Archive for October, 2015

Putting A Buy To Let Investment To Good Use

Tuesday, October 6th, 2015

05 Putting A Buy To Let Investment To Good UseFor many of us, financial uncertainty seems to be a key feature of life; saving and investing for the future in a time of low interest rates has become immensely challenging.

Many people who have accumulated savings, inherited money or wound up with a significant sum to invest, look instead to the buy to let property market in order provide for their futures.

In this blog post we will explore the best ways of ensuring that buy to let properties can provide for you and your family in retirement.

The golden years

In the decade between 1997 and 2007, property seemed to be all anyone was talking about. The TV stations were bursting at the seams with programmes about property ladders, property fortunes and property presenters.

It was clear, in hindsight, that the property bubble was about to burst.

The moment that a critical mass of people enter the market in one go, assuming that property is a licence to print money, the count down to a crash begins.

In 2008, an era of cheap borrowing, available credit and rising property prices came to an abrupt end and so did the dreams of many who hoped to become property millionaires overnight.

All is not lost, however

Get rich quick schemes aside, property can still be a great way of investing for the future; the rental sector is growing rapidly and predicted to continue expanding over the next decade.

Unless housing is built at a similar pace in order to meet demand, it is likely that rents and therefore rental income will continue to rise.

Most private landlords who own a buy to let property are small time property investors with one or two properties.

These days, the more risk averse banks are reluctant to lend to landlords with dozens of properties, recognising that they represent unacceptable default risk levels.

Banks have to lend money to someone, however, or they cease being banks, so you might find you can get a buy to let mortgage by presenting yourself as a low risk borrower with few liabilities.

Bank, building society or broker

Bank lending rules have become far more stringent since April 2014 and few are now happy to consider a buy to let mortgage without an existing property to put up as collateral.

Helping the next generation

Housing costs in London and other major cities have sky rocketed in recent years and even affluent young professionals find themselves priced out of the housing market.

If you have grown up children and dependents who are unable to buy, you might be able to provide for them and find an investment opportunity at the same time.

You will need landlords’ home insurance if you choose to become a buy to let landlord, as regular insurance policies will not be considered valid and the first concern of any new landlord is ‘insuring my property against possible damage or loss.’

The government’s pension reforms in the past year have left many retirees with a lump sum of cash that they can invest as they see fit, no longer having to purchase an annuity.

By investing in buy to let properties, retirees may be able to use rental incomes to supplement their pensions, and have a property to leave to the next generation in their will.

Save Like The Young Ones

Saturday, October 3rd, 2015

03 Save Like The Young OnesSaving for a rainy day is what lets you buy an umbrella to keep you dry until the rain passes. Alternatively you may be saving with a specific goal in mind, for example to buy a house, or towards a personal pension. Like many aspects of life, your saving needs and habits may change as time goes by.

If you are on the younger side, you may be looking at paying for your wedding, putting together a deposit on a house or planning for the costs of having children. If you are on the older side, then you may already have passed the bulk of life’s financial milestones. Instead you may be looking at saving for your personal goals. Alternatively you may be saving to help your children.

Whatever your age, the guiding principle should be to save money but enjoy life. You should also look at the most efficient and appropriate ways to save.

Treat savings as a key part of the family finances

In addition to day-to-day purchases, such as grocery shopping and utility bills, there are also recurring and foreseeable expenses which need to be managed. For example insurance policies may need to be renewed and household items, such as washing machines, may need to be replaced.

In very simple terms you will either need to have the money to pay for these or you will need to use credit.

It is also advisable to think about potential emergencies or challenges and how you would cope with them. For example having cash savings may form part of a plan for dealing with a period out of paid employment.

Do you really want to keep all your eggs in one basket?

As well as thinking about how much you need to save, it can be helpful to think about where to keep your savings. Here are some ideas.

Physical cash

Although keeping cash in the house (or elsewhere) means that you are missing out on the opportunity to earn interest, it can be convenient to keep some of your savings in physical form. If you need to use cash, but don’t want to, or can’t, go out, then having a stash of cash close to you can be very useful. Likewise if you live in a place where there is a limited number of ATMs, it may be useful to have a Plan B. Obviously storing physical cash has security implications. You will need to think about the pros and cons of this option for yourself.

Instant-Access Savings Accounts

These come in various forms such as standard savings accounts and individual savings accounts (ISAs). While the money is available to withdraw at any time, you will need to ensure that you understand how you go about accessing it. If you feel it is reasonably likely that you will need to withdraw more than the £250 available at ATMs, then you will need to check that there is somewhere accessible where you can pick up your cash, e.g. a local bank branch or Post Office.

Non-Instant-Access Savings Accounts

Some savings vehicles require a notice period before cash can be withdrawn. The reward for this may be better interest rates. Again, you will have to weigh up the reduced convenience against the potential gains.

Alternative Savings Vehicles

Premium bonds do not offer interest, but they do keep their cash value and can be redeemed at any time. Plus there’s always the possibility that you’ll win, somebody has to.

You might also wish to look at putting some of your savings into peer-to-peer lending. Unlike the previous options, there is always a risk of losing capital in this situation. On the other hand, there is the potential of attractive interest rates.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN.

YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED

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