Buying to let mortgages have grown in popularity since they were first introduced in 1996. The increased allure of these investments has forced changes in banking and lending policies to accommodate buy to let arrangements. Lenders used to offer only variable-rate loans, but they now offer fixed rates, trackers, flexible rates, and discounts. These benefits alone could save investors thousands of pounds sterling over the course of the lending periods.
Benefits of Investing in Real Estate The long-term benefits include most of the traditional advantages of home ownership. The letting fees cover the loan payments, and most rentals include a financial cushion to cover incidental repairs and maintenance. Owners pocket any excess funds, which Inland Revenue treats as ordinary income. Other pluses include the following advantages.
- The long-term outlook for property values makes real estate investments safer than stocks.
- Insurance cover lets owners guard against many perils.
- Excess letting fees and equity produce steady income.
- The demand for rental properties thrives in the U.K.
- The tangible benefits of ownership include having collateral for future investments or emergency loans.
- Rising rents, better loan deals, and lower home prices make buy to let mortgages very attractive to investors.
Making Arrangements for Best Advantage
These deals have some drawbacks, but careful research and proactive measures can limit unpleasant eventualities. Lenders usually ask for a down payment of at least 25 percent, higher than most home loans. Landlords should set rates of 125–150 percent of their loan payments to cover incidentals and periods of vacancy.
The most difficult problems arise from landlord obligations. Repairs, inspections, and responsibility for properties pass to landlords. Screening tenants carefully, insuring against threats, and hiring letting agencies offer workable solutions to handle these problems. People handy with tools might want to make a go of handling repairs personally, but they should prepare to give up nights, weekends and the occasional holiday.
These investments rarely earn quick money, but they make solid, long-term investments for stable people. High divorce rates, university housing demands, and the trend toward single occupancy make rentals flourish. Investors that do their homework could find lucrative investments that need little work from them to earn generous dividends.