We aim for our "Buy to Let" investors to be able to offset the majority of annual mortgage repayments during the High Season and to take advantage of the low Season to provide a solid secondary income stream.
Paul decides to purchase an investment property and after joining the IPIN and discussing his requirements with our investment experts, he decides that the "Buy-to-Let" investment strategy is for him.
Paul has savings of around €80,000.
Our investment advisors suggest property development X which has been vetted by the IPIN (IPIN Global) as a solid investment opportunity and meets with Paul´s deliverable criteria.
Investment property X is a new development with beautiful sea views on the East Coast and priced at €250,000.
Initially Paul pays his reservation fee of €3000 to hold the property.
Next Paul pays a 30% deposit of €75,000 (minus his €3000 reservation fee already paid)
Our investment specialists negotiate a mortgage for John for the remaining €175,000 at a rate of 2.75% (example only) this translates to a monthly mortgage repayment of €481.00 (interest only) which is equal to €5772.00 over 12 months.
Paul starts to rent his new property immediately and during the 3 months "High Season" he receives €2000 per month in rental income. These rental payments exceed his annual mortgage repayments and still leaves John with 9 months of rental potential to make a further profit.
If we assume that average rental rates for Pauls new property are as follows (conservative figures):
- High Season - €2000 Per Month
- Low Season - €1300 per Month
Now we assume that Paul decides to go on a short term rental strategy maximizing his income over the High Period. He easily rents his property for 3 Months during the high period earning €2000 per month. After this period he has a delay in getting his next tenants but over the course of the year he rents his property for a further 6 Months only.
- 3 Months x €2000
- 6 Months x €1300
Total Rental income = €13,800 after subtracting the €5,772 Mortgage repayments Paul has made a profit of €8,028.
* During this example we have not included any rental management or community fees that may apply but also we have only assumed rental income for 9 months of the year and with many holiday makers now booking private accommodation via the Internet this is very achievable.
The "Buy-to-Let" model is becoming more and more popular in Cyprus with the increase in demand of rental property as many holidaymakers are now utilizing the Internet to benefit from cheap flights and cheaper accommodation by booking direct.
Short-Term letting v Long-Term Letting
The final decision to be made by the "Buy to Let" Investor is which letting strategy to use. Its obvious that the highest income is made by the property owner by letting out short term during the high season. However you can off-set this against the increased overheads in constantly finding short term rental clients and the maintenance costs between clients. Long term rentals typically pay less on a month on month basis but usually require far less input from the property owner and the rental income is fixed over the course of the year. Some property owners choose to rent long term during the low season and then short term to higher paying holiday clients during the high season. The decisions to be made on your letting strategy are usually answered in part by the property you purchase. Some properties lend themselves to short term holiday makers and others to long term locals as a permanent home. Our experts will help you decide what's best and choose the property and rental strategy that's best for you.
The "Buy to Let" Strategy is not ideal for EVERY investor and it is essential that property for this strategy is chosen wisely as it needs to be a rentable property in a popular location to allow the investor to maximize income from the Investment.
The other benefit from this type of Investment is that during the time this property is being rented and earning the Investor an income and holiday home it is still appreciating in value at one of the fastest rates available. All in all the "Buy to Let" Investment model is a sound investment decision and Cyprus is currently an ideal location to deploy this strategy.