Thursday, February 26, 2009

How To Use A Buy To Let Mortgage For Income

By Chris Channing

A buy to let mortgage is a type of mortgage that allows a borrower to buy a piece of property. With this property, the borrower will be able to lease it out to tenants in exchange for monthly profits. In turn, the profits are used to pay off the mortgage. The key to making profit from the situation is to weigh costs and minimize them by maximizing profits.

Buy to let mortgages will continually cost the borrower money, whether or not the borrower has a tenant that is paying money on the property. To ensure longer periods of payment are had, it's always a good idea to make a lease of 12 months a mandatory agreement with the tenant. In the event that a lease is broken, most landlords include special fees that are applied, or even demand full payment for the rest of the term.

All good investments carry a certain amount of risk with them. Buy to let mortgages are no different, as market conditions may take a turn for the worst and prove to make a lack of tenants looking for housing. This can be circumvented by researching a target market based on its past and its projected future growth. Doing so helps ensure an investment isn't made in vain.

Obviously, there is a very fine profit margin in making payments on a buy to let mortgage and taking into consideration what is paid by the tenant each month. Since the two are usually about equal for an average mortgage payment and cost for average living space, it's important to reduce costs where possible. Taxes and insurance premiums are the main factors to worry about here, and both will need a respective agent to handle properly.

There are some other tactics that can help raise profits as well, although it is important not to exploit them for personal gain. One such method is to buy a few pieces of property in a specific location, so that prices can be changed at will. By controlling a large radius of residential investments, the competition is reduced to near nothing. Because this is somewhat of a monopoly, it allows an investor to charge market value with ease.

Buy to let mortgages will take a lot of research in obtaining. After all, even a few miscalculations can make an investment a mistake, and plummet the capital of an individual to near nothing. Bankruptcy is common when things go wrong, so do as much research and get as much second opinions as possible along the way.

Closing Comments

It won't take too much time to put a good portfolio of investments together- but it will take a lot of research beforehand. Go online to read more information on the subject of investing with buy to let mortgages, and ask financial leaders in the community for more advice on where to go from here.

About the Author:

No comments:

Post a Comment