Can You Afford To Buy To Let?

Let by sign. Buying To Let And Becoming A Landlord

Could You Afford To Buy To Let?
Buy To Let Mortgages, Tax And Costs

The buy to let mortgage market has been hit particularly hard by the credit crunch, with the number of different mortgages available slumping. So should you step into the market?

By Sarah Jagger

for sale sign Buying To Let And Becoming A Landlord

During the last 12 months there has been a steady improvement in interest rates for buy to let mortgages with a two year fixed rate dropping from an average of 5.98% in August 2009 to 5.61% now according to Moneynet.co.uk. A recent Mortgage Express buy to let survey showed that the typical landlord is male, aged between 36 and 55, and with another job apart from property investment. Some 1.2 million people in the UK currently own property to rent out in the UK with the majority regarding their buy-to-let as their retirement nest egg, according to the National Landlords Association.

Your Financial Position

So buy to let is a popular investment choice in the UK, but is it for you? You should start by considering your financial position. It's worth speaking to an independent financial adviser who can look over all your financial commitments before you take the plunge. You can find one in your local area at www.unbiased.co.uk. Ask yourself, can you afford to tie up money in a property long term? If the worst happened, could you afford to lose money? And if the property needs work, how will you finance a development? 'Buy to let is highly unlikely to make you a quick profit but should be viewed as a long-term investment; after all it may take months to sell your property and release your capital,' advises Malcolm Tarling from ARLA (Association of Rental Letting Agents).

Is Buy To Let Profitable?

That said, the current jittery house market and the slowdown in house prices may be good news for budding landlords as uncertainty among potential house buyers pushes up demand for rented accommodation and as house prices fall there could be potential buy to let bargains to be snapped up.

Before you buy a property it's important to research the existing rental market in an up and coming area, and know the market you'll be targeting. 'Speak to a local letting agent who will advise on the demand for rental properties and the level of rent you can expect,' says Malcolm Tarling. Have a look at homes to rent in your town on portals. You may find properties are cheaper on websites that cut out estate agents altogether.