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When does a property become a good investment opportunity?

By HopwoodHouse
06 December, 2016


Making a successful investment in property relies on a number of factors but one of the most important elements of renting a property is ensuring that renters are ready and waiting. 

Prospective tenants have differing needs and this can determine the type of property you should purchase. Young professionals will have different needs to a family and so you need to find a property that ticks every box while also understanding who you are targeting.

Once you have decided the market you want to target you now need to consider the financial side of the investment. Is the property going to increase in value, is the area likely to see price increases? There are several things to consider. On the whole, property prices are on the rise across the country but the amount is determined by the region because there can be significant differences.

The same can be said for rental prices. How much are tenants already paying in the area? You will also need to consider the fact that lenders will soon be bringing in new affordability criteria that will mean that the rent you receive will have to be worth a minimum of 125% of your mortgage repayments.

Buy-to-let is becoming more and more difficult due to the stringent checks and tests that are being put in place. New stamp duty changes that came into effect in April 2016 have also increases costs, all of which can make a difference.

Next year, more changes are coming into play as landlords will be losing some of the tax relief that was once afforded to them. Landlords with large portfolios can take on these additional costs but for smaller landlords, the costs could become too much.

Purchasing a buy-to-let property investment is not the only way to invest in property because it can now be done online and by investing in property debt. This will offer solid returns on your investment without the worries or concerns of being a landlord. You won’t have to worry about tenants or repairs or stamp duty costs.

Instead, it is possible to invest in secured mortgage loans and there are a number of online companies that offer this. It provides borrowers with access to expert finance in order to purchase properties carry out renovation work or develop properties.

There are a wide range of mortgage loans available and investors can develop a portfolio of loans that will come at a lower cost than purchasing a buy-to-let property. All of the loans are pre-funded prior to becoming available on many of these online platforms and so, investors can begin earning interest from the very first day.

Once the loan ends, the borrower repays and the capital is then paid back to the investor with any additional interest added. The average net return for investors is 7.2% per year. Loans are secured against the property of the borrower which means if they fail to make repayments the property can be repossessed by the online lenders in order to retrieve any losses.

 

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