A Buy to Let property is a property that is purchased (or remortgaged when previously used as a residential property) specifically to let out to tenants. This could be anything from a 1, 2 or 3 bedroom flat or a 2, 3, 4 bedroom house, pretty much any property that is let as a whole on a ‘single let’ basis using an Assured Shorthold Tenancy (AST) agreement.
CASHFLOW - The most important thing in property in my opinion is Cashflow. More specifically POSITIVE Cashflow!!!! Each property in your portfolio must have a positive cashflow. What is cashflow I hear you say?
Here is an example. Let’s say we have a property that rents out at £600 per calendar month (PCM). The mortgage on this property is £300 PCM and we allow 10% of the monthly rent for both management and maintenance, so a total of 20% of £600 which is £120. Cashflow is calculated by the rent received minus our costs, so in this case £600 - £300 - £120 = £180
In my opinion a B2L property should be making at least £100 PCM positive cashflow. If it doesn’t it is unlikely I would consider adding that property to our portfolio.
FINAL THOUGHT - How many B2L properties would you need to make a significant increase to your current monthly income?
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