Have you considered buy-to-let?

Buy-to-let, where you invest in a property to rent out, has been growing in popularity and is increasingly seen as an attractive investment option by many new and existing property investors. In fact, according to lender Kent Reliance, in the past year alone the average buy-to-let return in the UK stood at 13.6%, which is £28,617 in cash terms.

Indeed, despite moves by the former chancellor George Osborne to make buy-to-let less financially attractive, we have seen more enquiries than ever from people interested in investing in property, with some seeing it as a safer bet compared to the stock market with its large fluctuations up and down.

According to a Buy-to-let Index from letting agents Your Move and Reeds Rains, the average existing landlord in England and Wales has seen total returns of 10.2% over the twelve months to May. The Index goes on to say, “In absolute terms this means that the average landlord in England and Wales has seen a return of £18,769 over the last twelve months, before any deductions such as property maintenance and mortgage payments. Of this, the average capital gain (the amount the house has gone up in value) contributed £10,057 while rental income made up £8,712 over the twelve months to May.”

Things to consider

If you are thinking about investing in buy-to-let for the first time, it is important to do things right. You should ask yourself what type of property you want to buy and in what location.  What makes a good rental property is not necessarily the same as the sort of house you may want to live in personally.  Many people renting are young people, who may or may not have their own car, so a house you are renting out ideally needs to be close to public transport, and near to shops and schools.

Just like any other investment, you must ensure that you are aware of the potential risks as well as the rewards, and this is what our professional mortgage experts are there for.  Buy-to-let is something that you should invest in over the long term.  Anybody who has already bought a property will know how long it takes both to buy and to sell, so it is always a good idea to have other savings and investments too.  You must also be able to afford ‘void periods’ the time between when one tenant leaves and the next one moves in, when you may receive no rental income.

Buy-to-let, of course, has associated costs but, due to the challenges of getting on the housing ladder, inward migration and people living longer, demand has never been greater. Although there has been talk around the future of house prices, landlord tax and regulatory changes, rents are expected to rise and, with housing demand still outstripping supply, demand from tenants is also anticipated to increase further.

As a result, despite the recent Brexit vote, in our experience the vast majority of landlords appear to be undeterred by the result.

Finding the right mortgage

There are a wide variety of buy-to-let mortgages and the one suitable for you will of course depend on your circumstances as well as the lender’s criteria. Our specialists are there to talk you through what deals are available and weigh up which one is right for you.   Some buy-to-let mortgages do not even take your income into account, instead they look at the amount of rental income that you are likely to earn on the property.

In addition you do not have to be an existing home owner to get a buy-to-let mortgage, although the lender will want to be 100% sure that neither you, nor a close family member will live in the property.

The perfect storm

There are currently a wealth of opportunities in the buy-to-let sector and it is evident that bricks and mortar remain a sound investment for many investors. In fact, there is almost a perfect storm: mortgage rates at lifetime lows, increasing demand for rental properties from tenants and rising property markets.

Although the world of buy-to-let can seem overwhelming at first, thanks to our market experience and knowledge the advisers at Mortgage Pathways can help to ensure you go into any property investment with your eyes open and get the most suitable buy-to-let mortgage for your needs.

For more information on buy-to-let click here or pick up the phone and speak to one of our friendly advisers today.