When you own a rental property you will find that your rental income will increase steadily over the years. If you find the right kind of property you can bring in a 5 to 10% yield, however, this depends on where the house is located, the local rental market, and how good a deal you can get on the property purchase price.
If you get the right mortgage you should have a good return on your investment. While buy to let mortgages are more expensive than owner occupier mortgage loans the rates are usually quite competitive and you may find a good deal.
You should also be aware that investing in buy to let does come with a few risks. This is why it’s crucial you do a lot of research before you consider becoming a landlord.
A buy to let mortgage will require you to lay out a higher deposit in advance. Deposits can range from 15% up to 40%. If you can save up a higher deposit you are much more likely to get a great deal on your mortgage.
You should also be aware that mortgages such as these more commonly offered as interest-only mortgages rather than repayment mortgages. What this means is that when the term of the mortgage is up it’s likely you’ll need to sell the property so you can clear the loan.
Alternatively, you could pay the loan off another way, for example, you may wish to continue to let the property out until the loan has been paid off.
Income from your Property
When you apply for a mortgage a lender will look at the potential income that you may receive from a tenant. This will help the lender decide how much money they are going to lend you. You should ideally look to make a profit of at least 125% of your mortgage payments. If you can make a profit such as this you’re likely to be offered a good mortgage.
While purchasing a buy to let property will come with its risks, investing can ensure you have a steady income for many years making it a good option for many investors.