The Benefits and Disadvantages of Buy to Let

Buy to let has come back to prominence of late and as confidence returns to the property market, the number of buy to let mortgages has also increased. Buy to let mortgages provide people with the option to purchase a home and then to use it as a source of income. However, like anything in life, it’s not just as straightforward as that and there are pitfalls as well as benefits. So, let’s take a look at some of these ups and downs of a buy to let arrangement.

Benefits

  • Buy to let is simple to do and can perform a great source of income as well as a great way to fund a mortgage
  • Once you have a deposit of 20% you should have no problems finding some great properties to do up
  • The buy to let mortgage can provide a great form of income, especially as the inflation rate makes the mortgage less in real terms with time, while still increasing the cost of renting.
  • Property prices also benefit with time and they appreciate above inflation on average. This means you can sell the property in time for a lot more than you bought it for.
  • Even when times are not so good for property prices you may benefit. As house prices fall, the cost of renting will generally rise. This means that you will have plenty of people looking to rent and also pay higher yields for your property.

Disadvantages

  • The cost of entry into the buy to rent area can be quite high and you will need a substantial deposit to cover the house price. You also have to try and cover stamp duty, legal fees and a range of other often costly requirements.
  • As you are renting out the house you don’t have a complete say what goes on there. Even though you may lay down rules, you still may not be in full control. If you run into problem tenants then you will have to take care of repairs and all sorts of other problems.
  • The property will be empty for some periods and so it will not always be a money making venture. This should be reflected in the price of the rent and you need to spread the risk of void periods.
  • If you have a number of buy to rent properties it can be quite a task taking care of them and looking after them. From maintaining and caring for the property, to vetting new tenants and collecting rents and making other arrangements – it’s not always the easiest of jobs.
  • If you decide to sell the property onwards, you will be charged costs of up to 3% – these include estate agent, solicitors and a range of other additions.

Buy to let mortgages are a significant benefit to home buyers, though they also have their own downsides too. Being aware of the perils of getting involved in such an arrangement allows you the chance to make money, provide security and benefit greatly.

Larkin Royce is a writer and journalist who has followed the UK property market for a number of years and has written for http://www.bakerfinancial.co.uk/buy-to-let-bridging-loan.html

 

cormac84

I am a lover of all things DIY and have written for a number of renowned home improvement sites.

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