Is Property Investment for me?
With banks offering little incentive to save your money with them and interests rates for borrowing incredibly low, investing in property is becoming increasingly common.
There has been a lot of discussion around the benefits of purchasing additional properties as a long-term investment strategy and with the rental market in Northern Ireland being particularly strong, here are 3 key things to consider when deciding if this is right for you.
Deposit – When buying an additional property, the deposit required by many lenders can be 25%+. For many this can be off putting, although there are often alternative options.
Using some of the equity from your home as a deposit my make it affordable. We also have access to some lenders that offer lower deposits for second homes if you meet their criteria.
Yield – If planning on renting out the property, this is what you need to calculate to help you determine if it is financially a good idea. You can calculate the Rental Yield by using this formula:
Rental yield = (Monthly rental income x 12) ÷ Property value
A yield of 6-7% is usually seen as a good return on investment. Don’t forget that if you plan to sell you may be liable for stamp duty (if over £125k) and you will have to pay Capital Gains Tax on any profit you make.
Function – Whether you want to rent your property out long term to a tenant, use it as a holiday home for your family and friends or to rent it out as serviced accommodation (through Air BnB or booking.com etc) you will need to make sure you can legally do this and your insurance covers you for this.
To explore the options of a second home further and find out if it might be right for you, please get in touch and allow us to walk you through the process to experience the best mortgage advice in Belfast.