Should You Invest in Buy-to-Let Properties or Not?
Whether or not you should invest in buy-to-let properties should be directly linked to your ability not only to finance the property initially, but also, to your ability to continue to finance the property despite increases in interest rates on your buy-to-let mortgage, necessary repairs, and lapses in tenancy. In general, the 125% rule ensuring that the monthly rent meets mortgage payments and brings in a bit extra is a rule worth keeping.
Although it might very well be tempting to forego that rule in difficult times, it is essential to your buy-to-let health. Gambling on the value of the home raising enough to bring you some type of profitable gain at the end of your buy-to-let investment is not going to help the average landlord to weather financially difficult times.
In fact, it is essential that landlords look at the feasibility of letting each property that they are considering. Is the property in the proper condition for his targeted tenant group? Is the property in good to excellent condition or is it going to take a large investment of money to get the house in shape for tenants?
Plus, the possibility of a lapse in tenancy is a real one, especially if housing prices and interest rates coincide to create a favorable buying market for the average individual to purchase a home rather than to let one. Can you afford to wait it out until you do bring in a new tenant? Do you have enough residual funds left to cover the cost of your monthly mortgage payment on the property should the need arise?
It is important to take all of the above scenarios into consideration when you make the decision to begin a buy-to-let portfolio. The best strategy is to use your head and crunch the numbers rather than relying on your personal dreams and desire to invest. After all, affordability must come before profitability.
