What are the risks of buy to let mortgages?
As with all investments, the value of a property can go down as well as up - and unforeseen structural problems could prove expensive. However, if you pick the right area and are realistic about returns, you can reduce the risks.
Rental income from buy to let properties too can vary: if the market is saturated with rental properties, your annual income may remain static or even fall. You need to build leeway into the rent to allow for periods when the property might be empty between lets (it takes on average four weeks to let a property), and to cover maintenance costs.
The more cautious investor might prefer to borrow less - you should aim for a rental income of between 1.3 and 1.5 times the monthly mortgage payments.
Many people are put off buying to let by the thought that they will have to spend a lot of time sorting out problems such as broken washing machines or tenants who default on payments. A good agent can take care of everything, from finding tenants and checking references to managing an inventory and dealing with unexpected problems like burst pipes (although there is of course a cost for this).
Agents can also advise on tenancy agreements. Most lenders require you to have a six-month, assured shorthold tenancy agreement with your tenants. You may also find it more difficult to arrange finance if you are planning on letting to students or for more irregular tenancy periods, such as "holiday lets" or "company lets". You may also have difficulties should you be planning on letting to a DSS tenant.
