Buy to Let is the initiative devised by the Association of Residential Lettings Agents (ARLA) and supported by leading letting mortgage lenders. It is designed to stimulate the growth of the Private Rented Sector by encouraging the private investors to take opportunities given by competitive interest rates and the reasonable certainty of sustained capital growth over a number of years.
Many Landlords invest in property because of personal savings in banks and building societies, equity investments and pension schemes produce such low levels of interest. The investment in property also allows an investor to look at and improve his ownership unlike investment in shares or savings and in a market which most investors know and understand.
Demand for rented accommodation has increased by 50% throughout the UK in the last 15 years, with further particularly large increases seen in Greater London. Today, the private rented sector makes up about 15% of all housing stock and with the introduction and increased use of shorter employment contracts and the need for job mobility, the forecast is that it will continue to grow.
The growth in the private rented sector has also been assisted by the introduction of the Housing Act 1988. This deregulated the rental market as well as providing a legal framework which was fair to both the Tenant and the Landlord. Other factors which have assisted included the overall growth in the number of qualified specialist letting agents which with the introduction of the housing act have made mortgage lenders accept the risk of assisting private landlords with competitive interest rates.
Large increases in property values over recent years have also encouraged investors to invest in rented accommodation. Most of the UK has seen an average property price increase of 8.4% per annum over 30 years and even when property prices have fallen slightly it is predicted that they will always rise due the shortfall of new homes required to replace old stock and to accommodate the ever increasing UK population.
The supply of good quality 1 & 2 bedroomed properties in particular is unable to meet the current demand in many local areas and as a result rent achieved levels are increasing. In general demand for property to rent is providing a healthy rate of return on carefully and well prepared investment properties
The type and age of a property tends to be unimportant as long as the property is in good condition and the layout is not unusual or too small. A tenant will normally consider the same factors when choosing a property to rent as would a person looking for a property to buy, including factors as décor, how modern bathroom and kitchen facilities are and type of heating. In some cases it is advisable for a Landlord who is thinking of purchasing an older style property to have a survey carried out so to identify any future problems.
Most tenants will be looking for good quality one or two bedroomed flats in well maintained blocks. Larger flats will often produce a lower rate of return and are often more difficult to let. When purchasing a flat consideration should be given to the exterior appearance of the block and quality and upkeep of communal areas. Research should also be made into the cost of maintenance charged by the freeholder or managing agent and details of any soon large maintenance projects to the block.
Small modern properties on modern development are also an ideal investment but sometimes might have to mature before greater returns are achieved. Other properties such as larger homes will let but often do provide the level, of return most investors are looking for.
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