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With so many different options nowadays in the land of investment, it can be confusing to know where to put your money in order to get the best returns at the lowest risk.
Two of these options that we will be comparing are buy-to-let property investments and the bank option of the simple ISA.
Buy-to let Investments
There are many benefits to buy-to-let investments, with one of the most significant being the relative ease in which you are able to boost your returns by borrowing.
The vast majority of banks and mortgage lenders are generally quite content to offer landlords a mortgage equivalent to around 60% of the value of the property, meaning that as an investor, you only need to provide the remaining 40% out of your own capital.
If we work this out metaphorically then, an investor looking to purchase a UK property with a value of £300,000 with a potential rental income of £15,000 per annum would be able (in the majority of situations) to obtain a mortgage covering £180,000, leaving a remainder of £120,000 to invest out of their own pocket. Based on the potential rental income, this £120,000 would generate an annual yield of 12.5%, excluding fees, taxes and any other costs.
However, before you throw your laptop down and head for the nearest mortgage lender, whilst this 12.5% return might look attractive, there are the issues of instability within the property market to think about. If property prices suddenly plummet, or if the property is left empty and the investor then struggles to meet the repayment obligation, this leaves the bank with ultimate control, not a situation that … Read More
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