Eying up the hurdles that now face buy to let investments in this current climate - daunting. You may need to be an Olympic hurdler to overcome them and invest in property successfully. The main top five which stop many are as follows:
- Deposits are now as much as 25% to – larger cash injection.
- Valuations are not meeting sell price – more cash to find.
- There are now large fees on arranging a mortgage – more cash.
- Standard Variable rates are not in line with the base rate – who is winning here!!
- Legal fees and all associated fees – more cash.
Let us take an £85K house that is on the market – and you get it for £80K (well done you may think). Based on a 20% deposit that is £16K to find for the deposit. Now along comes the valuer and he or she reckons that the property is only worth £75k and the mortgage company will only lend you £60K to buy the house – leaving you out of pocket another £5K! The mortgage company says that they have a great rate at 4.99% (4.49 points above the current base rate) and they want to charge £2K for the honour of giving you such a high rate. (who is benefiting there then!) The associated legal fees are a variable but on these type of buy to let investments you should set aside another £1K. When you get your tenant in, you have the usual expenses of which are obviously a variable – but are time consuming and are by no means hassle free.
You will still need to shell out £24K.
£5K shortfall due to valuation
£2K for a mortgage arrangement fee
£1K legal fees
Not particularly attractive – a fundamental reason for an alternative option!!!!!
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Tags: crowdfunding, house prices, property investment UK, The House Crowd