About Buy to Let
The term buy to let refers to the purchase of a property that will be let to another person or persons. The aim of Buy to Let is that the rent exceeds the monthly mortgage payments. When the income (rent) is greater than the expenditure (mortgage plus other costs), then it is a worthwhile investment. There are number of reasons why people invest in property. Some of these include, long term investment, an alternative to a pension fund and because it tends to offer better rates as opposed to traditional savings. Whatever the reasons, the underlying fact is that the return on investment tends to be highly positive.
Choose A Strategy
In considering Buy to Let in Basingstoke, it’s wise to choose a strategy. By this we mean do your research and then choose your target market. Some of the main factors to consider in this process are location, target audience and impact of any major economic changes. For example if you choose a location close to major universities, you may consider choosing a strategy of HMO’s. This is because there will be constant demand for single rooms by students. At the same time, there could be many head offices and service companies in that area, so you may choose a strategy for 1 or 2 bed apartments, targeting young professionals. Whichever strategy you choose, look at the needs in that specific location. Get this right and you will minimise void periods and maximise rental income.
Do the Math
With any investment the figures must stack up. Whilst you should bear in mind in your calculation whatever annual income is earned from the property, allow for at least one void month per year. In the buy to let world many landlords and mortgage lenders will consider the yield.
Yield – This is the % of annual profit (rent minus mortgage) divided by the total outlay, (mortgage deposit plus fees). The yield for a worthwhile investment should exceed 7%.
So for example: property costs £100k and you put £20k deposit + £2k fees, total outlay is £22k. If the monthly mortgage is £334 and the monthly rent is £650; monthly income is £316 (annual gross income is £3792);
yield is % of 3792 / 22000 = 17.2%
Most mortgage lenders will lend on the basis that the monthly rental income is at least 125% of the mortgage (interest only) repayments. However, get advice from a mortgage expert, preferably a whole of the market broker. Let us offer you more help and guidance on your buy to let experience.
We work with Town Centre Mortgages
Town Centre Mortgages offer a Premier Mortgage Service which involves a 10 step process, whereby their expert adviser will take care of everything for you. This involves a full mortgage and protection review providing advice not only on which mortgage to choose but also on how to best protect your home, family and income should the unexpected happen.
Town Centre Mortgages is part of one of the UK’s leading independent award winning mortgage and protection brokers.
We can help
Whether you are looking to purchase one buy to let property or have intentions of building up a larger portfolio, we have a team of people who would love to speak with you. We have established long term trusted relationships with key contacts, including mortgage advisers, sourcing agents and experts who can help with strategy. We can provide a complete solution for your entire buy to let requirements.
For further information on investing in properties to rent in the Hampshire area, call us 01256 465 300.