Will big deposits help landlords realise bigger profits

With news emanating from the Royal Institute of Chartered Accountants (RICS) that average tenant rents have risen by over 4% in the last twelve months and are likely to do the same in the coming year, property investors are still being drawn into the private residential letting sector, as providers of landlord insurance can readily confirm.

However, investors who are tempted to try their hand in the letting sector for the first time are being urged to be cautious by at least one expert. Lee Grandin, a Director at Landlord Mortgages, believes timing your entrance into the market can make all the difference to whether a venture will be successful or not, and says having ample funds available from the beginning will be a big help. He said: “A lot is dependent on your deposit – the higher the deposit that you have got, the better the rate.

The most competitive rates tend to be over two or three years.” He went on to suggest a set arrangement fee for investors looking for mortgages over £150,000 and perhaps considering a change to a percentage once the loan has dropped a little.

Certainly the prediction by the Council of Mortgage Lenders that landlords can expect long term gains in both rental achievement and property values will not dissuade any prospective landlords from investing their money elsewhere, but it is worth remembering that new entrants into the market should be fully conversant with the demands the industry places on landlords, and as with any other financial venture, to fully research the business proposition before they release their cash.

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