Buy To Let Guides

The buy to let industry has exploded over the last couple of years due to a more lucrative option for investors in light of the current stock market downturn. Yields are forcasted to rise to 10% with the added bonus of strong capital growth. In addition, with interest on buy-to-let mortgages at below 6%, the growth in an initial investment geared at 80% over 3 years can be higher than 30% (even accounting for stamp duty and administration costs).

Although the rental market has grown significantly in the last few years, it is nowhere near capacity with housing professionals and the Government are forecasting further growth in the rental market.

• Historically, property values have seen strong growth and forecasts still show potential capital growth as encouraging
• Low cost of borrowing likely to continue
• The advantageous gearing effect of financing with a mortgage
• Increase in rental demand, with the Government predicting an extra 3.8m homes will be required between 1996 and 2021, of which 1.4m would probably be rented
• The rental market likely to remain bullish as prices often too high for many first time buyers, who are choosing instead to rent.
• The Housing Act 1988 de-regulated the rental market and provided a fairer legal framework for tenants and landlords.
• So, the rental sector will continue to grow. However, investment in property comes with some risks.

What should you consider when investing in property?

Ensure you buy a property that provides the best mix of stable and lucrative rental income, and a strong capital growth potential. For the majority of us, we will not find this property in the area in which we live. If you are not sure, take professional advice, but in principle:
Choosing the right type of property is essential, but can be difficult for those who do not understand the market

Location is important, both for attracting tenants to ensure the void periods are minimised, and for capital growth. Property can take time to buy or sell, so you do not have instant access to your investment

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