Buy To Let in a Ltd Company
Posted on 27th October 2022 at 15:41
I'll start this off by saying, I'm not talking about the tax benefits of an SPV etc.
This is purely a mortgage update for those who are considering BTL purchases or remortgages in their SPV and my view of the possibility of plausible investments during this period.
As you know, rates have been rising and so have the stress rates. Good news is though, the 125% rental cover requirement of a LTD/SPV is still going strong and means most loans are still affordable in this space.
Rate wise, if I pull up a list of 75% LTV loans right this moment (could change tomorrow)... I'm showing:
2yr fix - 5.89% and up
5yr fix - 6.04% and up.
Variable/Tracker - 3.90% and up. (great rate!).
We have had a long stretch of under 4% loans for some time now and thats been amazing for relatively easy BTL investing with minimal thought to profit margins but this current period of higher rates can, and does still work for a lot of borrowers.
The main thing to remember is to make sure the investment is one that will work, not just for now, but in the future too. Do your sums, use your broker and check that the property will be able to keep itself in the black for the next term.
If it stacks up and getting the minimum needed to stay profitable, buy it!
Once you have the property, even if the profit is low for the time being, it means you have that asset ready for when the rates drop and you can refix onto a lower rate again.
If you left it for now, unsure of the current market, someone else will pick it up and your time & research would have been in vain. When rates drop, the market will go crazy again and we will see a lot of long term fixed rates, especially 10 years (if available), as investors will be looking at locking in a low rate after seeing this stutter in the industry.
Without that asset already on your books, you will then want to start looking and buying at a time when the rates are low again and the market is suddenly buzzing.
You will struggle to find properties as they will be getting snapped up quickly.
This is why I would personally say that buying now, is a good way of getting those properties before anyone else, and then when the rates are lower, you already have it and can benefit from the long low fixed mortgage rates and a relatively simple remortgage transaction.
Not everyone will agree with me and that's the beauty of it, everyone has a different view of the current and forthcoming market.
Lets work with what we are dealt, if a property has good future prospects, buy it and plan for more than just this year. If it looks a bad investment in general, move along.
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