The Buy To Let Business Model

Of recent years, no business model has appealed to the general populous to the extent of the buy to let.  With a strong and stable economy, and snowballing property prices, the buy to let market has become an industry in its own right, and has given rise to untold fortunes for those brave enough and savvy enough to use this method of finance to best effect.  Obviously, as with any business, the buy to let has its own risks, and these are increasing as the market becomes more and more saturated, yet there is still a great deal of money to be made through sensible, planned borrowing and property investment.  

The buy to let business model runs on the basis that the borrower is buying a property to let it out, rather than to live in it as with a traditional mortgage.  In this sense, banks are more willing to lend money knowing that the property will generate an income to pay off the mortgage – if the lender can demonstrate that there will be sufficient payments each month to cover the cost of the mortgage, the bank will bend over backwards to offer a buy to let mortgage, which can often cover up to 95% of the value of the property.  With an income above mortgage payments every month, and a property at the end of it, buy to let is naturally an attractive option despite the many pitfalls that surround the nature of the business.

The first and main problem with buy to let is finding tenants.  You have to find tenants for your property and quickly in order to meet the mortgage repayments.  The longer your property is left empty, the longer you have to keep paying the mortgage from your own pocket.  The key to a successful buy to let is finding the right tenants quickly; tenants that will pay the rent on time every time to protect the delicate business of buying to let.  Without good tenants, the buy to let can be very problematic, and can end up costing you significantly more than you bargained for.  

Another major problem with letting any property is that as landlord, you have numerous legal responsibilities and duties to perform, and this burden is increasing year on year.  From repairs to safety checks through to the proper process for termination, the law favours the tenants rather than the landlords, and at times it can seem to be quite problematic and awkward.  Despite that, the buy to let model can be highly profitable and can present a great return on investment over the long term.  By providing an income whilst buying a capital asset, buy to let has the potential to make you very rich, but it won't come easy.  Mastering buy to let is definitely a skill that takes time and can be quite costly if you make mistakes along the way, yet for those with the business sense to manage finance and a large scale project, this can be a great way to provide a better quality of life for you and your family.

About the author

Graeme Nicholson is a Famous writter for stake holder pension. The author writes about individual savings account and Life Assurance.

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