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Buy-to-let basics

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06/06/2012
Buy to let is just one form of investment vying for your attention as you try to make your money grow.

Why buy-to-let?

Buy to let is just one form of investment vying for your attention as you try to make your money grow. It has grown in popularity over the last 15 years for a number of reasons. Property is seen as a stable long term investment alongside more volatile ventures such as the stock market.

Landlords have a tangible asset, something they can see rather than a slip of paper telling them what miniscule proportion of a company they own.

Even when house prices are going through stale periods or declining as they are in some areas at present, this doesn’t matter unless you are planning to sell the property. As long as the rent is still coming in, you should be able to ride out the storm until prices rise again.

Demand for rental property is flourishing in the UK. Socio-economic factors such as an increasing population, rising divorce rates and a developing trend for single occupancy mean that demand for rental property continues to thrive.

Throw constants like university students into the mix and you too can tap into this potential market if you do your homework.

Types of buy-to-let mortgage

As the buy-to-let sector has grown, one of the benefits is the increased choice of products available to potential investors. More providers have entered the arena, with specialist lenders sitting alongside the bigger banks and building societies.

Traditionally, buy-to-let mortgages were dominated by variable rate products, but as the market has grown lenders have diversified their offerings to include fixed rates, discounts, trackers and flexible-rate mortgages.

Each have their own benefits, but if you are starting out, you may like to plump for a fixed-rate mortgage to help with your budgeting.

The majority of buy-to-let mortgages are only accessible through intermediaries, so you may like to enlist the services of a mortgage broker if you want to choose from the whole of the market.

Buy-to-let investors

Long the domain of wealthy investors with a portfolio of properties, the buy-to-let sector is now also peopled by landlords who may only own one or two homes.

Some even use the rental income from their buy-to-let properties to cover the mortgage and make their money from the capital appreciation of the buy-to-let properties.

Whatever scale you operate on, the same values remain. Research your audience and what they want from a property, play by the rules and be patient. Buy to let won’t result in overnight success, those in it for the long run tend to be rewarded.

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