The key to profitable participancy in the buy-to-let sector is keeping properties rented. ARLA (Association of Residential Letting Agents) has found that buy-to-let tenants are staying for longer than ever. Regardless of the initial term of the tenancy often six months tenants are staying for an average of over 17 months.
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The long term outlook for demand is also positive. According to the housing supply review, there is a deficit of 450,000 houses in the UK which is growing by 120,000 per annum.
The Town and Country Planning Association has stated that 3.5 million new households are needed by 2021.
Recent research has reported that the number of one person households or living loners will increase by 53 per cent to 9.9 million by 2026: the resulting increase in the number of flats and converted houses in the future as a result of this will only drive the rental market further.
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Lee Tillcock, Editor Business Moneyfacts, said: Whilst house prices may not continue to offer double-digit growth, the suggestion that prices will fall markedly does not fit the supply and demand model. A section of the UK population continues either to struggle to afford to purchase their own property or simply prefer the flexible lifestyle of renting, as a result of which landlords and their properties will remain increasingly sought after.
But before jumping with both feet into the BTL market, make sure you do your homework. 2006 saw a raft of legislation introduced and this is set to continue for the foreseeable future.
While the return on BTL property may look very appealing when comparing mortgage costs to your potential rent, you also need to factor in the cost and time involved in complying with new the new legislation, the upkeep of the property, management costs, tax liabilities and any periods of unoccupancy. And remember property investment should be a long term commitment, especially as the housing market reaches a peak and short term gains start to diminish.
So once you have found your perfect investment property, make sure you also find the most suitable finance options.
With over 2,000 buy to let mortgages available from almost 100 lenders it can be a potential minefield to find the best deal. Not only are there variations in rates, terms, fees and incentives as per the residential market, there are also variations in lenders criteria, both in terms of portfolio sizes and also the affordability calculation, whereby lenders use different rental calculations, underlying rates or even take into account your own income.
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Tillcock said: Figures released today from the Council of Mortgage Lenders showed that 330,000 BTL mortgages were taken out over 2006, a 48 per cent growth in volume over 2005. So while BTL is certainly still in vogue, dont assume its an easy, sure fire way to make vast sums of money. It takes experience, investment, research and time to build a successful BTL portfolio.
