay in cash or take out a buy-to-let mortgage with a deposit.
A mortgage comes with risks – if you need to sell the property for a loss, the sale price might not cover all that you owe on the mortgage.
You would have to make up the difference.
Also remember, that if your tenants vacate and there is no rent coming in, you still need to make your mortgage repayments.
Once you buy a property, you can potentially earn a profit in two ways:
- Rental yield – Rent received, minus any maintenance and running costs, i.e. repairs and agency fees.
- Capital growth – the profit you earn if you sell your property for more than what you paid for it.
Leaseholders who are in process of selling but have unpaid service charges
What are the risks and returns
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- The amount of rent you can charge varies according to a number of factors, including wider market trends outside your control. Rents are not guaranteed to stay the same. They fluctuate.
- If you can’t find tenants – or if you can’t charge the rent you expected – you might not be able to cover your mortgage repayments.
- If house prices fall, the value of your property is likely to fall as well. You might not be able to sell it for as much as you hoped.
- If you have to sell and the sale price doesn’t cover the whole mortgage, you’ll have to make up the difference.
- Major repairs or difficult tenants might increase your costs.
- If the housing market does well, you might be able to sell your property for a profit.
Importance of inventory at tenancy disputes
Access to your money
To access your money, you’ll need to sell the property or take out another mortgage.
Both take time. A new mortgage would need to be approved by the bank.
How to prevent void periods on your rental property
Charges
You’ll need to cover the costs of buying, which can include:
- survey fees
- solicitor’s fees
- Stamp Duty Land Tax.
There are also running and maintenance costs associated with any kind of rental home.
A sales or letting agent will also charge a fee. If you want to use an agent, compare costs to make sure you get the best deal.
Please contact Pelin Martin to book a 30-minute complimentary property consultation on +0208 994 7327 – pm@bluecrystallondon.co.uk