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Thanks to a moribund residential mortgage market, many more people have decided to rent in the UK and for many landlords that has meant the chance the up rents and cash in on the current private rented sector boom.
If you are a buy-to-let landlord who has seen the opportunity, you may now earn extra money each month. That's great – a good property investment should move with the market, but have you considered the affect on your buy-to-let mortgage?
You may have not thought about your loan for a while – you may have taken out a cheap rate some years ago and have since moved onto your lender's standard variable rate without noticing. SVRs are low right now thanks to the 0.5% base rate, and many people who have both buy-to-let loans and residential mortgages have been happy to stick with them. But could you get hold of a better mortgage now you have a better rental yield?
Because buy-to-let mortgages are all about rental yield – the bigger the yield, the better the loan. So if you have increased the yield on your property by a few percentage points then you may be in line for a cheaper rate.
Talk to a buy-to-let mortgage specialist about your mortgage. You may find you could get a cheaper loan which means even more rental profits over the long term – all it takes is one quick phone call.
To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog
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Many people think that once they get hold of a property and a buy-to-let mortgage then everything will be set for them to start making some money each month – but as a landlord you need to protect yourself and your business.
You must have the right insurance because buy-to-let is a business and that comes with a lot of baggage. It comes with hundreds of sheets of paper to sign, countless rules and regulations and it comes with risks that need to be protected against.
For example, if you hire builders or tradesmen to fix your property up they effectively become an employee of your business. So should they hurt themselves while working for you what do you do? They could claim for hundreds of thousands of pounds so without the right insurance your venture could fail before it begins.
The same goes for letting agents, they are also employees of your business. So how would you chase them through court if they withheld rent? It happens all the time, but it could be a lengthy and expensive process to bring a rogue agent to justice so again you need protection against that.
You will also have tenants in your buy-to-let property and they are also your responsibility. What happens if a faulty wire hurts a tenant? What if the roof falls in? What if the boiler is faulty and explodes? These are all hypotheticals but are all within the realms of reality – and if you are not covered for all eventualities it could cost you a fortune.
Talk to your buy-to-let mortgage adviser about taking out professional landlord insurance. It's different from regular insurance because it protects your business as well as your property. But then, like all good insurance, it could save you a fortune in the long run.
To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog
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It is a fact of life that the tough economic environment has forced more people to rent – which means those who have the means to invest in rental property have the chance to cash in on the recession.
Alan Ward, chairman of the Residential Landlords Association says: "It’s inevitable, in a recession, that more people turn to renting rather than buying. For one thing, fewer houses are being offered for sale and new-builds are also down dramatically with only 60,000 built last year – so people who have no need to move are renting instead."
On top of restrained housing supply, the availability of mortgages and the level of deposits required, which is usually around 20%, means first-time buyers are staying in rented property for longer.
Ward adds: "For some, it’s a lifestyle choice to rent rather than pay for a more expensive mortgage. Typically £650 would pay only the interest on a £160,000 mortgage rising to around £1,000 a month on a repayment. This equates to the rent on quite a large property outside London – and that would still only represent a house at £200,000 – so renting can make financial sense."
So there are more people looking to rent. This means if you can find a good property you can be sure of profits – if you get hold of the right buy-to-let finance. Having an expensive mortgage, or one with large fees, or even inflexible caveats might mean the difference between renting failure and success.
Talk to a buy-to-let mortgage expert about taking out the right mortgage to take advantage of a rising rental market. If you can find a loan that fits with your finances and fits with the rental income then you could do better than most during these tough economic times.
SOURCE: RLA, 02/03/10
To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog
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More Britons are choosing to rent from a buy-to-let landlord as mortgages remain an elusive dream for millions – and this means there has never been a better time to invest in a livable property.
According to the Department of Communities and Local Government, The number of owner occupier households decreased from a peak of 14.8 million in 2006 to 14.6 million in 2009. At the same time, the proportion of social renting households is also in decline, falling from 19.5% in 2001 to 17.7% in 2007.
That leaves a big hole because while the number of owned houses and social homes are declining, people still need a roof over their heads. The Government says 41% of private renters rely on the private rented sector for their long-term housing needs and have no intention of purchasing a home.
Nigel Terrington, chief executive of the Paragon Group says: "The private rented sector's importance to the UK's housing needs is growing annually as increasing numbers of people decide to rent – owner-occupation has been in decline since 2003 and we believe that this trend will continue as potential buyers are either unwilling or unable to step on the housing ladder."
While there are less homes, there are more people – the Government says the UK's population is forecast to grow from 61 million today to 71.6 million by 2033. This means those who do invest in property will not have to look very far for tenants.
Terrington says: "There are growing numbers of single person households, economic migrants and students, and these groups all have a greater propensity to rent rather than buy. People are also getting married and starting families at a later age, so the average first-time buyer age is creeping up, while affordability is a growing problem for most people that want to get on the housing ladder."
SOURCE: DCLG, Paragon, 26/02/10
To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog
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You have probably heard about all the good things about buy-to-let mortgages but what are the risks? What do you need to be cautious of when investing in property?
The first thing to remember is that your buy-to-let loan and your residential mortgage are not mutually exclusive. If you fall behind with your residential mortgage payments then you may put your rental property at risk, and vice-versa. That is why it is so important to get professional mortgage advice before taking out a rental loan – if your loans can't work together then they cannot work at all.
You also have to know that you need to be able to show that your rental income covers 125% of your mortgage repayments in most cases. This means choosing a success property in a good position is as important as getting an affordable loan – picking a property that doesn't attract renters means you will not be able to pay your loan. So it's important to have a good estate agent, to do your homework and make sure for certain that the property you want will deliver results.
Just like a residential loan, if you don't pay the mortgage you risk having your property taken from you. Of course, if you have tenants living in your property that just adds to the responsibility – being a landlord means making sure you are comfortable but also your tenant is comfortable too as they are your lifeblood and without them you can't pay your mortgage.
You also have to be sure that you have a good letting agent because if your property is empty for any period of time, you will suffer. Even if you have a prime property in a great position without a good letting agent no one will know its available for renting and you will be forced to pay the mortgage from your own pocket. Buy-to-let is a whole process, and all the aspects of that process need to work properly for your investment to succeed.
Being a buy-to-let investor is a lot of work – on top of all this are reams of regulations and forms that have to be filled in to satisfy that you are a legal and safe landlord. But with a good buy-to-let mortgage and a good financial plan all the other problems will not seem as big and will be a whole lot more manageable. Talk to a buy-to-let mortgage adviser about getting on the right track with the right buy-to-let loan.
To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog
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Residential property has been a better investment than cash, shares or bonds over the past decade as landlords in the UK enjoyed returns of nearly 200%.
According to Halifax, UK house prices were up 105% in the 10 years to December 2009, while buy-to-let landlords could have made total returns of 187% including rent. Only by investing in precious metals like gold would you have made more from your money over the last ten years.
The UK stockmarket was only just up over the decade, but after factoring in inflation investors still failed to make a real return. As a result, a buy-to-let mortgage was a better investment that stocks, funds, pensions and ISAs over ten years.
Martin Ellis, group economist at Halifax, says: “Property has still delivered good long-term gains despite recent turbulence. But the poor performance of UK shares, which registered one of their worst decades ever, would make people think harder whether they want to invest in equities”.
So what about this decade? Will buy-to-let investment top all others to be the most profitable UK endeavor? We just don't know – house prices are unlikely to rise as they have over the last ten years but many people will spend the next decade renting rather than buying a home as debt and a slow economy continues to hamper the mortgage market.
Buy-to-let investment is a personal choice – it depends on a number of factors and while the figures look enticing it is still risk. Talk to a buy-to-let mortgage adviser about the pros and cons of property investment over the next ten years.
SOURCE: Halifax, 19/02/10
To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog
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A good landlord who has taken some good buy-to-let advice will probably be making a tidy profit each month – but what is the best thing to do with this extra money?
Because mortgages are still hard to get hold of, and because house prices have stood up to the recession, many people are be forced to rent. So there is more rental income out there and more landlords are making money on their property investment. But what's the best thing to do with that money?
To know the best answer for your situation, you need to talk to a buy-to-let mortgage expert. They are experienced in managing money and making sure buy-to-let investments work as well as they can.
It might be that you should pay the money back into the mortgage, overpaying each month so as to reduce your debt. It might not be the best option for everyone, but it's a great way to reduce debt and improve your chances for a better mortgage in the future. It might even be prudent to invest into the property itself, improving and renovating it to make it more attractive to renters and to allow you to charge more rent.
Or it might be better to invest your money elsewhere. As well as knowing all there is to know about buy-to-let mortgages, a good adviser will also know about where the best investments are right now. It might be an ISA, an investment fund or even a pension – everyone is different and that's why you need expert advice.
Alternatively, it might be best for you to look to increasing your property portfolio. Again, it is not the right choice for everyone but a good adviser will know whether it would benefit you to invest in another property and step up your rental business into the next gear.
To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog
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People invest in a buy-to-let property because they want to make money – but if you are not making money it might be time to do something about it.
Recent figures from LSL Property Services found that, if average rental income and property prices kept on the trajectory they were on in January, a landlord would make a total return of £27,500 on a typical property this year.
That's a better return than most investment funds, and certainly better than any savings products that are on the market. But are you making a decent return on your property?
It might be down to the state and position of your property. But there are things you can do about that – talk to your buy-to-let mortgage adviser about taking money out of your property through a loan or a remortgage so as to be able to renovate the property and make it a sought after home. Investing in your home is a sensible, viable option that, with the right advice, will lead to better rental yields.
But it might be that you are simply paying too much on your mortgage. You may have got your loan several years ago and have now lapsed onto a more expensive variable rate. If this is the case and you need to find a mortgage that doesn't sap quite so much of your rental income, talk to your mortgage adviser. They will be able to help you scour the whole UK buy-to-let mortgage market and hopefully find you a cheaper loan.
Don't be content with just getting by with your buy-to-let loan. House prices are rising against the odds and rental income is high. There is also a lot of demand for rental properties while so many people are unable to get onto the housing ladder – all this spells rental success. So make sure you're taking advantage of this purple patch with a mortgage that works.
SOURCE: LSL, 15/02/10
To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog
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New figures from LSL Property Services has found that rental yields fell in January but property prices kept on growing, making it a mixed month for landlords.
LSL found that yields on residential property fell by 0.5% to 4.75% in January. It says this is the lowest level since August 2008 and a big fall from when yields peaked at 5.1% in March 2009, at the point when house prices reached the bottom. By contrast, house prices are 3.3% higher in January than they were in December 2009.
This yield drop followed a period of more intense activity in the housing market as buy to let investors rushed to benefit from the stamp duty holiday, so the amount of rental properties on the market ballooned. But now the stamp duty break has ended it might be likely that rental properties become more popular amongst those who simply cannot afford to get on the property ladder now that stamp duty has returned to its previous levels.
Total returns for buy to let landlords in January, combining rental income and house price growth, were 16.7% on an annualised basis. This means a landlord would make a total return of £27,500 on a typical property this year.
David Brown, commercial director of LSL, says: “Landlords moved fast to add to their portfolios before the stamp duty holiday ended in December. Sacrificing a few pounds a month in rent to save themselves an average of £1,600 tax on each property bought was a very shrewd move as it would take years to recoup that saving through gradual rent hikes. Now the holiday is over, it’s crucial landlords don’t lose sight of rents. Total returns look very enticing at present as house price increases contribute a larger share of a landlord’s profit.
"But, landlords should look to balance their returns between a steady rental income and long term capital growth. Focusing on one at the expense of the other is a risky investment strategy. Over the long term, investment in buy to let must be underpinned by a strong yield.”
SOURCE: LSL, 15/02/10
To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog
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More Buy-To-Let landlords are feeling confident about the prospects of their business over the coming months, according to Upad.com.
The website has found that 57% of UK landlords feel more confident about the buy-to-let market for February 2010, compared to January. But survey respondents highlighted lingering issues surrounding arrears and finances. Statements included. Some comments included things like: “Rental is stable but arrears are mounting due to job losses", or “More confident of the lettings market at the lower end".
For the 43 percent feeling less confident about the market, some of the comments included things like: “There is so much competition. Too many properties around and houses lying empty" and “I am wary of the damage high interest rates will do to UK property".
James Davis, founder of Upad says: “For the third consecutive month since we launched the Index, landlords have highlighted their growing confidence in the market. Whilst it’s not a huge majority, I do believe we have turned a corner and that we will continue to see a greater number of new entrants to the sector, as banks begin to open their doors to lending, and renting becomes increasingly popular.”
It seems like there are landlords out there who are happy with their buy-to-let business, others who are not so. Those who are unhappy worry about the availability of mortgage finance, being able to collect enough rent to cover their repayments and worry about the possibility of having an empty property. They worry about getting a lower rate, they worry about the growth prospects of their investment and they worry about the costs involved with running a buy-to-let business.
All those fears can be allayed with the help of a good buy-to-let mortgage broker. They can help you find the right loan that fits with your finances and they can help you find the right insurance so as your property investment is safe whatever the rental conditions. They will do their best to find the cheapest rate and they will help any budding investors keep within a budget and on track, financially.
SOURCE: Upad, 09/02/10
To keep up with the latest News and comment on the UK buy to let market visit the Buy to Let Mortgage Blog
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