The last Chancellor made buy-to-let a less certain form of investment, especially if the people in your chosen market sector are prone to rent dodging or to leaving rented property with unacceptable levels of damage. But that is not the whole story. Careful selection of what and where you buy can help you avoid both the dodgers and the damagers, while property is far less volatile as a market than the stock exchange, and interest rates continue to be low.
There are some good deals around in buy-to-let mortgages. We’ll try to steer you through the pitfalls.
Demand is good, and could well get better
The demand for good rental property remains firm and is likely to increase. The rise in property prices means that fewer people are able to climb onto the property ladder. Many of those potential tenants are exactly the kind you want for your buy-to-let investment: responsible professional people in receipt of an income that, though not enough to allow them to buy without the substantial deposit they don’t possess, is more than enough to pay the rent. And rising demand means rising rents. The increase in property values when you come to sell after a number of years is icing on the cake.
Interest rates may not be low for ever
There are no immediate indicators that significant rate rises are likely in the near term, but borrowing more than you could afford to repay, were rates to rise very much, is a recipe for disaster. When doing your calculations, don’t plan to borrow right up to the limit. Always include a margin, just in case things move against you.
Be aware of fees
Many lenders will offer deals with and without fees, but it’s worth remembering that the latter is ‘without fees’ in name only. You’re always going to pay a fee, and the only question is: are you going to pay it up front, or as part of your monthly repayments (in which case, the total you pay will always be greater than it would have been if you’d settled it at the start)?
Looking good right now
You should not just accept the first mortgage you are offered and feel grateful for it. There are a number of decent offers around at the moment, and the wise landlord checks out the best available and chooses the one which best fits her or his needs.
If you’re looking to take on a new buy-to-let property, come and see us. We’re here to help you find the kind of property that will give you the best returns.