Investment Success Depends on Location
With the number of investors increasing, gurus and analysts warn new property investors to pay close attention to the location of their property. Inflation in rentals has increased almost five percent, but profit will only be seen if the investor has the right property - and the right loan.
David Carmichael, associate director of Savills private Finance in Glasgow, says: “Investors who bought properties for more modest prices in the regions have enjoyed excellent returns over the past few years and are probably still doing well. But people who stretched to buy some of the premier properties in Glasgow and Edinburgh could well be feeling the pinch after the increases in mortgage rates.”
David Hollingworth of L&C Mortgages, said: “The typical rental cover is now about 125%, so if the monthly mortgage payment is £100, the rent must be £125. But competition is driving some lenders to offer mortgages with just 100% rental cover.”
Hollingworth advises investors to save some equity. He said: “If the calculation is too tight, you are taking a bigger risk. If there is another rise in interest rates, you could run into trouble. What happens if the property is empty for several weeks, or the letting agent increases its fees? If you aren’t careful, you will have to subsidise your buy-to-let investment with other savings or surplus income.”
A good home loan can make the difference between profit and a loss, so do the maths. Lenders typically demand a deposit of 15%, although some are cutting that amount to attract more business.