Hardly a day goes by at the moment without some story announcing the demise of the buy to let market. Government legislation changes, mortgages becoming more expensive all of these and more seem to be aimed at scaring property investors away from the market. Yet the unshakeable truth beneath it all is that the demand for rental properties continues to grow as people cannot buy their own home. So can you still make money from property in London?
Understanding interest rates
If you are going to invest or continue to invest in property in London or around the country, it is important to understand all this business about interest rates and how it can affect your potential profit. Right now, interest rates are low and actually getting lower. That means the cost of borrowing money for any reason is also lower than before.
But what about when this trend changes and interest rates start to rise? Then correspondingly, the cost of your mortgage will also rise, unless you have a fixed rate mortgage. While this rise will no doubt be gradual, it starts to eat into your profit as the cost of the house increases but your rental income doesn’t.
So the first step in making money from property is to be prepared for these interest rate rises. Fixed rate mortgages are one answer, also making sure you have enough rental income to cover the cost and still make what you need.
Finding the right property
Another big element to ensuring continual income is to get the right property in the right areas of the capital. There is huge demand to live in London and rental prices are sky high compared to the rest of the country. Yet even within that demand, there are areas that are more popular than others. Of course, properties here cost more but then the return is also higher as people expect to pay more rent for these areas.
If you are unsure which area of the capital you should be focusing on, then talk to estate agents around the capital. Start with estate agents like Keatons Canary Wharf, and move around to others in other areas, then to some of the Greater London boroughs. See what kind of rental income properties are getting and what the cost of the properties are currently. This will help you decide on what area to focus on.
Make sure you look at other opportunities to get into the market or expand your portfolio such as internet sites that focus on buy to let properties and specialists in the market. There are lots of good deals to be found, including property auctions, if you are in the position to move quickly when the right property appears.
Running the property
There’s a split between landlords who run their own tenancy and those who get a letting agent or estate agent to do it for them. The latter costs more money but if you have another job or don’t live near the property, this can be money well spent. Otherwise you could have to take an unpaid leave day every time there is a problem with the property and this costs you money.