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Buy to Let - How Much Rent Do I need?
Buy to Let - How Much Rent Do I need
The rent that a landlord receives generally has to be either 1.25% or 1.30% (although some may calculate as low as 115%) more than the interest payment of the buy to let mortgage. For example if you were looking to purchase a buy to let property at £100,000 the maximum loan you could achieve is 85%. Assuming an interest rate of 5% this would make the interest only monthly repayment of £355. Therefore the rental income that can be achieved must be £443. This figure being 1.25% times the rental amount. However, some buy to let products may also take into account the applicants other income which may enable them to borrow more but all mortgage lenders have different criteria and a different variety of buy to let mortgages available.
By working on these calculations, gives the buy tolet investor a margin to cover the letting agent's fees and any other associated costs. Even if these margins appear very low, it is important to remember that you are in this for the long run and property investment is not a get rich quick scheme. In the same way that other investments need time to mature, this can also be said for the property market. And don’t forget that historically property prices have doubled every 10-15 years in the and more and more areas are being regenerated and this can take time for the property and surrounding area to reep the rewards.
To get an idea of how much the monthly repayments try an online buy to let mortgage calculator to work out the repayments immediately.
Either way it is worth shopping around as it is a very competitive market and new products are being made available all the time.
What If I don’t have a Deposit?
If you are looking to invest in your first buy to let investment property but don’t have at least a 15% deposit, then you may find that you could release some equity from your own residential property.
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