Why Buy-to-Let remains attractive
I was surprised to note the recent resurgence in the buy-to-let market, which had plunged dramatically in the aftermath of 2007. On first inspection, buying a property with a finance charge of 5%, whilst receiving 6% income on it seemed to be a lot of hassle for little reward.
However, a closer look at the maths reveals why it still holds an appeal for many investors trying to eke out an income from their capital.
Say you borrow £100,000 from your bank at 5%, buy a property for £150,000 and then rent it out for a yield of 6%. You would receive £9,000 of rental income per annum, or £4,000 net of finance costs. This is equivalent to an 8% return on your £50,000 investment.
Granted there are other costs, such as repairs and management fees, but it still provides a decent cash return. With interest rates set to remain low for some time and renting becoming more popular buy-to-let could provide a decent way to diversify your investment portfolio.
I was surprised to note the recent resurgence in the buy-to-let market, which had plunged dramatically in the aftermath of 2007. On first inspection, buying a property with a finance charge of 5%, whilst receiving 6% income on it seemed to be a lot of hassle for little reward.
However, a closer look at the maths reveals why it still holds an appeal for many investors trying to eke out an income from their capital.
Say you borrow £100,000 from your bank at 5%, buy a property for £150,000 and then rent it out for a yield of 6%. You would receive £9,000 of rental income per annum, or £4,000 net of finance costs. This is equivalent to an 8% return on your £50,000 investment.
Granted there are other costs, such as repairs and management fees, but it still provides a decent cash return. With interest rates set to remain low for some time and renting becoming more popular buy-to-let could provide a decent way to diversify your investment portfolio.