Eying up the hurdles that now face buy to let investments in this current climate Â – daunting. You may need to be an Olympic Â hurdler to overcome them and invest in property successfully. Â The main top five which stop many are as follows:
- Deposits are now as much as 25% to – larger cash injection.
- Valuations are not meeting sell price â€“ more cash to find.
- There are now large fees on arranging a mortgage â€“ more cash.
- Standard Variable rates are not in line with the base rate â€“ who is winning here!!
- Legal fees and all associated fees â€“ more cash.
Let us take an Â£85K house that is on the market â€“ and you get it for Â£80K (well done you may think). Based on a 20% deposit that is Â£16K to find for the deposit. Now along comes the valuer and he or she reckons that the property is only worth Â£75k and the mortgage company will only lend you Â£60K to buy the house â€“ leaving you out of pocket another Â£5K! The mortgage company says that they have a great rate at 4.99% (4.49 points above the current base rate) and they want to charge Â£2K for the honour of giving you such a high rate. (who is benefiting there then!) The associated legal fees are a variable butÂ on these type of buy to let investments you should set aside another Â£1K. When you get your tenant in, you have the usual expenses of which are obviously a variable â€“ but are time consuming and are by no means hassle free.
You will still need to shell out Â£24K.
Â£5K shortfall due to valuation
Â£2K for a mortgage arrangement fee
Â£1K legal fees
Not particularly attractive â€“ a fundamental reason for an alternative option!!!!!
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