How to make your money back quickly
Profiting from buy-to-let can be a slow business. Spencer Fortag, of Dockside Property Services estate agents, said: “The rough rule of thumb if you put in a 25pc deposit and don’t refinance, you should get a return on your capital outlay in seven years.”
More impatient investors may opt instead for a popular strategy of buying, refurbishing, and refinancing (known by some as BRR), which can bring a return on investment after just six months.
“Say you have a street where homes are typically selling for £65,000. If you can find a property that needs a lot of work, maybe it is being sold probate, maybe you can buy it for £40,000,” said Mr Fortag.
“You spend £10,000 to £15,000 refurbishing it, you add value, you refinance after six months and it is valued at £65,000, you get 75pc of that back and you have covered your outlay.” Finding the properties, however, is increasingly tough.
It is also best to invest in an area that you know well, he added. If you’re buying from out of town chasing high yields, “it is very easy to fall into the trap of buying a horrible property to have to rent”.
Max Armstrong of North East Property Investment, a buy-to-let specialist, said the key to refinancing is to be able to prove that you have added value. Lenders will take into account factors such as being able to charge higher rents than were previously paid for the property.