Despite the growing popularity of the BTL market, its ‘Renting and Letting’ report warned potential investors to look at the pro’s and con’s of the sector before buying that first rental property
According to figures from the Council of Mortgage Lenders (CML)released in August, lenders advanced 152,000 BTL loans worth £17.5 billion in the first half of 2006.
The report stressed that investors should consider a BTL investment in the same vein as running a business, with the turnover in the form of rent exceeding the costs of buying and maintaining the property. As a rough guide, it said this excess should be 25-30 per cent over the running costs. This would cover the owner in the event of the property being unoccupied, for large expenses such as a broken boiler, and costs such as tax on rental income.
Commenting on the report, Kate Faulkner, author of the ‘Renting and Letting’ guide, said: “Budding property entrepreneurs should remember there are lots of ways of investing, and buying property can be risky. You must be sure at the outset that buying a property to let will give you better returns than putting your money in the bank for the same period of time.”
Marc Goldberg, board director at Blemain Group, agreed that investors should do their homework before making any rash decisions. He said: “While there are many benefits to the BTL market, there are also certain pitfalls that many people fail to consider. Buying a property is the easy part, but investors need to think about factors such as what happens if they cannot find a tenant or the property remains empty for long periods of time, or even if there is work that needs to be carried out. Mortgage payments still have to be met – can they afford to do this?”
