Simmonds Mortgages

Mortgage Brokers covering Berkshire and beyond

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5 Tips For Newbie Property Investors

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What do you want to achieve when investing in properties?

Most landlords would purchase buy to let/investment properties to receive an additional income stream earned by renting the property out to tenants. This rental income would pay for monthly mortgage payments and cover owner’s overall monthly expenses to maintain the property.

Another reason is that purchasing a buy to let/investment property will most likely provide capital appreciation in the long run, if the property value increased over time this would increase the equity in the property.

Buying a property for investment means you have a tangible asset, something you can touch and feel.

Is purchasing this investment property right for you?

For most landlords purchasing an investment property is for a medium-term to long term commitment, another important thing to consider is which areas should you be purchasing in.

For most of us this would mean purchasing an investment property as a residential property i.e. having tenants who are professional’s, families or students.

If your main objective is income from the rent, you may want to look at lower value properties in areas with lower property value and higher rental yields for example in the North East of England or if you feel capital appreciation is your main focus you may want to target high-value properties in more expensive areas for example London and the South East. Alternatively you could take a risk on areas which are “up and coming” or rumoured or planned new rail links or large developments are to take place. 

If you were thinking more in the lines of a commercial property this may be a bit to risky as a first-time landlord as most commercial lenders will require some sort of landlord experience.

Financing your buy to let purchase.

If you are needing to finance your properties via a mortgage, it would be expected that you have a 20% to 25% deposit, there are different lenders for different types of scenarios such as a first-time buyer’s, first time landlord’s and non-owner occupier’s.

In regard to the deposit, more choice and lower rates become available if you have a 25% deposit.

If you have a 20% deposit available, we will have a shorter list of lenders to choose from. The rates tend to be at least 1% higher than with a 25% deposit.

Always seek advice and guidance from a specialist experienced, whole of market broker.

Start small, gain experience and move forward

As a first-time landlord this will be a great opportunity to have your first investment property and practice for a while. Once you have gained some experience and feel comfortable you can know look at options to invest more. For example, Houses in Multiple Occupancies, Student Lets or properties containing more than one flat or unit.

What is a rental yield and what is a good rental yield to aim for?

A rental yield is in short, the value of the rental income your property will make in a calendar year, in a % form.

Different areas will achieve different rental income from each property, it is very important that your rental income covers the running costs of the property. This includes mortgage repayment, wear and tear and any other lettings expenditure that you would otherwise incur.

Most landlords would expect a rental yield that is around the 5 to 8% mark.

Rental yield is calculated by dividing the annual rental income by the price of the property and then multiply this by 100.

As an example, if your property was purchased for £200,000, and you charge £10,000 per year in rent you would achieve a rental yield of 5%.  In September Zoopla published a list of top ten UK Hotspots for rental yields:

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If you are willing to look further afield, find a good agent to manage your property you could find a bargain with a higher rental yield. Of course you would need to factor in all the additional costs, i.e. agent fees and travel costs.

 

Let us help!

If you would like more information or help with your investing needs please call us on 01344 225 149 or 07979 690 056. Alternatively please send us an email at info@simmondsmortgage.co.uk

Your home may be repossessed if you do not keep up repayments on your mortgage

 

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Simmonds Mortgage Services is an appointed representative of Stonebridge Mortgage Solutions Ltd and can source the most appropriate cover from its panel of insurers with a free review of you overall protection and insurance needs. As with all insurance policies, conditions and exclusions will apply.

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Your home may be repossessed if you do not keep up repayments on your mortgage.

Simmonds Mortgage Services Ltd is an Appointed Representative of Stonebridge Mortgage Solutions Ltd, which is authorised and regulated by the Financial Conduct Authority.

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