Although 2011 saw the average house price change very little compared to recent years, one sector of the market appears to have picked up*. Buy-to-let deals have become a lot easier to find as the rental market has strengthened**.
Figures from the Council of Mortgage Lenders (CML) show that the number of buy-to-let loans increased by 16 per cent in the third quarter of 2011. Between May and September, 34,500 buy-to-let loans were advanced and the value of lending stood at £3.8 billion, up from £3.2 billion in the second quarter.
The numbers indicate the highest levels of buy-to-let lending since the fourth quarter of 2008, which some commentators are taking as evidence of confidence returning to the market.
Of course, while the market is nowhere near its peak of 2007, it is strengthening according to the CML. So if you have a nest-egg you’d like to invest, you may like to check Barclays’ current mortgage rates, use a mortgage repayment calculator and consider taking on a buy-to-let mortgage that will turn you into a landlord.
Buy-to-let investors could be financially rewarded in several ways if the market conditions allow. Either through capital appreciation should house prices rise; the provision of a steady income stream from monthly rents or through tax deductions related to mortgage interest. Many buy-to-let landlords often see the properties they rent out as long-term investments and as a way of diversifying their investment portfolios, which may include pensions, cash and shares – although – as with all investments there is the potential for their value to go down as well as up so you could get back less than you invested.
There are also common pitfalls to avoid. For instance, taking out landlord insurance may help should tenants damage the property - or cover rebuild costs should the worst happen. Potential landlords should also think about whether they could afford to pay the mortgage during ‘void periods’, when the property is empty. Putting away a bit of money each month into a dedicated savings pot could help with this.
And what about agent fees? If you use a letting agent to find a tenant or to manage your property, their services will take a chunk of your money. Some will charge you a finder’s fee in the first instance and then typically up to 15% of the rent for management***. You can try to find tenants on your own by using websites such as gumtree.com to advertise your property and if you can, manage the property yourself. This way you’re more likely to get to know your tenants and make sure they’re looking after your property as well as keeping your costs down.
Any property used as security, which may include your home, may be repossessed if you do not keep up repayments on your mortgage.
This article has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions. Expert financial advice should always be sought and any links contained within this article are included for information purposes only.
Barclays is a major global financial services provider engaged in retail banking (bank accounts and instant access savings accounts), credit cards, corporate banking, investment banking, wealth management and investment management services, with an extensive international presence in Europe, the Americas, Africa and Asia. With over 300 years of history and expertise in banking, Barclays operates in over 50 countries and employs over 140,000 people. Barclays moves, invests and protects money and provides ISAs, home insurance, life insurance, a mortgage calculator, guides on how to buy shares and other services for over 49 million customers and clients worldwide. For further information about Barclays, please visit our website www.barclays.co.uk.
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Article date: 1/27/2012 12:00:00 AM