A significant part of your investment strategy should consider what outcome you desire: are you looking for extra income, future capital growth, or immediate capital gain? This will determine how you proceed. Whatever your aims, however, the vital first step is to buy below market value, giving you the flexibility to move with changes in the market and still make money in any circumstances.

When you buy property with the help of a mortgage, you are committed to paying interest on the loan every month. The fundamental aim of successful Buying to Let is that the monthly rent you receive should be sufficient to cover the monthly interest, as well as all other outgoings such as management fees, insurances, maintenance, and of course void periods (it is unusual for properties to be fully let 52 weeks a year, every year). For the moment, however, after the substantial price rises of the last few years, rental yields have mostly fallen behind, as rents have failed to keep pace with price rises. This means it is often necessary to inject a few pounds a month to help with the mortgage interest but, in any event, the opportunities for capital growth far outweigh any short-term subsidies that may be necessary. 

Most lenders expect the rent to exceed interest payments by 30%, calling it 130% rental cover, but there are always deals available if the property in question is in an area experiencing high rental growth, or where prices are growing faster than average.

So if you are searching for extra monthly income, you should buy properties which return a good rental yield and which are likely to have low maintenance costs. It is also important to ensure there is good rental demand for that type of property in the area, to safeguard future income streams against void periods.

If your aim is for future capital growth only, you can afford to accept properties with a lower rental yield, as long as you are not out of pocket each month after paying interest and all other outgoings. The interest and outgoings are often referred to as holding costs; in other words the costs to you of holding on to the property.

Provided you are not expecting surplus income, but are covering all holding costs from rental income, you can simply hold onto the property for ever and watch its value increase dramatically over the long term. There are many property professionals whose attitude is “why would you ever want to sell? If you need the extra money you can re-mortgage against the increased value without paying any taxes at all.”

This is an excellent approach in most circumstances, provided the rent covers the increased interest resulting from the larger mortgage. As always, you should establish the degree of risk you are comfortable with, and stick to it.

There are times when it is appropriate to sell; either because of your personal circumstances or in response to market movements; or perhaps that was your strategy for a particular deal anyway. With an off plan purchase, for instance, if you invest a £10,000 deposit and can sell it on before completion at a £10,000 profit, you have made a 100% return; doubled your money. Try getting that return from a Building Society!

Whatever you choose to do with your property, it is very wise to have decided your strategy before you commit to buying. To help you with that vital process, Viceroy Invest works with you on your personal property plan before you commit to any purchase with them.

This is all part of the service which helps distinguish us from our competitors, some of whom are quite happy to take your money for developments which are quite inappropriate to your personal goals. If they don’t find out what your aims are, how can they help you achieve them?