Profit from Property Development – Buying to Let

Buying property, renovating it and the selling it on is very expensive out of the league of a lot of people but there are alternatives.

Rather than sell a property, many developers choose to buy one, develop it and then let it out, hoping that their capital asset will increase while they receive a stable income over a number of years.

For the foreseeable future it looks like the rental sector is anticipated to continue because:

a)Some potential buyers are being cautious and choosing to rent rather than buy or sell, while they wait for the property market to stabilise.

b)First-time buyers are waiting longer before buying property. Many young people still decide to move out of their family home and the only affordable way to do this is by renting.

c)The increasing number of company relocations is creating new demand for rental properties. Also, the majority of workers on short-to medium-term contracts, and those on contract from overseas, will rent.

In short, the strength of the rental market seems set to continue.

Hints  amp; Tips For Buying To Let

  1. Carry out thorough research. Check local rental conditions, analyse rental demand and determine the types of renting in your area. Look for clues such as large company relocation, the opening of trendy bars and shops (for young professionals) or the existence of good schools (for families) and choose a property that will appeal to your market.
  2. An appealing rental property is one that is close to transport links and/or has off-street parking. Naples property management companies make sure that when they are about to build a property or developing a land, it is near the community where transport and establishments are accessible.
  3. If you plan to rent your property to professionals, all of the bedrooms should ideally be doubles.
  4. Think low maintenance. You want a property that will run itself as smoothly as possible.
  5. If you are managing the property yourself, be prepared to do some hard work.
  6. Choose a property close to home that will allow you to sort out any problems quickly.
  7. Bear in mind that family rental homes require plenty of space and storage.
  8. If you are the sole freeholder of the property, you will need to ensure that the common parts and the exterior of the property are well maintained. If your buy-to-let is leasehold, the responsibility for the maintenance of the exterior and interior communal areas will rest with the freeholder unless your lease specifies otherwise.
  9. Steer clear of large gardens, unless you intend adding the cost of a gardener to the rental.
  10. Consider whether you want to let furnished or unfurnished. Sometimes there is little difference between rents for unfurnished compared with part or fully furnished properties. It all depends on your market and the demand in your area. Before looking for furniture, do your research.

Buy To Let As Pension Or Investment Profits

When rental returns are not booming you are likely to have to hang on to your rental property for at least ten years if you want to make money. Even then, after all the hard work and stress of renting a property, there is still no guarantee that your asset will increase in value. Consider the following:

a)The state of the market and predicted conditions

b)Interest rates have a direct impact on prices; any changes will affect the stability of the market.

c)See how buying to let compares with other forms of long-term investments. Note that you will have to pay tax if your capital appreciates in value.

Financing A Buy-To-Let

The general characteristics of a buy-to-let mortgage are as follows:

a)Mostly available for between five and 45 years and for up to 80% of the property’s value.

b)Your income will be taken into account by the lender and you will be able to make before-tax deductions against the rental income for costs such as insurance, maintenance and agent’s fees.

c)You can claim for replacing items of furniture, fitting or fixtures, although their original costs are not tax deductible. Alternatively, you may find that a ‘wear and tear’ allowance based on 10% of your rental income is deductible.

d)Insurance cover is available for the buildings and contents, as well as legal expenses in the event of court action against a defaulting tenant.

e)Many lenders expect landlords to use a letting agent to manage the property and for an assured Shorthold Tenancy Agreement to be drawn up.

Additional Costs

For most investments lenders require that your gross return (the total rent received before tax) is at least between 130% and 150% of your monthly mortgage repayment. This helps budget for the additional financial commitments required when buying to let, which many investors often underestimate.

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