Selecting the perfect rental property requires landlords to step into the shoes of potential tenants, and determine what will appeal to them the most – the fastest way to get a good rental income and capital growth is to invest in a property that tenants will find desirable, and which will let quickly.
An ideal rental property will either be located in an area which is presently in demand, or an area that has just been discovered, and shows plenty of potential for becoming a highly attractive location in the future – this could be an up-and-coming area that is close to another desirable location, or an area which has recently been the target of improvements, like new transport links, or the opening up of upscale shops and franchises. Ideal properties are also those that are close to commercial areas, and facilities like schools and parks.
In addition to its location, an ideal rental property has several features which appeal to tenants and draw them in. A property which is characterized by good security is sure to let almost immediately – house/apartments situated in secure locations with low crime rates are eagerly snapped up by tenants. Properties which provide parking, have large, spacious, well-maintained gardens, and are positioned in such a way that all the rooms get plenty of natural light, are also sure to be rented out quickly. When it comes to the interior, tenants are almost always sold on houses/apartments that offer plenty of storage space, are airy and spacious, and have kitchens and bathrooms that are in perfect working condition, in addition to being attractively decorated and furnished.
Once you have settled on the rental property you want to purchase, you will need to look for a mortgage. If you are building from scratch, you might want to look into the mortgage deals that builders and developers have on offer, while if you are planning to rent out a home which you had previously been residing in, you will need to get in touch with the mortgage company, for the purpose of turning your residential mortgage into a buy-to-let mortgage.
Many assume that buy-to-let mortgages comes with arrangement fees and interest rates that are a lot higher than those of residential mortgages, but this is not the case – there is only a very slight difference between the two. When you apply for a buy-to-let mortgage, the lender looks into the value of your property and credit history, as s/he would with a residential mortgage. The only difference is that when considering giving you a buy-to-let mortgage, the lender also considers the rental income you are likely to get from the property. The ‘rent to interest ratio’ is key in this scenario – lenders will be looking for a rent that is around 20% more than the interest which you will be required to pay on the mortgage.
Another slight difference between the two types of mortgages is that with buy-to-let mortgages, most lenders usually give you 80% of the value of the property – you are expected to procure the remaining 20% yourself.
If you are considering investing in rental property, do not let the thought of buy-to-let mortgages scare you off. At the end of the day, you just need to make sure you borrow an amount for which you can comfortably meet the monthly payments, even during void periods.
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