Despite interest rates creeping up and experts warning that house prices are nearing a peak, the buy-to-let (BTL) market is still booming. Figures from the Council of Mortgage Lenders (CML) show that 330,000 buy-to-let mortgages were taken out last year, a rise of almost 50 per cent on the previous year.
With BTL proving a good investment for many, more and more people are becoming portfolio landlords with more than one rental property. The latest figures from Paragon Mortgages show that the number of properties in the average landlordÂ’s portfolio is increasing and now stands at 11.1.
Paragon’s BTL Index also shows that average rents charged on a typical BTL property have risen by 6.5 per cent over the past quarter, from £9,942 in January to £10,591 in April.
There are, of course, some risks of getting involved in BTL. With house prices possibly nearing a peak and rumours of a housing market crash, investing all your money in property may not be a good idea. Also experts are divided on whether interest rates are at the top of the current cycle yet – if they rise again those landlords on variable mortgage may start to struggle.
Another potential problem is getting the wrong tenant, or not having one at all. Problem tenants can take time and money to evict and if you have any rental voids you will have to cover the mortgage repayments out of your own money. Even if you have good tenants, managing and up-keeping a portfolio of properties is time-consuming and potentially expensive.
Employing a letting agent is one way to hand over the hassle to someone else, but their services donÂ’t come cheap. Agents typically charge 10 per cent of a propertyÂ’s annual rent to find a tenant, check references and arrange an assured shorthold tenancy (AST) agreement, the most common form of rental contract between landlord and tenant.
For about 15 per cent they will offer a “full management” service which includes rent collection and dealing with any maintenance issues. To make sure you are using a reputable agent, check they are registered with the Association of Residential Letting Agents (ARLA) at arla.co.uk.
