Buy-to-let Investment Properties

Buy-to-let investment properties are showing very good returns. In fact reassurance for those who own a buy-to-let investment property is that Paragon Mortgages’ latest Buy-to-Let Index showed average yields rose to 6.3% in January - their highest level since March 2006. Industry experts feel that given the current economic climate this trend in buy-to-let investment properties will continue.

The explanation for the boom in buy-to-let investment properties is simple. As finance become sparse, buyers, especially first time buyers will opt to rent. Apart from high interest rates, lending institutions are also asking for very high down payments. Nationwide Building Society, Britain’s largest building society, tightened its lending criteria recently by demanding a deposit of at least 25 per cent to secure a mortgage.

Another factor bolstering buy-to-let investment properties is the fear of a further downward spiral in property prices making buyers shy to invest right away.

Whilst healthy yields are important to those who already are in buy-to-let investment properties, it has also attracted many new people to invest in a buy-to-let investment property. Good returns suggest buy-to-let investment properties are generating strong cash flow. This yield is the single most important factor that many property investors will use to judge the financial viability of a potential buy-to-let property investment. Tempted by the returns, some first time buyers are turning their homes in to partial buy-to-let investment properties by letting out part of their houses.

In some emerging markets like India however, buy-to-let investments properties have not proven to be to be as lucrative. In metropolises like Mumbai, buy-to-let investment properties have seen increasing rents. However driven by the traditional need to own a house, many choose to opt for a housing loan and buy in less expensive localities. In other parts of India buy-to-let investments properties have experienced a very long plateau in yield.