This increase in demand is a reflection of the continuing rising of house prices, first time buyers are finding themselves unable to afford that first step onto the property ladder, many instead are looking for rental properties. Renting gives them the necessary time to save the large deposits often needed to buy your own home nowadays. Students and young professionals struggling to get on the property ladder are becoming ideal target tenants.
Similarly the large influx of migrants from EU member states is further pushing the demand for rental properties, as often they too cannot afford to buy their own home, especially in towns where there is a severe lack of affordable housing. With the new member states of Romania and Bulgaria who now have access to the UK we are expecting a increased demand for rented properties. Since the massive rebuilding program after the end of the last War in 1945 the house building program seems to have lost its impetus despite the ever increasing demand for new houses, despite the efforts of the Government to put pressure on local authorities to find more land for development.
It is easy to see investment in 'bricks and mortar' as a sure fire success, like any investment it must be carefully considered, but in most cases it offers returns you will not find by simply placing your money in a high interest account. With the uncertainty surrounding the future of our pension schemes worrying many of us, our desire to look for secure methods of investment is understandable. A wisely chosen property that meets the demands of those aforementioned target tenants will reap rewards for you as the landlord. Potential investors should always seek the assistance of an Independent Financial Advisor as buy to lets should form part of diversified portfolio and should not be the only vehicle in which to invest for the future. There will always be short term needs as well as long term and other forms of saving for the short term would be more appropriate.
If you are considering the prospect of purchasing a property for rental purposes, now is a wise time to act, as currently lenders are keen to offer very favorable deals, offering greater flexibility to consumers than ever before. Previously Nationwide would only allow a client to have three buy to let mortgages at any one time, but they are now increasing this threshold to a huge ten mortgages per customer, and will extend mortgages up to the value of 3 million pound in individual cases. Many other specialist lenders have seen the light and large portfolios of buy to lets is not uncommon even for the smaller investor.
Greater lender flexibility also means that some banks are offering up to 90% loan to value on property mortgages, leaving you only requiring a deposit of around ten percent. However a larger deposit of around 20-25% can often allow you to secure a far more competitive deal, especially in terms of interest rates, which in some cases can be slightly higher than a standard mortgage rate. Finally many lenders who previously required the rental income to cover the mortgage interest by a margin of 125% are in some cases being far more flexible with this calculation. Finding your way round the many schemes does not have to be a problem seek the advice of an Independent Financial Advisor with the access to the whole of the market who can guide you to the right scheme to suite you circumstances
Buy to lets really shouldn't be dismissed as a money making scheme that's peaked, if you consider the long term prospects and plan your finances thoroughly, they can provide a steady income not just now but years into the future together with the capital growth that you will see in the value of the property.
UPDATED 20/01/2009
In the current credit crunch clients must accept that they will have to find a larger deposit, normally around 30 %, and lenders do not like new build properties and are unwilling to consider most new build flats and apartments where there is a massive over supply in most town centres. As the property market fell in 2008 by nearly 17 % and is forecast to fall by another 10 % in 2009 you can appreciate that lenders are very cautious, and are looking for low risk, low loan to value with rental coverage of up to 140 % of the mortgage interest payments.
In 2009 the opportunity to purchase property at bargain basement prices is there to be taken advantage of, but make sure that you secure your funding before you go property hunting, you need to do your due diligence well in advance of the buying process.
Need some help? call Michael Alexander 0845 2 605 506
