After years on the shelf, mind buy-to-let is again being praised as a key tool for investors. It is a combination of rising rents, cheap mortgages, poor bank savings rates and strong capital growth which is bringing this tool of the shelf.
– An average easy access savings account now only pays 0.78%
– The average rent in England & Wales has risen 3.3% in the last year (LSL Buy-to-Let index)
– Landlord borrowers can get rates of 2.74 per cent for a two-year discounted tracker from Principality Building Society or a five-year fix at 3.99 per cent from Clydesdale Bank.
– Property prices in some areas of London have risen by up to 10% in the last year
However investors looking to buy in London should be aware that yields vary significantly, shop depending upon where an investor wants to buy. A potential landlord should work out his investment goals and research thoroughly before buying; Gross yields can exceed 7% in areas such as Barking but fall to around 5-6% in areas such as Wandsworth and to around 4% in prime markets like Westminster. However, advice these prime markets such as Westminster are tending to see more capital appreciation at the moment (even though their rental yield is slightly lower).
For those future landlords considering buying a property to let in London, it is also worth considering which type of property will let best (on top of capital appreciation and yield). One or two-bedroom flats are still a safe bet and should let quickly, particularly if they are within zones 1-3 and minutes of a tube . These sorts of flats will generally receive strong demand from young professionals.