Buy to Let tops 5bn
The Council for Mortgage Lenders reported this week that Buy-to-let lending in the UK has just hit its highest level for nearly five years. It has reported that 40,000 mortgages, worth £5.1bn, were advanced to buy-to-let investors in April, May and June, the highest since the third quarter of 2008. This was 21% up on the preceding three months. On a wider measure, Buy to Let Lending Is 19% higher by volume and 31% higher by value over 2012, although this was from a relatively low level. The highest activity occurred during the peak of the housing boom of the autumns of 2006 and 2007, at £12.7bn. The CML said landlords had been taking the opportunity to remortgage their properties during the spring, and were also benefiting from strong demand from tenants. This is expected to continue after the Bank of England signaled continued low interest rates for some time to come. The growth is fueled by relatively high yields from rentals (typically between 4% and 6%) compared to other forms of saving, more availability of BTL mortgages at lower interest rates, and also property price stability – with small increases in many areas of the country, This has all generated increased confidence for investors.
For those thinking of investing for the first time in buy to let, here are some starting tips:
– Research the market
– Choose a promising area
– Do the math
– Shop around to find the best mortgage
– Think carefully about your target tenant
– Don’t overstretch yourself (target yields and remember running costs)
– Consider looking further afield, or improving a property
– Negotiate hard over the price
– Understand the risks
– Decide how much involvement you want to have
Some investors are now professional landlords, and devote much of their time to managing their property portfolio; but the vast majority of Buy to Let investors have normal jobs and will look for a professional agent to help them manage the property. It is crucial that they choose a partner who understands the legal complexities of rentals (especially with regard to managing deposits), who will take care of the property and the tenant, and also provide supporting services such as emergency cover. Make sure that all the staff are properly trained and qualified, and not just the head of department.
If you do the necessary planning and preparation, then the experience can be a positive one and yield significant financial rewards.