Mar 18 2016

Buy-To-Let Lives!

There is plenty of doom and gloom around concerning the tax changes to be made in April, and that as a result people may well consider that property is not as lucrative as it used to be with regards to returns on investment.

True, buy-to-let landlords are certainly facing a battering from the Chancellor, who apparently has a “50p size hole in his £100 purse” he needs to fix.  However, all is not as dark as it seems by any means, as the trick when looking to be successful in buy-to-let investment is not about putting in lots of money but the minimum needed as far as lending is concerned.

Typically, you need to put 25% into a buy-to-let investment, with the mortgage company lending you the rest; and we have heard on the grapevine that there are some mortgages coming on to the market only requiring a 20% deposit.

Carrying out some basic maths will tell you that if you were looking at a purchase price of £100k (rather unrealistic as far as London is concerned!), you only need to make a £25k deposit.  As long as all the factors stack up – you are reasonably solid financially, have a good credit rating, are looking to rent it out for more than enough to cover the mortgage payments etc., and that’s all the lender is looking for – then they will advance you the £75k.

Now, if the property goes up just 1%, effectively, you get a 4% return because you only put in £25k of your money but you get 1% on the whole £100k.  Furthermore, confident predictions from various sources are that because there is such an incredible shortage of property in the UK, especially in London, property prices will go up by 25% over the next 5 years; with similar figures making a 100% return on investment!

Examining it closely, or even not very closely, where else will you get those kinds of returns on your money?  Whilst the proposed tax changes could make a dent in your monthly profit on investment on rental yields the long-term picture – and you need to view the long-term in the value of property – clearly shows that no other investment vehicle performs as positively as property.

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