What is Capital Growth?
Capital Growth is how much your property value has increased since you bought it. Capital growth comes from different sources, mainly improvements in the area, including infrastructure and other factors that make the area more attractive economically, financially and socially.
What does the term “Yield“ mean?
Yield is the return you get each year compared to the amount you invested. For example, £800pm rent on £120,000 investment is a yield of 8%.
Should I purchase in my own name or set up a limited company?
If you are planning to buy one or two properties, we suggest you buy in your own name. If you want to have 3 or more properties, then it makes sense to buy in the name of a company due to taxation purposes.
Is taking a Limited company mortgage more expensive?
In general, limited mortgages are slightly more expensive than personal equivalent. Also, the choice is somewhat more limited when compared to personal mortgages. However, you have to consider the advantages of buying in the name of the Company.
What kind of mortgage should I get?
Like tax, your mortgage options depend on your circumstances, whether you’re investing as an individual or as a company and even the property itself. We suggest that you discuss your circumstances with a mortgage broker and (s)he can give you a more holistic view of the mortgage market at that point in time.
What is a ‘good’ rental yield?
We usually search for properties with at least a gross rental yield of 8%. We invest in these types of properties ourselves and we make sure that we source the same type of properties to all our investors.
What about tax?
As with all tax questions, the answer depends on your own personal circumstances. We suggest that you discuss your objectives and the current situation with an accountant who is experienced and who can give you a good value in terms of advice.
What insurances should I have?
You have two elements to cover: 1. The Building; 2. The contents you own within that building. In our area of expertise, Glasgow, most apartments and flats have building insurance provided by the Factor (Building Management company). You could also consider rent guarantee insurance or, indeed, select a Letting Agency which provides this for you.
What if the tenant doesn’t pay their rent?
Non-payment of rent within our investment recommendations is thankfully rare. However, a tenant has to be in multiple arrears before any eviction order can be applied for. So you need to ensure any mortgages are covered within this period. Alternatively, you could consider a landlord insurance policy with rent guarantees.
What should I expect in terms of growth?
No one can predict the future so be wary of companies which guarantee Capital Growth. However, you can use several types of statistics to forecast potential growth. Glasgow property currently grows at an average rate of 5% per annum, but it changes year on year depending on several circumstances. It’s important that your property is cash flowing on a monthly basis so you can re-invest that income for the compound effect to take place.
Interest-only or repayment mortgage?
Most buy to let mortgages are interest-only, which means your monthly repayments just cover the interest owed and the amount you borrowed will not go down.
What is an Additional Dwelling Supplement?
Introduced on 1 April 2016, a 3% levy is due in tax on the purchase of additional dwellings in Scotland, such as buy-to-let properties and second homes. So, it’s important to work with reliable partners who can help you take all costs and taxation into consideration before buying any property for investment purposes.
Is it tougher to get a company mortgage?
In short, no. It is no different from a personal buy to let mortgage in general underwriting terms. The strength of the application comes from the directors of the company, and majority shareholders themselves, rather than the Ltd company itself.
How do I ensure I am compliant with all property and rental legislation?
Our clients tend to target a passive income from their investments. With that in mind, and in light of ever-increasing legislation, we always recommend that