Property Investment Vs Property Development

Property Development Or Property Investment

Property development and property investment could be classed as one and the same in some quarters - but in reality they are a quite far removed.

Property development is best hightlighted by the televison programs that frequent our screens such as Property Ladder and How To Be A  Property Developer. A residential property is acquired below the market value due its state of disrepair and then developed into something that can be offered for resale or to the Buy to Let or rental market.

Profit is made (or lost) by the developer but time has to be factored into the equation as development is very much hands on and linear. Many individuals that are property developers can only concentrate on one project at a time.

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Property Investment on the other hand is all about the rental market and is completely scalable.

Why Property Investment Is More Profitable That Development

The ideal starting point for a would be or potential property investor would be to research properties in your area - visit local estate agents and ask to be put on their mailing list. Ideally pick a dozen or so properties that will not take up too much of time firstly, to initially view - and secondly to visit should the need arise.

The type of properties to avoid are flats or apartments where you may need to factor in the cost of ground rent or communal maintenance - this monthly cost will come out of your profit.

It is important  to remember that your profit is not based on the potential of your equity rising in years to come but a solid monthly profit from the rental.

Once you have found the formula for success it can repeated over and over again.

Property Investment is by a better option and by far a better use of you time and capital.

Best Mortgage For Buy To Let

Buy To Let Mortgages

If you just starting out in the property investment market and completely bemused as to which type of mortgage to choose for your buy to let property, there are specific mortgages for Property Investment - i.e. to rent out rather than live in - you will need a buy-to-let (BTL) mortgage.

Buy to Let mortgages are unique and quite different from the mainstream mortgages as, instead of assessing the amount you can borrow from a lender, based on your income, loans are calculated on the rent you could get for the property.

In the past mortgage lenders required a rental coverage that was above that of the mortgage amount, for example 120 % of the monthly repayments. But lately the rules have become more relaxed and you can get a mortgage with rental coverage of 100 per cent in some cases. The credit crunch is seeming to work in favour of the property investor compared to the standard residential mortgage.

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However, it is still usual practice to have to raise a deposit of 10% or more, but more recently the number of No Money Down deals have populated the market.  Traditionally only a small number of specialist lenders offered BTL mortgages but more recently we have seen high street banks start to lend to landlords.

BTL mortgages can normally be either repayment or interest-only loans. Interest-only mortgages mean cheaper monthly payments but the property will not be yours at the end of the term – you will still need to repay the capital amount or sell the property. Repayment mortgages ensure that you repay a bit of the capital and a bit of the interest each month and at the end of the term the debt is fully paid off.

If you have have ambitions in the Property Investment martet and would like to find out more information about Buy-to-Let mortgage option you can register for a Free property Investment Workshop in your area.

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