The Bank of England seems to have decided about interest rates. They are to keep low for the next year and that’s that. At the last meeting of the committee that selects interest rates there was but one dissenting voice that said rates should be raised by one quarter of one percent but this was drowned out in the chorus of voices saying that interest rates should stay precisely where they are. It rather looks as if we are heading for a historic period wherein interest rates are unusually low and set to continue low well into the future.
Good news for me as I can now afford my monthly mortgage payments and don’t need to Sell My House! Less fantastic news for those of us with a bit of brass invested in the building society who would like to earn some interest on it. Therefore investors as pensioners relying on the interest from their savings through to wealthy business managers with funds to spare are all going to have to look for different ways to maximise the returns on their investments. It’s time for these sort of people to get imaginative with their investment strategies and one way must surely be by using the potential of the private rental market.
Being a landlord is not as uncomplicated as simply letting your money fester in the building society, clearly . It is a business like any other business, but if you have a talent for buying property and dealing with people then the returns can be exceptional whilst minimising the total of work that you need to do to get those returns.
When We Buy Houses for rental the criteria are somewhat different than when We Buy Homes for us to live in. As a general rule multiple occupancy units give a lot higher returns than single occupancy , thus flats , apartments , houses of multiple occupation will often be more money-spinning as far as the monthly rental goes, but may not achieve the same level of capital gains that a single house or cottage in up and coming area area. Mind you, considering that the new coalition government seems hell bent on slapping a huge level of capital gains tax on landlords when We Buy Houses for renting out, it does make you wonder if capital gains on the rental properties is going to be quite as significant a factor in the future as it has been in the past . A possible way to minimise this is to have more than one rental property rather than invest everything in one larger property. This would mean that, say if I had two houses for rent and I decided to Sell My House in a tax year and then sell the other house in another tax year. I would then get two lots of capital gains tax exemption rather than if I had just one property which sold in a single tax year. Well that’s the theory anyway.
Quality is everything when We Buy Homes for renting out. If a property is going to achieve a top whack rental then it has to be finished to a high quality, albeit it pays to use robust finishes and materials as this should minimise any repair work which is always a bit of a nuiscance when there are sitting tenants. A letting agent could help you with the day to day running of the properties, collecting rent, organising repairs etc, although you are unlikely to get away with less than eleven percent plus VAT in fees .
It goes without saying one of the principal advantages with this sort of investing is that you can leverage your investment by borrowing against the rental property. Mortgages of up to sixty percent of the property valuation are available from specialist rental property lenders , such as The Mortgage Works, and even though fees are a fair bit higher than for residential mortgages if you do your sums right you could find that the further rental income more than pays the mortgage thus topping up your monthly income by a factor.
If you’re prepared to put a bit more time in than you have to do investing in the bank then getting into property rental could provide outstanding short to medium term ongoing returns for your capital with the added bonus that if ever there is a bit of a property boom you could reap an extra dividend.
Tags: home, homes, houses, property, Real Estate