Thinking of becoming a landlord? Property is a great investment, however you may have more to lose than gain in borrowing from the banks to invest in buy-to-let property.
Unless you’ve got a big pile of cash in the bank, you’ll need a mortgage from the bank to buy the property.
In the good old days of low interest rates, people could put a deposit down on a house with a 3% mortgage rate and yield up towards 7-8% on their investment. This nice profit margin made it a perfectly viable investment for many people.
In the current property market however, with interest rates for buy-to-let mortgages up to 6-7% this margin is now severely reduced if your yield still generates 7-8%.
In essence, all the rental income you generate will go towards paying the mortgage and interest you owe back to the bank. This consequently will take a massive hit on your margins and may even lose you money.
Some buy-to-let property owners are in effect faced with two options: raise the rent in the hope that a tenant will pay it and keep the landlord in profit territory, or sell up.
Therefore, our argument is simply: why buy property just to inevitably pay the banks back with the rental income that you earn?
At SPPF, our business model means that we pay all our investors an 8% fixed rate of return per annum paid quarterly.
This comes without all the inconveniences of being a landlord including development risks, buy-to-let risks, rental risks and estate agent or solicitor fees.
In addition to this, SPPF don’t charge any hidden or monthly management fees, meaning that you keep more of your returns.