Repayment mortgages versus interest-only mortgages
Repayment mortgages are more expensive but you will build up equity in the home and end up owning it. How much this means to you will probably depend on your long-term goals.
For example, if you plan to let out a property for a few years and then move into it yourself (or have a relative move into it), then a repayment mortgage could be a very sensible option. If, by contrast, you want to maximise your yield, for example, to provide an income in retirement, then an interest-only mortgage is likely to be a better option.
Get pre-approved for a mortgage
This is standard advice to any buyer, residential or investment, and it serves two, very useful purposes. Firstly, it forces you to think about how much mortgage you can actually afford and secondly it marks you as a serious buyer who can make good on any offer.
Double-check you know what your transaction costs will be
When figuring out how much you’ll actually end up paying for a property, you need to include the purchase price, plus transaction costs, plus the costs of any updates you need to make. Sometimes transaction costs are different for investment buyers, for example, there is a Stamp Duty surcharge. These rules can and do change so make sure you know what rules are in force at the time you make your purchase.
Speaking of rules, if you’re planning on using a property for short-term lets, it’s very much advisable to check the local rules on this as many local authorities are putting this area under tighter regulation.
Do your sums very carefully
This is true of all property purchases, but especially with investment property as you will often find yourself having to work on estimations. Base these on thorough research. Err on the side of caution when estimating how much you can charge for rent and what you can expect in terms of void periods and maintenance/repairs.
Make sure you account for all costs involved in the running of a property. In particular, check exactly what your potential lettings agent offers as part of their standard fees and what services are extra. Remember, you will not be able to charge these extra fees directly to tenants, so if you’re going to need to use add-on services, you need to make absolutely sure that you can recoup the cost of them in your rent.
