The 1st quarter of 2013/14 saw the highest number of buy-to-let mortgages being obtained since the financial crash of 2008. In fact 40,000 of these specialist mortgages were advanced in the months up to June 2013 in comparison to 33,000 at the same time last year an increase of 21%
At the time 1 in 10 mortgages were being sold to landlords and with new figures suggesting 93% of landlords only have one property, we can conclude that many of the landlords buying in the boom of 2013 had little or no experience.
Now one year on we are starting to see the effects of becoming a landlord without looking at the bigger picture with new reports of novice landlords who have badly burned after being lured by the ease of obtaining a buy-to-let and the dream of cheap money.
In London the average monthly mortgage payment is £1,240 with the lowest coming in at £760 and the highest (Kensington and Chelsea) being £3,062. The average monthly cost of letting a room in London is £550 but, like mortgages will be area and zone dependent, for example renting a room in a flat in Paddington can set you back £1100 per month.
Looking at those figures people toying with the notion of becoming a landlord might make the mistake of thinking that on a monthly basis, whichever area they choose, they can cover the cost of their buy-to-let mortgage with a small profit each month which sounds great but it’s not reality.
Landlords must consider that they will be subject to increased insurance costs, legal and admin charges, maintenance costs, tax on the extra income not to mention agency fees; there goes the small profit.
So you can still live without the small profit; you’ve got an extra property and the mortgage is being covered, but what happens when you don’t have a tenant for any period of time? You now find yourself with two mortgages to cover by yourself.
The result of easy to get mortgages and bad letting agents can be disastrous, leaving inexperienced landlords in financial boiling water.
If you are going to enter into the world of buying and letting you must account for all of the above before going ahead, ensure you have a float to cover void periods and remember you are running a business therefore you will incur costs and where you may not see financial positives in your bank account each month, as the saying goes, your money is in your bricks and mortar; understanding each of those points will give you the key to landlord success.
Now we’ve had a reality check let’s look at how to make life as a landlord as cost effective and hassle free as possible.
Rent Guarantee Schemes are available to Landlords and mean that you can rest assured that you will receive your rental income each month for the length of your guaranteed rental income contract.
At Homebridge Housing we specialise in providing Guaranteed Rent but not only that we can also eliminate your property maintenance costs and agency fees as a contract with us means that we bring you the rent and handle the rest.
If you are a landlord who’s had a difficult time or your letting for the 1st time then this could be how to make the future brighter.
If you would like to know more about how to take all of your landlord worries to one place and have them dealt with efficiently and effectively then contact us or for more information on rent guarantee schemes read our blog page.