The term buy to let is a British term which means buying with the specific purpose of then using the property to generate revenue, usually in the form of rental yield. A buy-to-let mortgage then, is a mortgage loan, the terms of which are specifically tailored to this purpose.
This is not at all like buying a home to live in. Instead, a buy to let property is essentially a business investment. For many, having a property is preferable to buying stocks and shares that they can’t see. It’s a good idea, then, for those who are willing to have money tied up for a long period of time and are willing to accept that the housing and renter’s markets fluctuate.
Yes, there are definitely risks involved with a buy to let mortgage, but there are also ways to mitigate these risks.
How do buy-to-let property investments work?
Here are two ways you can buy a residential property: you can pay for it straight up with cash (if you have it) or you can use a cash deposit and finance the purchase of the property with a buy to let mortagage.
There are then two ways to profit from the property: revenues from rentals (what your tenants pay minus what you pay in maintenance and other overhead costs) or capital growth.
What’s capital growth? This is when you “flip” the property, earning a profit when you sell it for more than what you paid
Buy to Let Properties and Risks… Read More