Key Factors To Consider When Investing In A Buy-To-Let Property


Are you looking to receive a higher than average return when investing your money? With Property investment showing such strong returns in the UK, it could be a good option to look into.

In the last 70 years, house prices in the United Kingdom have gone up from £750 to more than £200,000. In North London, a semi-detached property used to be sold at £850 just before WWII, but now, the same property is valued at £50,000.

Real estate is often a better investment than bonds and stocks. According to research done by Hamptons International, realty prices in London have gone up by £16 a day over the last 60 years. That is a healthy return on investment.

Rent Out Your Property and Earn a Steady Income

There are stories of quick flips everywhere, people buying, renovating, and reselling for a quick profit, but renting remains at the core of real estate investing. You can generate a steady income to pay back the mortgage. The price appreciation helps you bring in profits when you sell off.

But there are a few things you must keep in mind before making that investment decision.

Rental Property Investment Key Considerations

Desirability – You will lose rental income if you cannot find tenants. So your property should appeal to renters. If you are looking for students, then buy close to a college or university. If you are looking for families, buy a property near a school. The property type also plays a key role. A young professional is unlikely to go for a 3-bedroom house with a garden, but this could be perfect for a family. Also remember, it could be easier for you to find a tenant if you have a smaller place because larger accommodations cost more money.

Where Can You Get The Most Rent – Many homeowners want to stay close to their property. The better option would be to hire a property management service so that you can look further away and invest at a place where you get the maximum rent. For instance, the average rent in London is actually falling, whereas, house rent prices in Wales are going up faster than anywhere else in the UK. Romford, Luton, Dartford, and Rochester rank amongst the top cities for buy-to-let properties according to the LendInvest 2017 buy-to-let index.

The Gross Yield – Avoid if it is lower than 9% gross in places like Manchester and Liverpool because you may have to contribute after general expenses such as bond repayments and levies every month, if applicable. The yield will be stressed when the property price goes up. So look where you can get the best yields.

Affordability – Homeowners who are thinking of buying a second property as an investment will have to pay two mortgages, which is difficult for most. Consider a reverse mortgage loan where you can free up equity on your existing property to fund the next purchase. You can get up to 80% of the present value of your home, which will be enough in most instances for the purchase.

A property investment can give you rich dividends, but you need to do your homework before investing your hard-earned cash. How much rent can you expect every month vs. the cost of finance? Where and how you can get the maximum rent? The right research and knowledge will help you make the correct investment decision.

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