Financing a buy to let property is a business that can be rewarding in various ways. But understanding which financing options are better for certain properties can help you reduce the risk that comes with investing, and increases the chance your investment will pay off. When investing in a buy to let property, you often want to invest directly with your own money, take out a buy to let mortgage, or find a direct lender to assist you in investing in your buy to let property.
Buy to let mortgages
The decision of whether to finance your property out of pocket or through a buy to let mortgage is important. If you choose to go with the latter, you’ll be happy to know that you can earn money in two ways. As an investor, you get to earn money directly through your property through capital growth, that’s why it’s essential to find a property in a location that has maximum potential for value increase. Also, you get income from the rent paid by your tenants. It’s crucial to find long-term and reliable renters, so screening is a must. Also, you need to be aware that even if the property has no tenants, you’ll have to continue making regular payments on your investment, which is why making sure that all your apartment units are rented securely is a must. It’s essential to seek buy to let advice if you decide to go with this route towards financing your property.
Out of pocket financing – Consider how you intend to profit from the property
You can consider financing a buy to let property out of pocket. If you finance a property out of pocket, you usually have to pay it all at once. If you do that, the main issue you have to understand is the risk and return of the property. Once you invest in a property, you see profit in one of two ways. Either you sell the property for more than you paid for it, which is known as Capital Growth, or you earn Rental Yield when what your tenants pay is surpasses your property fees.
What you can charge for rent is heavily determined by the Register of Fair Rents. You can compare the property to the Register, and quickly understand what rent prices you can charge. This option is better for those interested in financing buy to let properties out of pocket. For those more interested in selling the property though once its value increases, we recommend looking into a buy to let mortgage.
Financing a buy to let property is heavily dependent on how you intend to profit off the property. Using personal capital can help you finance a buy to let property with minimal risks, but you will have made the full investment immediately. If you take out a buy to let loan or buy to let mortgage, on the other hand, you can pay over a longer period of time, but it can be more flexible, especially when you have limited funds.