Buy to Let

Buy-to-Let is a joint initiative by the Association of Residential Letting Agents (ARLA), and the mortgage lenders. The scheme is designed to help private individuals to invest in property to let without being penalised by mortgage surcharges or paying commercial rates of interest. Mortgage lenders in the Buy-to Let scheme will take account of rental income likely to be achieved from a property in assessing how much you can borrow.

Great care should be taken in choosing a property as a Buy To Let to insure it provides the best level of rental income against capital value as not all properties do.

Why Invest in Property

Investing in a residential property that is rented out is now seen as a very secure profitable way of investment. Returns in recent years have been as good if not better than most other investments including the stock market. Because of the nature of buying a property which can be lengthy, it is very much a long term investment and particularly it is a very secure investment. It provides two levels of income firstly the rent itself and secondly the capital appreciation when the property comes to be sold

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What are the returns from letting property?

Gross returns – the rent received before taking account of the cost of letting – such as management fees, maintenance, service charges ground rents and insurance varies between 5% and 10%. This can be less for very expensive properties.

The average rental return in this area today hovers around the 5-7% mark, and capital appreciation is likely to match inflation for the foreseeable future over a period of years.

As a rule of thumb, the gross rents should be between 130% and 150% of the monthly mortgage payments.

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What difference does a Letting Agent make?

Buying a property to let is not the same as buying your own home. Mortgage lenders will want to know that an ARLA member agent has been advising on the selection of properties suitable for letting. This is very important to secure the best investment with rent against capital value.

The experienced agent will know the local market, whether there is a demand for say, two-bedroomed flats, or four bedroomed houses, or for properties close to schools or transport links or secluded properties with gardens and the likely rent for such properties. Also the agent will know the standard of decoration, furnishing, fixtures and fittings required.

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