Buy to Let: boom time for one-bedders
If you are thinking of investing in a buy-to-let property, go for a one bedroom flat. According to rental agent Ludlow Thompson, rents on one bedroom flats have risen twice as fast as the rest of the market, jumping by 5.4% in the last quarter.
Rents on one-bedroom flats in London have increased by 16% in last year and by 8.4% across the UK. Returns on one bedroom flats grew twice as fast in the last three months as rents on two bed flats at 2.5% whilst for four bedroom houses rents actually fell slightly by 0.3%.
Ludlowthompson.com says that the trend for tenants to stay longer in rented accommodation rather than buy their own houses continues and the longer people stay in the rental market the more likely they are to upgrade from flat sharing to renting their own one bedroom flat.
'Eventually renters want a bit more privacy and rising wages means they can pay for that,' said Stephen Ludlow of ludlowthompson.com. He pointed out that the trend towards longer-term renting has other benefits for buy-to-let landlords. Void levels will be lower and other lettings related costs such as advertising the property and undertaking credit checks on new tenants should also be reduced.
Stephen Ludlow advises potential buy-to-let investors looking at one bedroom properties to look for higher than average quality properties, saying that to retain better quality tenants landlords may need to upgrade some of the properties’ fittings
Meanwhile there are some very good buy to let mortgage deals around. Increased competition between lenders in the buy to let market will often allow investors to more than make up for the recent squeeze in property investment yields by remortgaging at a lower rate.
Mortgage broker Charcol is recommending landlords who haven’t recently reviewed their existing buy to let mortgages to do so in order to ensure they maximise the yield on their properties. Charcol has a two-year fix at 5.45% which is available at up to 80% loan to value. Rental yield must be 130% of the monthly cost of the mortgage to qualify.
Skipton Building Society has expanded its choices for residential buy-to-let borrowers with the launch of new discounted and fixed rate products. The Buy-to-Let Discount Mortgage now has an initial rate of only 5.69%, whilst the new Buy-to-Let Fixed Rate is fixed at 5.89% until 30 April 2008.
‘We’ve already made our buy-to-let products more attractive with the recent announcement of increased loan to values and reduced rental income cover,’ said Jennifer Holloway of Skipton Building Society. The mortgages are available for up to 85% loan to value and there is free valuation and free legal fees through Skipton Home Conveyancing Service on all residential buy-to-let remortgage cases
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