Property Investment Finance
Property Investment Finance | The Questions You Should Be Asking
Stepping into property investment finance is a major decision and investing landlords need to make sure that they have considered all the aspects that will affect the success of their investment. One key consideration for landlords who are taking out property investment finance is to keep their expectations realistic. Buying investment properties should not be seen as a get rich quick scheme. On the contrary, most property investments take time to mature and landlords should expect to retain a property for several years before it begins to provide a long term return.
In the short term, landlords with property investment finance in place can expect some reward in the shape of rental income from their buy to let property. But even this is not as simple it may appear. Property investment finance may require higher deposits than residential mortgages. Although there are some providers of 100 per cent property investor finance, there are many more with loan to value ratios of 65 per cent to 85 per cent. This means that landlords may have to find a deposit of up to 35 per cent and to tie up that cash indefinitely. Before taking out investment finance landlords need to be sure that they can manage without that money.
Long Term Property Investment
Another aspect of property investment finance goes beyond the issue of securing the mortgage. Landlords have to spend quite a bit before they get a return on their property investment finance. This includes spending on refurbishing and renovating a property, furnishing it, insuring it and perhaps getting professional management. All of these costs have to be considered as part of the property investment finance package.
It is also important for landlords who are taking on property investment finance to be aware of the tax implications of this move. Our understanding of tax issues are as follows: Income on the rental property will be taxable at the appropriate rate for your status. This means standard rate taxpayers will be taxed at the standard rate of 22 per cent and higher rate taxpayers will be taxed at 40 per cent. We do, of course, recommend you check this out with a tax expert.
It is also worth knowing which aspects of your deal attract tax relief. For example, many landlords choose to have interest only mortgages as the interest on the mortgage attracts tax relief. 
This aspect of property investment stands in sharp contrast to residential mortgages, where mortgage interest relief for taxpayers is long gone. It is worth knowing that maintenance of a property attracts some tax concessions though refurbishment does not. There are also tax allowances available for wear and tear. For most landlords, it makes sense to take professional advice on these aspects of property investment finance before proceeding.
As well as these aspects, the factor that will most affect the success of a landlord's property investor finance plans is the let-ability of the investment property. Again, taking professional advice on the right type of property to invest in and the right kind of tenant can reap dividends. For these reasons, a local letting agent is another professional who can assist landlords to make the most of their property investment finance.
