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| Update June 2002 |
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Buying
to let can be a good long-term investment.
By Michael
Horbowyj
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| “Buy-to-let”
has been big business in the UK particularly
during the last five years. Last year saw
£6.6 billion lent on investment property,
according to market analysts Datamonitor,
a major increase compared with £3 billion
in 1999. This is being fuelled by 40-year
low interest rates and poor stock market returns.
Britain saw buy-to-let mortgages increase
by 50% in 2001 as investors rushed to benefit
from the housing boom. |
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| Many
experts predict that this market is about
to slow as demand for rental property decreases,
equities recover and interest rates rise.
Despite the drawbacks, Datamonitor have said
that buy-to-let properties can still offer
a good return to investors, if they are prepared
to do their research and treat this as a long-term
investment. |
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| Although
60% of lenders in the UK now offer a but-to-let
scheme, raising finance for this type of investment
here in Portugal has been difficult. Lenders
are now seeing the market as having potential
for growth with property construction booming,
particularly in the Algarve and the tourist
industry flourishing. Holiday letting is increasing
with the Algarve receiving around 5 million
tourists annually. This is expected to rise
in the future with the government realising
the benefits to the Portuguese economy. In
1997 legislation was passed allowing foreign
investors to build hotels, restaurants and
bars only needing to obtain permission from
the relevant municipality and not from the
local civil governor as well. |
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| Investing
in property long term has produced a sustained
level of investment return but people can
make mistakes particular in the buy-to-let
market. There are a number of considerations
to bear in mind when venturing into this market. |
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| You
should aim to charge a rent of at least 125%
of the normal mortgage payments. Get your
sums right, you need to cover the mortgage,
periods when the property is not let, agents
fees, service charges, insurance and other
outgoings. It is not a “get rich quick
scheme. Position is all-important for holiday
rentals, it is usually good to be close to
all the amenities and have access to a swimming
pool. Do not just think about rental yield.
To maximum returns you should also purchase
a property, which will appreciate in capital
terms. Obtaining an appreciable amount of
capital gain needs a long term commitment
and is vital part of the calculation. You
need to check out with the local agents to
see how strong demand is in your chosen area.
Remember the property will need to be maintained
and furnishings will need replacing from time
to time. Do not base your choice on personal
taste, decorate to a high standard to attract
the right customers but keep it simple. |
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| Buying
property is always a major financial commitment.
Always seek advice, talk to the local agents,
you can let properties yourself but this can
be hit and miss. Letting agents are the professionals
some offering guaranteed annual contracts
but of course, guarantees have to be paid
for. We believe that property as an investment
should always be part of a balanced portfolio
and should not be seen as the only method
of long term investing |
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| If
you would like further information on buy-to-let
mortgages for Portuguese properties please
give us a call. |
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| YOUR
HOME IS AT RISK IF YOU DO NOT KEEP UP REPAYMENTS
ON A MORTGAGE OR OTHER LOAN SECURED ON IT |
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