Put your personal tastes aside and seek advice on the best properties to invest in. We are happy to provide this input for you free of charge. We will give you information on the level of demand in different areas and steer you away from expensive mistakes.
If you prefer to buy close to home then you’ll probably know the local market but if you’re flexible on location then we can offer plenty of advice based on our experience of the North East.
You should consider the popularity of the area, transport links, local employment, schools and attractions. Buying in the very best areas obviously means you’ll pay top prices but will get a high rent. But buy in a slightly cheaper location and the rent can still be almost as high, giving you a better return on your investment.
2. Choose the right mortgage
A Buy-to-Let mortgage is assessed on the rental income that the property is likely to generate, not on your own salary income like a traditional mortgage. Lenders will typically want the rental income to be at least 125% of the monthly mortgage payments (assuming an interest only product). So if your mortgage payment is £400pm, the rent would need to be at least £500pm. You may be asked to increase your deposit if the figures don’t quite work. Deposits required vary from 15% to 30%, the higher your deposit, the better the interest rate offered.
Most lenders also want you to be employed and have a reasonable earning capacity to act as a cushion. Look out for large arrangement fees and make sure you can cover the repayments should your tenant stop paying or if the property is empty in between tenants. If you’re not a cash buyer – no problem! We can recommend a mortgage broker to help you find the best deal for you.
3. Look to re-cycle your deposit
We always look for properties which look “cheap” in comparison to others around them. This could be because the property is mis-priced, requires refurbishment work or simply needs a little updating. The easiest way to make money in property is the price you purchase it at NOT the price you sell it at.
By looking for opportunities when buying, it may enable you to recycle your initial deposit, refurb and buying costs when you refinance. This means as little money is tied up in the property as possible, allowing you to continue expanding your portfolio.
4. Calculate both short and long term returns
Renting is a medium to long term investment, with the expected increase in the property value being the “icing on the cake”. Remember to factor in costs that will occur regularly, such as repairs and maintenance, insurance, mortgage costs etc.
We believe the best strategy is to choose areas with good capital growth as well as a strong rental return. The highest yield doesn’t always provide you with the best return!
5. Decide how you want your portfolio managed
Consider the current demands on your time and how much you want to get involved in the day-to-day management, with all the extra hassles this can involve. We can either find you a tenant or fully manage your properties and offer a variety of packages to meet your needs.
If your property needs a full redevelopment or slightly updating we also have an in-house refurbishment department who can do this for you.