There has been a lot of news in the papers about the growing confidence in the UK property market with many investors buying properties as another form of investment as traditional investments are performing so badly. Often figures of 8% yield or above are quoted, which all sounds brilliant in practice but realistically you should expect a rental yield of around 6%. Higher yields are available, but these are usually repossessions or riskier investments and you need to do your homework first to ensure there isn’t a hidden cost in the refurbishment and very high service charges.
Firstly remember that there is the cost of the mortgage. Buy-to-Let mortgage are always higher than traditional mortgages and at the moment stand at 3.5% on average but this is with a 25% deposit which is not always achievable by many investors. On top of this mortgage lenders might charge ‘admin’ of up to 2% on top, then valuation fees, legal fees, search fees, stamp duty etc.
Secondly you need to find tenants to maintain this yield. To do this you might pay a letting agent to conduct viewings, check references and affordability, draw up contracts, and collect your rent on a monthly basis and deal with all your problems.
Finally there is the maintenance of the property. Many tenants when they live in a property that isn’t theirs are not going to keep it in the standard you want them to, meaning regular inspections and costs when you need to find new tenants. Most landlords that we speak to say that they expect to put aside up to 2% of their income for refurbs and decorating.
If you are thinking of purchasing an investment property and would like some free and impartial advice please call or visit our shop on 18 Church St, Dunstable where we are only too happy to help.
