Buy to let mortgages have a mixed reputation in the UK. On the one hand, they're known as an effective investment that can sometimes yield double digit returns. At the same time, it's a volatile industry that can leave fledgling landlords with empty properties and, in the worst cases, even be responsible for the failure of banks. However, the many advantages of buy to let mortgages mean that they've remained popular with investors throughout the years and there are several pros and cons to consider before getting involved in this market.
Firstly, getting a buy to let mortgage can offer a fantastic rate of return on your investment. The average buy to let mortgage holder makes a 6 per cent yield on their investment. In London in 2012, people renting properties near Olympic sites - including in areas like Stratford and Greenwich - may see returns that reach 10.3 per cent. And according to property agents Knight Frank, some landlords who rent to students see yields of over 13 per cent.
Moreover, if you're reaching pension age and you're worried about your future, buy to let may be an ideal way to invest your savings. Thanks to the economic downturn, property prices have stagnated across the UK, though some recession-proof areas have defied this trend. Many would-be first time buyers have also found themselves unable to secure a deposit or a mortgage, and landlords are still attracting these people as renters. So if you're able to buy a property with a buy to let mortgage, the chances are you will find someone to rent it in today's uncertain economic climate.
Simultaneously, buying a house to rent has its pitfalls too. Many buy to let mortgage providers ask for a large deposit, sometimes of up to 30 per cent, so you have to have a large amount of money at the ready for your investment. Additionally, while renting to students can be lucrative - especially if your property is located close to a university or college - you may also be required to renovate at regular intervals to ensure that it remains an attractive rental option.
It's also important to remember that landlords have a variety of legal obligations. So while you may not live in your buy to let property, you're still responsible for fixing anything that goes wrong and you should also invest in a comprehensive landlord's insurance policy. To make sure that you're in a position to make a good return on your investment, remember that location is key: buying property near a school, university, hospital or other places with a large number of potential renters is usually a wise option.
The author of this article is a part of a digital marketing agency that works with brands like Shoosmiths. The content contained in this article is for information purposes only and should not be used to make any financial decisions.
