Buying to let
By Gordon Miller, Property Writer
Over the last decade, buying-to-let has become increasingly popular and is seen by many as the safest place to invest money. Brand new properties offer special advantages for an investor.
They’re the obvious choice for a landlord wishing to attract a high calibre of tenant, since new-build properties can be furnished quickly and easily and are easily maintained. What’s more, the development that you are buying from may well have a furnishing rental package, which generally includes everything that a tenant will expect and often a whole lot more. If you are a first-time buy-to-let investor, check out developments that offer special incentives designed specifically for you.
Before embarking on a property investment, it is crucial to decide how much you have to spend and if the property is a short-term or long-term investment. An established city centre with good amenities is a safe bet for a short-term investment but for a long-term investment, areas that are being regenerated will offer higher capital appreciation. Speak to local estate agents to get an understanding of what is popular in their areas and how much you can expect to rent the property out for.
A rental yield of 5-6% gross is considered a viable proposition – calculate your yield by dividing the price you paid for the property by the annual rental income eg if the property cost £100,000 and you earned £5,000 in rental income a year, the gross yield is 5%. However, the net income is the crucial figure because it takes into account your overheads and outgoings, which include service charges in apartments, estate agents fees and upkeep of the property. Remember too that you will have to pay income tax on the profit so it is worth using the skills of an accountant who will be able to advise you on offsetting costs.
When all is said and done, don’t expect to make your fortune from the rental income but with the average capital appreciation consistently showing healthy returns, it is clear that buying to let is here to stay.
