A Buy-to-Let property is an income-producing residential investment, with potential for making a capital gain when the property is sold. An investor buys a property either off-plan or immediately available and makes money on their investment by renting out the property in the short term, with the long term goal of making a profit on the property when they eventually sell it. Buy-to-Let property is generally seen as a stable, medium to long term, low-risk investment and has become a very popular income generating scheme for many in the UK.
Those purchasing Buy-to-Let property usually fall into one of two categories; the investor with a portfolio of properties that is using rent from tenants as their sole income, or an investor that is looking for an added income stream by having one or two homes that they rent out.
In the current financial climate, property investment is widely considered as an attractive investment option compared to saving which offers low interest rates or the volatility of the stock market.
What to Consider When Making a Buy-to-Let Investment
There are two key factors to look for when making a Buy-to-Let purchase in order to achieve maximum value on your investment.
Invest in a ‘promising’ area that:
Galliard has identified the best locations for return on investment as ‘regenerating’ areas.
Here at Galliard Homes we have built our reputation on acquiring sites in London areas where there was little or no development, unlocking the potential for our investors to attain huge capital growth by joining us in these yet to be regenerated locations.
Our regeneration masterplan began in the early 1990s when we helped pioneer London’s Docklands, taking the locale from an undesirable residential address, bogged down by part constructed schemes and buildings in receivership, to an attractive place in which to live and invest. Buyers who acquired homes at our Papermill Wharf development in 1993 have seen their £50,000 investment now valued at £500,000.
In 1995, Galliard reinvented the South Bank with conversion schemes at County Hall and The Whitehouse - creating over 1,000 luxury homes. We unlocked the potential of this area long before the Tate Modern, London Eye, London Aquarium, and the myriad of bars and restaurants that now grace this highly sought-after locale.
Similarly, in 1997, Galliard helped to transform car parks and derelict warehouses adjacent to Butler’s Wharf into a premier riverside postcode, with schemes such as Spice Quay Heights, Tea Trade Wharf and Cayenne Court. We were able to spot the potential of these sites and, once again, we passed on a great opportunity to invest with us and achieve capital growth.
Today, Galliard Homes continues to invest in Canary Wharf, which has seen exponential economic growth in the last 20 years. Canary Wharf and its E14 postcode is now considered as London’s highest salary postcode, with an average salary of £100,000, due to the commerce which emanates from major banks who are based in One Canada Square.
Orchard Wharf is Galliard’s brand new, mixed-use development in the Docklands. It will have an outstanding assortment of 338 one, two and three bedroom apartments, duplexes and penthouses, which will be up to 600 sq.ft. Many of the rooms will also benefit from dual-aspect views of the City.
The development will be conveniently situated within the Leamouth Peninsula and the Royal Docks, there is the potential for capital growth for investors, as Orchard Wharf will be situated close to Crossrail at Canary Wharf, which will be on the Crossrail line, which is due to be operational in 2019.
Residents will only have a five minute stroll to East India DLR station and a two minute journey to Canning Town and from there a four minute service to Canary Wharf, which will open up across London and the Home Counties in just two years’ time.
What are the Advantages of a Buy-to-Let Investment?
In order to keep the market afloat, Buy-to-Let mortgage rates are at a record low to incentivise investors following the recent tax increases for landlords. For those looking to make a start on their property portfolio or expand their existing one, this is an ideal time to take advantage of such low rates.
Ideal for those with a large deposit, but unable to buy their property outright; a Buy-to-Let mortgage allows investors to buy or re-finance property that they would rent out to tenants. Whereas residential mortgages calculate eligibility according to the borrower’s salary, Buy-to-Let mortgages operate using a rent to interest (RTI) calculation. This is where the buyer must prove that they will earn enough rental income to cover the interest on the mortgage, and typically lenders look for rent that will cover around 125% of the repayments per month. Learn more about Buy-to-Let mortgages.
Just like any investment, there is risk involved; however, house prices have a pretty good habit of continually increasing in value, even through times of economic downturn. Savills' five-year forecast for 2015–2019 predicts a 10.4% increase in London house prices.
It is important that you research the market prior to committing to any investment strategy. In terms of Buy-to-Let, this includes calculating affordability and making a contingency plan for any outgoings which this type of investment may incur, for example mortgage payments and property maintenance/repairs.
Even if you have chosen the most popular area of London to purchase your Buy-to-Let property, there may be periods where your property is empty. You will need to contingency plan for times like this, and also unexpected costs such as repairs or a new boiler.
Lastly shop around for your mortgage provider and consider seeking advice from a specialist Buy-to-Let broker in order to secure the best deals. ThisisMoney.co.uk provides an excellent Best Buys table.
Investing in property has always been considered a fairly stable mid to long-term investment, as renting can earn a good income on a monthly basis and if the property is bought and sold later, it can make a considerable profit, particularly if research has been made into the area, such as transport, education and leisure facilities.
The announcement of Crossrail in 2010, which is a railway line which runs through London and the South East, as well as the Home Counties, has already boosted property values. In January this year, MoneyWise reported that house prices rose 60% in areas that were on the line.
Properties in Hanwell, West Ealing and Acton Mainline averaged a 60% increase due to their inclusion in the Crossrail line; while properties near Tottenham Court Road and Bond Street averaged £1.6 million, an increase of 66%.
Galliard Homes has launched a number of offers designed for Buy-to-Let investors:
This offer is guaranteed to benefit investors and owner-occupiers alike as all buyers will receive 3% simple interest on their deposit held between exchange and completion at Silver Works in Colindale.
Launched in May, this offer covers Galliard’s developments, Harbour Central and Orchard Wharf, which will be situated in the prestigious E14 postcode. The deals include a 12-month service charge holiday, 0% letting and management agreement (if Buy-to-Let), plus a free furniture package.
Without this scheme I would not have been able to purchase this specific property nor would I have probably joined the property ladder. Galliard were very helpful throughout the process and dealt very well with my case, I would most definitely recommend the scheme to other purchasers.
The Galliard Homes staff were great, very responsive, and did everything in the times they said. I found the overall help to buy service helpful and a life saver! I would absolutely recommend this scheme to other purchasers. A very positive opinion from me.