Buy-To-Let Investors Must Be Rich

Saving and Making Money

08 November 2007 | 0 Comments

Only the wealthy can afford to invest in buy-to-let property, the Royal Institution of Chartered Surveyors (RICS) warned today.

Only the wealthy can afford to invest in buy-to-let property, the Royal Institution of Chartered Surveyors (RICS) warned today. A report by the organisation has found that getting into the buy-to-let market is so expensive right now that would-be-landlords need to lay down an average deposit of £65,600 just to get a foothold on the buy-to-let ladder. That's more than six times as much as they would have needed to put down just five years ago. Why? Because to qualify for a buy-to-let mortgage, most lenders require borrowers to prove that rental income on the property will exceed 125% of their monthly mortgage payments. Rising interest rates means investors have to invest "more capital than ever", according to RICS, to keep their mortgage payments low enough to meet this target. Senior economist David Stubbs remained upbeat, however, predicting that existing landlords would use the equity in their past investment properties to fund the deposit needed for new ones, and this would ensure that demand from the buy-to-let sector "does not dry up entirely". Going forward, RICS predicts the yields on buy-to-let investments will increase slightly next year, arguing there is evidence that rents are rising strongly and buy-to-let will continue to be an attractive proposition to many. That is, if they can afford it...

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