Investing in Property

Why invest in residential property to let?

There are many positive factors that make buying a property to rent an attractive proposition.

Becoming a landlord or landlady has never been easier thanks to the Buy to Let initiative devised by the Association of Residential Letting Agents.

Are you looking for a relatively stress-free investment over the middle to long term? Have you ever considered investing in a property or properties to let?

High Demand for Property

The aftermath of the recession, changing working practices and a general desire for flexibility, have brought renting back into fashion. Around two million households now rent their homes through the private sector, and more and more investors are being drawn to the returns on offer. These can be as much as 10 - 12% (gross) in some areas, although this is not guaranteed.

What is Buy to Let?

Buy to Let is designed to stimulate growth in the Private Rented Sector by encouraging private investors to take the opportunities given by low, highly competitive interest rates, and the reasonable certainty of sustained capital growth over the coming years.

Lenders viewed borrowing money to purchase property as a commercial venture and as a result, many Investors found it difficult to take advantage of the investment opportunities available. However, since the launch of the Buy to Let scheme in September 1996 by A.R.L.A. (Residential Letting Agents), this has become a favoured and easily available investment.

So why the change of heart? Increased confidence in the housing market has helped, as has the surge in demand for rented property. The 1988 Housing Act de-regulated the market and created a legal framework that is fair to both landlords and tenants. Lenders have also been willing to amend their lending criteria and lower the interest rates they charge, because of the presence of professional letting and property management agents to guide landlords through the complexities of the rental market.

Removing Obstacles

In the past, anyone who tried to rent their property faced a surcharge from their mortgage lender, and could find themselves paying as much as two or three percent over the standard variable rate. They would also have to have substantial income behind them, because lenders were unlikely to take potential rental income into account when assessing suitability for a loan.

Investment mortgages makes investing in property a real possibility for many people, by giving them access to specifically designed mortgages at realistic interest rates.

Capital Growth

By investing in the Residential Property Market, you could experience gross yields of between
6 - 9% on rental returns, as well as the prospect of future capital growth.

The average gross return in the UK at the present is about 8 - 9%. Like all good investments, the key to success is buying the right property at the right time. Do that, and you can easily achieve the high yields we mention.

With the expectation of the UK Rental Market growing in the next ten years from 11% to over 20%, there is a strong demand for more Investment Landlords. The incentives to buy have seldom been better. Interest rates are lower than they have been for many years, and there is little indication of any sharp rises.

The latest figures have revealed that property prices in England and Wales grew between 15 - 25% during 2001 and 2002, as the lowest mortgage rates for thirty years has fuelled the house-buying public into action.

Good News from the Tax Man

There is a major tax benefit for individuals renting out properties. All income from UK property is treated as the profit of a Schedule A Business. This means that landlords can add up all their rental income, deduct their property expenses and pay tax only on the surplus. In addition, if losses arise, they can normally be carried forward and set against future Schedule A income.

Naturally, if you are thinking of becoming a landlord, you should take expert advice on the tax consequences and on how to keep accounts.

Please note that income derived from letting your property is subject to UK tax whether you are resident in the UK or overseas, and must be reported in your Self Assessment Return.

Choosing Your Property

Before you apply for an Investment Mortgage to buy your property (which in many cases will be a second mortgage), you will need to consider the type of property you are looking for and how easy it will be to let; e.g. Studio / Flat / House, number of bedrooms and primarily, the area.

It is important to remember that for an Investment Mortgage, you will require at least 20 - 25% deposit and a minimum of fifteen years before your retirement (this will ensure that your mortgage repayment is no greater than your rental income). As an example - to purchase a property worth £80,000 you will need a deposit of £12,000 to £20,000.

Also an important factor, once you have decided to invest in a Buy to Let property, treat the investment as you would any other investment medium to long term. Homes & Co of Romsey Residential Letting Agents will be pleased to offer sound advice as to which properties are in short supply.

What Income can I Expect?

This will depend on size and location - although recent times have senn substantial growth, a realistic expectation could be 12% of the capital value of the property. Gross rents should be between 125 - 150% of the monthly mortgage repayments (for example: if your mortgage is £300 per month, you should be looking to receive a rental of approximately £400 - £450 per calendar month). Please also bear in mind the costs that you will incur, such as insurances, agent's fees, maintenance costs and mortgage protection should you decide to contribute.

Why use Homes & Co of Romsey?

As Residential Property Agents and Property Investment Specialists, handling Tenants and Landlords requirements for nearly ten years, the company has become a very successful Letting Agent in the Romsey area, with a reputation based on quality of service and customer care. Being strategically based, we are able to successfully deal with the relocation of personnel for all major UK and overseas companies.

If you would like to generate extra income with total peace of mind, Buy to Let with Homes & Co of Romsey Residential Lettings, provides the ideal solution. Our experienced staff will identify the most lucrative properties in the locality, and provide professional, sound advice and support. Finance can be arranged through our mortgage advisor. Please telephone 01794 518771 to arrange an appointment.

Your home is at risk if you do not keep up with repayments on a mortgage or other loans secured
on it.

Your home is at risk if you do not keep up repayments on a mortgage or any other loan secured on it