Published on: Monday 01 October 2007 by
Buying a property to let should be considered as a medium to long-term investment of at least 10 years. Although property prices may fluctuate from year to year, historically they have generally followed an upward curve.
Would-be landlords must be realistic as buy-to-let is by no means a guaranteed road to riches. You'll need sufficient funds to cover any void periods and should factor in additional outgoings such as council tax, insurance, utility bills, refurbishment costs and an annual gas check.
Alok Dhanda, principal and independent financial adviser at Dhanda Financial, Newcastle says many amateur landlords are taking equity from their main house to buy a rental property but urges a note of caution.
He said: "People are jumping on the property bandwagon thinking it's an easy way to get rich quick just like they did with stocks and shares at the end of 1999. But many of those people are still suffering a loss four years later and the same thing could happen with property.
"You need to be able to sustain a void period of at least six months and to factor in possible falls in rent, which look likely due to an oversupply of rental properties."
Although demand for rented properties has increased at a moderate but steady rate over the last 15 months, the latest RICS survey says new instructions are running ahead of demand in the North East, rental growth has slowed and rents are expected to drop in the next quarter.
However, chartered surveyor and RICS residential lettings spokesman Jeremy Leaf is still optimistic. He said: "Buy-to-let remains as popular as ever, despite interest rate rises and the constant debate about an imminent threat of a burst in the housing market bubble.
"There is also nothing in our monthly housing survey to suggest that owner-occupiers are selling their properties in order to rent in the short-term in the hope that prices drop before they purchase another property.
"Rents are rising, but so are property prices and this has been reflected in the declining rental yields over the last nine months. The largest decline in yields has been reported in the northern regions."
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