Why Buy To Let?
Buy to let; Buy to let is often the first move that many stand out investors make. Demand for property continues to grow within the UK, particularly with the younger generations choosing to rent a property before buying their own. The opportunity for a constant and steady income comes from an assessment of the properties ‘rental yield’. Summed up quickly, rental yield is the amount of income that can be taken – the most common calculation used to assume the rental yield potential of each property uses this sum
“Yearly rental income ÷ purchase price + refurbishment costs x 100 (to get a percentage figure)
Applying this rule means that you can assess multiple different properties and compare the rental yields of each to decide on the right purchase for you! An accurate assumption of annual income costs from this type of financial venture can often provide the perfect substitute or indeed addition to a pension plan.
It is also worth noting that buy to let properties can be bought with a particular but to let mortgage – opening up this area of property investment further. A buy to let mortgage does, however, come with some differences when compared to a normal residential property mortgage. These differences are often:
- Most buy to let mortgages are only offered on an interest-only basis – this means that the monthly costs will only cover the interest part of the mortgage and the capital debt will stay the same but need to be paid off before the end term of the agreement.
- A buy to let mortgage often requires a higher than normal deposit amount on a residential property.
- Buy to let mortgages are more of a risk to the lender so come with higher interest rates than residential mortgages.
A popular way to increase profit margins within the buy to let industry is to invest in properties suitable for multiple occupants, ie renting out individual rooms rather than entire houses. HMO’s (houses of multiple occupations) offer landlords many advantages, one of these being that if one tenant moves out there are still the other tenants to keep the money coming in. Another advantage of an HMO is that a landlord can often charge more overall for the property than they could if it was a single lease property, thus increasing their income rental yield.
Both HMO investments and single lease investments offer risk, but with risk can come huge pay off – For more information on the properties we offer, please get in contact today.