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Guideline - How to buy to let.
Investing in UK property.
Introduction
There has been an explosion of people
purchasing Residential Investment Properties (RIP’s) to let. Since
2003 ‘Buy To Let Properties’ accounted for 50% of the total
mortgage lending in a number of Irish Banks.
There are two kinds of investors in the RIPS
market – “The Professional” who has 3 properties or more, then
“The Private” who as 1 Residential Investment Property, a factor
which also determines how much they can borrow against the
property (see later).
Presently it is the private investor, which is
driving the markets. With changes in the revenue allowing one to
offset interest repayments against rental income and a reduction
in stamp duty, the appetite of the investor has been fuelled even
more so to a dangerous level. This is especially true in the
cities where rental income has not kept pace with higher mortgage
repayments due to increasing purchase prices.
On the other hand, with the opening of the
~European borders and substantial increase in East European
employees migrating to Ireland, the rental market in rural Ireland
is buoyant where property prices and the cost of living are more
affordable.
In some cases the costs involved cab be
prohibitive to purchasing investment property, particularly in our
cities where values are higher. This has resulted in people
looking further a field to the UK and Eastern Europe for
opportunities.
The Irish have now become the largest national
foreign investors in the UK, largely encouraged by a greater
rental potential due the a larger population and more reasonable
stamp duty charges.
In the UK, with London and the South becoming
more expensive, the Midlands (e.g. Birmingham, Nottingham and the
North East around Newcastle have now greater growth potential and
proving increasingly attractive to Irish Investors. As the
European Union expands, cities such as Prague, Budapest and Sofia
etc. have become ‘flavor of the month’ for Irish investors.
‘Buy to Let’ properties are now viewed as a
must in any investment portfolio along with equities and cash and
can be very profitable if financed properly. However, before
investing in a 2nd property Irish Mortgage Network Ltd
would strongly advise that people investigate all costs involved
and the potential rental income achievable.
Guideline - How to
Buy to Let
• Don't overstretch
yourself to buy an investment property just because everyone else
is doing it. If you are releasing equity from your own home, make
sure you can cope with the higher mortgage repayments before
taking the plunge and remember that interest rates will inevitably
go up, but rents won't necessarily follow.
• Investigate the
merits of interest-only mortgages, but remember that you won't
make any dent in the capital owed under this type of mortgage.
Also, the longer you stay on it, the higher your monthly
repayments will be for the remainder of the term, and the higher
your total interest repayments will be. If you stay on
interest-only indefinitely, you will have to sell the
property to clear the
loan.
• Contact Irish
Mortgage Network for the best deal. Although the simplest way to
release equity from your home to finance a second property may be
to take out a top-up loan from your current lender, there may be
better rates on offer elsewhere. Buying a second property could be
a good time to switch lenders and get a better deal.
• Choose a location
where there is a proven rental market and decide on the type of
tenants you want i.e. families, professionals etc., but remember
that there is such a thing as being too fussy. If it's a choice
between renting your property in a short-term let to an overseas
student who doesn't want to sign a lease, or leaving your property
empty while you hold out for a more permanent arrangement, you
could be waiting.
• Take advantage of the
tax breaks. Property investors can offset mortgage interest
payments against rental income, and there is also tax relief for
refurbishment and structural costs. Remember that there may be a
capital gain tax (CGT) liability on a second home when you go to
sell.
• If you're buying
overseas make sure to use a trustworthy agency with good local
knowledge.
Always do independent
research to make sure you are not paying over the odds for
properties in areas with no rental market. Check if the country
has a double taxation treaty with the Republic of Ireland if other
local taxes are likely to eat into your investment return.
• Hire a lettings
management agency if you don't want the hassle of fixing broken
pipes or inspecting carpet burns. They will take a 5% to 10% cut
of the rent for taking midnight emergency calls about leaking
washing machines, and ensuring tenants comply with the terms of
the lease. However, the expense could be worth it for
inexperienced landlords and busy investors with large property
portfolios, plus fees can be offset against tax.
• If you are renovating
a fixer-upper in the hope of earning huge capital appreciation
solely through your inspired DIY efforts, make sure to watch
Channel 4's Property Ladder at least once. In each episode,
amateur property developers go woefully over budget, ignore sound
advice and find when they go to sell, that not everyone wants to
buy a property with no upstairs bathroom.
Investing in UK property.
The easy way to the UK.
Thousands of Irish investors have made very profitable purchases
in various parts of the UK. But is is not a straight forward
process. Irish Mortgage Network offer invaluable advice based on
expertise to investors seeking finance for the UK property market.
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Sterling (stg£) loans for properties purchased in the UK
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A UK current account facility
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Introduction to a UK valuer and solicitor.
Why the UK?
Investing in property in the UK is particularly attractive for
three main reasons;
Stamp Duty Is Lower,
Stamp duty on UK property is currently 4%, compared to the 9% in
Ireland.
Rents are high,
Recent trends suggest the rental market in Ireland has slowed
down, where as rental returns in the UK are still very strong
Spreading your risk,
Diversifying you property property portfolio would reduce the
impact of a market slump or increased rate increases.
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