Mortgage broker, Springtide Capital has today announced that there has never been a better time to become a buy to let investor. According to the Council for Mortgage Lenders (CML), gross BTL lending in 2012 amounted to £16.4 billion, 19% higher than in 2011, reaching its highest level for four years.
According to mortgage sourcing specialist, Springtide Capital, there is now a new wave of mortgage products for landlords which provide a solid return on investment.
Gross annual rental yield (zero gearing) at q4 2012
Henry Knight, Managing Director of Springtide Capital offers his top three Best Buy’s for Buy to Let Landlords:
- Two year fixed rate at 3.59% with a £1,999 set up fee at 70% LTV- Clydesdale
- Five year fixed rate at 3.99% with a £1,995 set up fee at 75% LTV- Accord
- Two year fixed rate at 4.99% with a 2.5% set up fee at 85% LTV- Kent Reliance
- Two year fixed rate at 3.19% with a £1,999 set up fee at 65% LTV – Godiva (Coventry)
Looking back twelve months the costs of these rates are down nearly 25%, making a significant difference to funding costs for potential borrowers.
Further research from Chesterton Humberts indicates that while the mortgage market is appealing to Buy to Let landlords at present, there are still a number of novice property investors who are making common mistakes with their portfolios and finances.
Nicholas Barnes, Head of Research for Chesterton Humberts says:
- ‘Building a BTL portfolio does not automatically guarantee financial success and before entering the market, investors would be well advised to prepare a detailed business plan to prevent nasty shocks further down the line. A basic checklist would include the following considerations:
- Tenant demand: the first question to ask is what is the likely level of rental demand for my properties? Thorough research on location and type of property which is most in demand should be conducted.
- Pricing: again, research your target market in terms of rental levels and what is realistically achievable plus anticipated uplift over time (which will likely be linked to changes in RPI).
- Acquisition & ongoing costs: operating costs as well as purchase costs must be allowed for as this is the only way (once your rental income has been factored in) of calculating what your gross and net yields will be. Remember also to allow for the inevitable void periods and allow for a sinking fund to cover repair & maintenance costs along with professional fees and possible legal bills. Don’t forget the tax aspects either!
- Exit strategy: before committing, you should always consider your exit options – for example, will you be able to sell your property easily should you want to? It is worth noting that property is generally regarded as a longer term investment as it is less liquid than, say, equities, securities or commodities.