Friday, June 18, 2010

TPS Ltd Buy To Let Formula

Questions and Answers on Buy-to-Let investment :

Thinking of investing in rental property? Below are answers to a number of key questions people ask about buy-to-let property investment...
Why should I consider buy-to-let property?
What type of buy-to-let properties should I consider?
How do most buy-to-let investors raise finance?
Am I too late to get into property if I am about to purchase my first property?
House price increases?

Why should I consider buy-to-let property? :

Many people started investing in buy-to-let property because they became disillusioned with investment returns in stocks and shares, mutual funds, unit trust and private pensions. Many invest to create an income to supplement other retirement income, or even as a main source of retirement income. Other investors have been attracted by high capital value increases, as the housing market has strengthened slowly from 1996 and very strongly from 1999 onwards. The main attractions of investing in property are:

You can leverage your funds to 75% plus, giving greater exposure to capital value increases (unlike stocks and shares);
It is an asset that is real, you can see it, use it, rent it, improve the value of it;
Long-term capital value has risen by 8% per year on average – this is over the last 25, 50 and 100 years (note: this does not necessarily have to continue!);
Property can produce attractive rental income;
Property can be managed by a letting agent, hence there is no critical requirement to be close to them, hence investing in property can be a ‘virtual’ job;
Significant tax advantages are available;
There is a shortage in supply of housing, and hence with strong employment, high GDP growth and more single households will support prices and increase the likelihood of potential capital gains.

What Type of buy-to-let properties should i consider? :

The golden rule is, make sure you purchase a property that has a good rental market and is not overvalued. Be open minded, you might find a 2 double bedroomed flat above a grocery near a station rents out far faster than a similar flat in a nice road 15 minutes walk from a station, and costs considerably less to purchase. A large 6 double bedroomed house in only fair condition with no garden, close to a University could rent out with high yield to multi occupancy students, whereas a similar house with large garden in a leafy suburb could be impossible to rent out, since there are not many large families, and most people with families like properties in very good condition (new bathrooms and kitchens). Another example is, if you purchase a large house in a re-generating area with many double bedrooms, you might let the house on a room-by-room basis either to builders as weekday accommodation, or to foreign nationals seeking work in the UK.
However, if you buy good valued 1 bedroomed, or 2 double bedroomed flats close to a city centre (hospitals, universities, large offices, public sector offices) and transport/communications are very good, you will probably not have too many problems renting the property, though every city and area has its own micro-market, and asking a local letting agent is essential.

How do most buy-to-let investors raise finance? :

TPS | Buy To Let

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