When looking at investing, any Adviser with sufficient experience will always recommend having property as an investment, to diversify your investment portfolio.
This article will help to make one a seemingly complex issue easier to deal with, my name is Hadi Naqvi, a Registered Individual from Beneficial Mortgages and I have been a mortgage adviser since 2006.
So in this video I will look at the Buy to Let market and help improve your understanding of how to purchase and build up a portfolio of rental properties in an easy to follow guide.
The Buy to Let Market has been an ever changing market giving conflicting messages regarding taxation and where to invest. Changes to Stamp Duty and the Mortgage Interest Relief Allowance, coupled with lenders slightly complex mathematical calculations to if a property is deemed self-sufficient has led to some people looking at the rental property market as something to stay away from.
This is not the case, and should not prevent people from Investing. The traditional way of purchasing a Buy to Let property does require a higher deposit than a residential purchase which is 25%, however as the purchase type is not regulated, the assessment is based upon the property rental income and if it is significantly more than the monthly mortgage payment. Some lenders will stipulate a minimum income of £25,000 earned by one of the applicants to be able to cover any rental void periods – the periods where no tenants are in the property.
In general, purchasing a property as an investment is a lower risk option, as in theory, rents increase over a period of time and generally when there is a crash in the property market, like in 2008, people generally look to rent as oppose to buying a residential property.
There are risks to purchasing and maintaining a rental property as there are with any investment, but these can be protected against with proper planning and having the right team in place. One of the factors which makes people shy away from investing in property are bad tenants and the issues of going to court to remove tenants who have not paid. If you have a fully managed option with reputable and registered letting agents, these factors will be minimised as they will be responsible for going to court and replacing the tenants straight away. With the right insurance products, such as rent guarantee, this will minimise the impact caused by the loss of rental income. Further to this will be general repairs to the property to bring it up to a lettable standard, so ensure that some money is kept aside for emergencies.
A crucial point to understand is that as an investor, you are not limited to geographical locations, or even the type of property, so you could purchase a Take Away in Bristol, but you live in London. As long as you have an ability to be able to recover rental income, either directly or through a management agent, the possibilities of growing your property portfolio are unlimited.
This is just the basics and I hope that you have felt at ease, there are as with everything, different aspects to the Buy to Let market such as Limited Companies, Inherited Properties, Accidental landlords and Let to Buys which will require detailed advice on a case by case basis, so click the link if you would like more advice or contact me on the number displayed below.
Remember when it comes to mortgages, bring them to Hadi.