If you’re looking to grow your income by investing in a property, a buy-to-let mortgage is the first step. But what exactly is a buy-to-let mortgage, and can you really earn a profit when buying to let?
Read on for our guide on buy-to-let mortgages and our top tips on how to earn a profit with a buy-to-let property.
What Is A Buy To Let Mortgage?
A buy to let mortgage is a type of mortgage for landlords who plan on purchasing a property with the sole intention of letting it out to tenants.
Buying to let is considered a low-risk investment – and can be a great way of generating an income. Some landlords will let out just one property, and others will have a portfolio of properties and rent them to tenants as a sole source of income.
With a buy-to-let mortgage, you may wish to sell the property at a later date. However, it’s important to consider the tenants and the contracts – there are certain legalities that you need to research before selling a property that is occupied by tenants.
Being a landlord can be a full-time job – and it can involve a lot of responsibility. As a landlord, it will be your responsibility to make up for costs such as property damage, maintaining the property, and ensuring rent are paid on time.
Buy To Let Profit
There are several ways that you can earn a profit from purchasing a buy-to-let property. One of the best ways that you can earn a profit is by purchasing a property when the property market is rising – and letting it out to tenants until it peaks.
Then, you can sell the property for more than you paid – providing that you’ve checked the legalities regarding occupancy beforehand.
If you purchase while the property market is rising, you could see a return of around 15%. A good rental yield could be around 8%.
For example, if your property value is £200,000, and you’re charging £1000 for rent per month, your rental yield will be 6%. However, other costs may factor into this – for example, maintenance costs and arrangement fees.
Tips For Earning A Profit With Buy To Let Property
Becoming a landlord isn’t always an easy job – and not everybody understands what it takes to earn a profit through buying-to-let. However, we’re here to help – here are some tips on how to earn a profit as a landlord.
Consider The Risk
One of the most important things that every landlord and potential landlord should do is consider the risk of their investment. Like with any investment, buying to let can come with risk.
Be sure to think about any potential issues that may arise – will your tenants pay the rent on time? What about any damage that may occur to the property? You should also consider your finances – if you don’t keep up with the loan repayments, then you could incur penalties.
A good way to consider the risk of a buy to let mortgage is to figure out the pros and cons of a buy to let mortgage.
Choose The Right Property
The property you choose to let out is one of the most important things when you’re hoping for a return on your investment. First of all, consider the location – check out the local area and the average rental payments in the area.
If you plan on using the property to let out to students, check if there are any universities in close proximity to the property. Buying to let in Liverpool is especially popular as there are 4 universities – which means a lot of students that need accommodation/ student housing.
The property market is always changing – property prices rise and property prices fall. In fact, housing prices have fluctuated more than usual over the last few decades. Chatting with a quality mortgage advisor can give you an insight into the housing market and whether property prices are rising or falling.
Local mortgage advisors also tend to have knowledge of the local area and can let you know what sort of properties generate a high rental yield in the area.
If you’re looking for a quality mortgage advisor to streamline the buy-to-let process and find you the best mortgage deals, look no further than LTC Mortgages. We have access to the full market of lenders to find you the best deal available. Contact us to get the ball rolling today.
Liam Coker is a highly skilled mortgage and protection specialist who delivers excellent customer service. His knowledge of the mortgage industry is key to finding the correct solution for people’s specific needs.