Things York buy to let property investors need to consider

Growing numbers of investors in York buy to let property are attracted by the higher rate of returns they can expect for their money when compared with other asset classes.

However, it’s crucial that investors do the right things to ensure that their returns are as good as they can possibly be.

York's leading letting agent Redmove can help York buy to let investors prosper

York’s leading letting agent Redmove can help York buy to let investors prosper

This is the Redmove, York’s leading letting agent, guide to helping property investors become a successful landlords – it is not, as many will believe, as easy as you many would have you believe and this guide is aimed at being a ‘reality check’ for what investors should consider.

Obviously, with years of experience in helping York property investors run effectively their property portfolios we are always willing to offer help and advice – having a letting agent really does help prepare for the day-to-day headaches that can occur.

The main reason for this is that anyone investing in rental property is also creating a business so professionalism and commitment are key for success.

York buy to let property

There has been a resurgence in the enthusiasm for buy to let property, particularly in York, because the criteria means that lots of people with the financers can enter the market fairly cheaply.

Essentially, all a buy to let investor needs is a big enough deposit to buy a property and get a buy to let mortgage. They then install tenants and earn an income from the rent and enjoy the capital appreciation as the property value increases.

Helping investors into the market is a growing financial services market for the sector which is seeing new financial products being added on a weekly basis.

Many of these buy to let mortgages are at very low rates though anybody thinking of taking on such a mortgage should be aware that interest rates are likely to increase at some point in 2015 and they need to know that they can withstand any jump in mortgage repayments.

It’s important to realise that mortgage rates have remained at 0.5% since 2008, when the financial crisis struck, which means that they will inevitably rise again – a prediction which has also been made by the Bank of England.

But to let mortgage fees

Alongside this issue of interest rate rises is that buy to let mortgages come with fairly large fees, if these fees are added to the mortgage they can substantially push up the cost of the mortgage itself.

Most buy to let mortgage fees are charged as a percentage of the agreed loan but even with flat fees the figure may run to £2,000.

The most effective way to incur a lower fee is to offer a higher deposit, for instance a 40% deposit with some building societies will come with a £994 fee.

While that is a more agreeable figure than the flat fee, it should be understood that if the fee is added to the mortgage and the mortgage is, say, £150,000, then the actual fee repaid over the deal term would be £7,594.

We could also highlight another similar deal from a buy to let mortgage provider who is offering a five year fixed rate at 3.65% with the same fee – but over the five year term this would equate to a £28,370 additional cost.

The obvious message for buy to let property investors in York is that if you can afford to pay the mortgage fee then it would be a cheaper proposition to do so up front.

Increasing demand from tenants fuels buy to let

It helps that there are other factors underpinning the vibrant buy to let sector in the UK, especially the York buy to let property market, such as an increasing demand from tenants for rental properties, rising rents and affordable house prices for investors.

However, as we have stated before on the Redmove blog, research really is key to understanding the market and making a successful buy to let investment.

This means that potential investors need to look beyond the benefits and profits they could make and appreciate the risks they could be running too.

Potentially the biggest problem for anyone looking to put a sizeable amount of cash into a buy to let property, and this will include those people thinking of cashing in their pensions from April this year, is that their capital will be tied up with a property that may well fall in value.

In addition, they cannot then get their hands on their capital until they sell the property.

Potential property investors also need to appreciate that buy to let mortgage lenders are generally looking for the rent you charge to cover 125% of the mortgage repayments. Most finance deals are now looking for at least 25% of the deposit to get the best buy to let mortgage rates.

York buy to let property investments still have impressive returns

There’s no doubt that buy to let property investments have paid off handsomely for many people around the UK mainly through the rise in property values and in finding good tenants who pay their rent regularly.

Indeed, it might be a worthwhile experience going onto some of the online landlord forums and asking for some honest advice from people who have been in the industry for some time.

Be aware that doing this may invite people to be too honest to the point where they put you off from investing in buy to let property!

The next most important consideration for anybody thinking of buying investment properties to rent out is to choose a promising area. This does not mean buying a house in the cheapest area possible, it might not even mean buying a house in the town where you live.

Part of your research will uncover where the demand from tenants is and that’s a demand you should be trying to meet.

If this means there is strong demand from students, for instance, then you’ll need to buy rental property close to a university or if there’s demand from families then you need to buy near to good schools.

While there are some obvious attractions for buying a property in an area you know well, or one that is close by, it may not mean you will enjoy the best returns on profits by doing so.

Calculations to consider when buying York buy to let property

Property investors also need to calculate whether they can afford for the property to remain empty and no-one paying rent. These are known as void periods and your calculations for determining whether a property will make for a good investment is to reckon on the property itself generating 10 or 11 months of rent; many people who have been investing for years will always recommend that you never work out these figures with a full year of rent being paid.

Potential buy to let investors should also spend time shopping around for the best mortgage deals available for their rental property and, if possible, use the services of a specialist mortgage broker.

So while this Redmove guide to things an investor in York buy to let property needs to consider before buying is a ‘warts’n’all’ look at the potential for investing, there are still good profits to be made from rental investments – especially if you get a firm such as ours to help you manage your property portfolio.

As the leading letting agent in York, the experts at Redmove can help show you how to boost yield and rental investment profits. Also, if you are interested in investment property in York and want to become a buy to let landlord, then discuss your needs by contacting Redmove on 01904 488444.


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