Purchasing buy-to-let property is an attractive medium or long-term investment, but to know whether it is right for you, there are points you should consider.
Property is a physical object, unlike stocks and shares which exist on paper and electronically. Some investors like to be able to see and touch their investments.
Property investing is not an overnight get-rich-quick scheme, and can tie up money for many years. The only way to access all the money invested in a property is to sell it, and this can take some time.
Like with all investments, there is an element of risk. It is possible for property prices to go down.
Most people will need a commercial mortgage to purchase buy-to-let property. The rent on the property minus running costs like repairs and agents’ fees need to at least cover the monthly repayments on the mortgage and ideally exceed these payments.
Buy to let property can earn profits in two ways:
• Rental returns
• Capital growth: the difference between what was paid for the property and the current value.
It is important to include the extra fees when making plans to enter the buy-to-let market. These include the likes of solicitors’ fees, stamp duty, tax and survey fees. Investors also need to take out building and landlord insurance and pay a letting agent if using one.
With careful planning, buy-to-let property investment can be a profitable way to make money, but it’s a real commitment rather than something to dabble in playfully.