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Buy to Let
Selecting a new home may be the largest purchase decisions you will make and we at Strathmore Homes are committed to making that event as stressful free as possible and that your home will bring you pleasure for many years. Our success and reputation are based upon a firm belief in traditional values of craftsmanship combined with a determination to be innovative in design and construction. Strathmore Homes is committed to being the leader in customer service.

With poor stock-market performance over recent years and many experts suggesting this may continue for some years, wise chosen buy-to-let property investment opportunities are a great way to either balance your strategic investment portfolio, prepare something extra for that increasingly more risky pension plan. Rental yields of 5-12% pa are possible, even in a static or falling market. In addition, capital gains are quite possible in a growth market, in which case your rental yield can be impressively supplemented by the additional capital appreciation. In the past, property gains have been excellent and many investment and pension funds traditionally concentrate a portion of their fundholding on property investment. Indeed, while rents increase with inflation, loan repayments may stay fairly constant and so your profit should go up as the years go by. However, as always, past performance is no guarantee of future performance.Though buy-to-let is not without its problems. It is suitable for long-term investors, and people saving for their retirement and to supplement to a pension. As with any investment, you should not put all your eggs in one basket.
Beware of wildly forcast profit figures and ensure you take advice from a competent letting agent such as those found though ARLA. Excessive profit forcasts are often unreal after taking account of the expenses of running an maintaining the home, including a number of hidden expenses such as insurance, gas safety checks and central heating contracts. Buying an older home invariably means maintenance expenses are greater. Fortunately by investing in a new home there should be a lower expense of maintenance with a higher monthly rental. Consequently this produces a better net profit return.

Buy-to-let specialist

If you need to borrow to fund an investment property, lenders typically charge one per cent higher than on loans for your own home and the normal status checks apply. The usual range of deals is on offer from around 20 of the major players. Try a mortgage broker who specialises in buy-to-let as they may serve you best. Lenders will normally take into account your salary as well as the rent. To be on the safe side, rents should be 130 per cent to 150 per cent of the mortgage payments. With buy-to-let, a hefty deposit of 25 per cent to 50 per cent of the value of the property is normally required. There may also be the usual arrangement and valuation fees of around £500, not to mention stamp duty, legal and other costs.

Location is everything

Buy a property for commercial reasons alone, never just because you would like to live there yourself. There are many options - with the Government 's intention to encourage half of all 18-year-olds to stay in higher education, students are a growing group. First-time buyers are finding property too expensive, so they are renting instead. Company lets are still in demand. "Location, location, location" is everything. A one-bedroom flat in central London may be better than a house in rural Britain. Properties near good transport, popular town or city centres, popular holiday destinations and universities are wise choices. Visit local estate agents - ask them how much current rents are in the area, the demand, the likely period of vacancies and what standard of décor is expected. Once you have chosen the right property, make sure you select an agent, particularly if you are inexperienced. They may take up to 15 per cent of the rental should you chose the all inclusive package, but it is worth it as they alleviate stress. At the lower cost end of the option, you can simply appoint an agent to "find" you a tenant. The agent drops out of the picture once both parties start talking.
Ensuring that agents vet the tenants and can be invaluable if things go wrong. Before your tenants move in, take a deposit of at least one month 's rent and make sure a rental agreement is in place. A shorthold tenancy is generally best, as it usually allows the landlord to get the property back fairly easily. Arrange insurance for the building, contents and public liability and ensure your lender and insurance company are aware of the proposal to rent with a copy of the tenancy for prior approval in the lender's case. Also consider legal expenses cover and, if you have a hefty mortgage, rental insurance cover, although this can be quite expensive. Comply with all fire and safety regulations. For both your sakes, make sure you provide a detailed inventory before the tenants move in, then sit back and think of your next property project.

The Buy to Let scheme is designed to help private individuals to invest in property to let without being penalised by mortgage surcharges or paying commercial rates of interest. Mortgage lenders in the Buy to Let scheme will take account of rental income likely to be achieved from a house.A number of lenders now provide mortgages for the private rental sector. Always check your local buy to let market conditions to ensure that the gross returns on any properties you are considering. Also consider the day to day letting and rented house manangement.

This article is not intended to provide advice or guidance on which you should make decisions.



The Deputy Prime Minister's web site for assured shorthold tenancies - a guide for landlords and tenants with links to other sites

The Inland Revenue's site on the non resident landlord's scheme (IR 150)

ARLA (The Association of Residential Letting Agents) host a website with a comprehensive list of buy-to-let agents and advice tips.

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