Title:
Buying To Let: Is
It For You?
Word Count:
882
Summary:
This article
deals with the basics of buying to let, so that you can decide whether it is
for you or not.
Keywords:
buying to let,
buying let, buying let property, buying let mortgage, advice buying let
Article Body:
If you read the
title of this article and thought to yourself, "Let what? What am I letting happen buy buying? And what am I buying?", than this
article is definitely for you. First let
me establish that the "buy" refers to a house and second, the
"let" part, that refers to renting that house out to someone
else. Basically it means that you buy a
house and let someone else pay the mortgage and live in it. There are, as with everything, some really
good aspects of this kind of arrangement, and some really bad ones as
well. This is not an agreement to enter
into frivolously for if you do, you very well may regret it for the duration of
your mortgage.
Basics of the Buy To Let Agreement
Buying to let, or buying to rent,
simply involves a person finding a house, signing for a loan, and then
immediately renting it out to someone else.
The house is in the buyer's name, but then it is contractually signed
over in a rental or lease agreement to a tenant.
Why Would I Want To Do This?
This is a great way to generate some
extra cash flow, buy a house to later sell for profit, or buy a house to later
dwell in yourself.
Extra Cash Flow
When you make the purchase of a
house in order to rent it out to someone you go through the loan process just
like with any other house. Once you have
established the mortgage payments that you will owe every month you then can
set the rent price. The rent price is
set by you and can be whatever you want it to be. If you are paying $500 per month and want to
rent for $800, you are making $300 profit every month. You can set the price of rent to whatever you
think that the market will bear.
Buying For Selling
You can get an interest only loan,
the kind of loan that typically has the lowest payments for the first few
years, and buy yourself a house to rent.
Assuming that instead of those $500 payments per month, and now your
mortgage is only $400, but you are still charging $800, you will have a lot of
money to put back into the house each month.
You can, instead of spending or saving the profit from the renters for
personal use, put it right back into the house in the form of repairs and
upgrades. The renters think that they
are getting a good deal because you are constantly doing good things to the
house that they live in. You will be
thankful and grateful to the renters because they will be paying for your
mortgage and for the repairs that you are doing. After a few years you can sell the house at
an inflated price cue to all the things you have done to it and you can make a
lot of money on the deal.
Buying For Living
If you don't have the money just yet
to make the mortgage payments than perhaps you could consider renting your
property out for a while until you can get to point where you can afford to
live in it. Or, perhaps you want to buy
a summer home but don't have the means to do so. You can buy now and rent it out until you
have the resources available to take on the extra mortgage payments
yourself.
If it sounds too good to be true…..
Renting isn't the wonderful,
astonishingly simple way to make hordes of extra cash and become the next big
real estate mogul. There are some
negatives to it as well.
Landlords and other bad things
If you buy and rent out a house, you
are the landlord. You have to make sure
that the tenants are paying rent on time, you have to fix things that break or,
if you can't fix them, you have to pay to get someone to come out and fix them. You have to make sure that you have tenants
that are not going to tear up the house and leave it is shambles when they
leave, especially if you are renting in order to later sell for a profit. Any landlord will tell you that renting to
good tenants is a great experience, but renting to bad tenants, nothing could
be worse. If you don't get tenants that
will treat the property just as good or better than you will, than you will
probably end up losing money on the deal.
What next?
If you feel like the role, or should
I say, job, of a landlord is for you, than go out and start looking for
someplace to buy. Make sure that you
have a clear idea of what it is that you want to do with that property and get
the loan that is most appropriate for your situation. If you don't think that you will do well
getting called to fix the roof, seal the plumbing, spray for termites, or any
of the many other things that have to be done for a house, than maybe you ought
to stay away from being a landlord.
Perhaps the only thing worse than renting to bad tenants is renting from
a bad landlord.