Buy to Let Building Insurance

It seems like a tough dilemma in some ways.  You want to own your own property, which means that you have to invest quite a sizeable amount of money in order to achieve this.  You could get a mortgage, but do you really want to have the bank rule your life for the next ten, fifteen or even twenty-five years?  Probably not.  But look at the alternatives and you will see that a mortgage isn’t necessarily the devil in disguise.

In order to buy a property without a mortgage you only need one thing, but you need an awful lot of it.  Yes, you guessed it.  You need money.  Do you really have the full asking price of that property available right now in cold hard cash?  And bear in mind that that isn’t all you will have to shell out before your name goes on the deed.  There will probably be surveys, fees and various other things that you have to pay for, all of which can add several thousand dollars onto the amount that you thought you were going to have to spend.

Getting a mortgage in order to buy a property doesn’t eliminate these extra fees.  You will still be liable for them, and when you get a mortgage you will actually end up paying the bank far more than it loaned you in the first place because of the interest payments.  However, without a mortgage, can you really afford that property?

If you can, congratulations.  You are one of a very small minority in the world that has enough money to buy a property without having to borrow any from a third party, such as a bank or lending corporation.  However, if you can’t, a mortgage offers you the opportunity to get onto the property ladder without having to save for forty years or more first.  Yes, you will end up spending a lot more on your property than the original asking price, but you will at least be in your property, albeit a property that you own jointly with the bank.  At the end of the repayment period you will own that property outright and you can consider the extra money you have paid as the price necessary in order to get into a property of your own when you did, rather than having to wait.

A mortgage is often seen as a nightmare – a debt that sticks by you through thick and thin and can easily take your home from around you.  However, a mortgage is also often the only way that you can afford to get into a property of your own and you can often choose the terms so that you have a lot of leeway with repayments.  You effectively choose the size of your payment, and you can even choose a fixed rate mortgage that means you will always know how much your monthly mortgage payment will be, rather than having the stress of wondering whether interest rates will cause your monthly payment rise beyond your ability to pay it.

There are many factors which you have to take into account when deciding to take the plunge and go for a holiday buy to let.

Perhaps the biggest factor which you have to give some consideration to is how you are going to get your mortgage for your holiday buy to let property.

You can of course choose to search for a mortgage yourself but this takes time and you have to know what to look for and more importantly where to look. Those who are wise however choose to go with a specialist broker when it comes to securing their mortgage for their holiday let.

A holiday buy to let can be a great investment if you have done your homework thoroughly and go about it the right way. As a general rule of thumb the holiday let mortgage is a whole lot harder to arrange than a traditional mortgage. When it comes to the holiday buy to let you will find that the property will be excluded from many of the standard buy to let mortgage schemes and this is where a broker comes into their own in finding you the best deal.

In order for your holiday buy to let to be a great success you should consider the location of the property well before you even look for a broker. The location can make all the difference to your let being a great success or a failure, but providing you do your homework when it comes to location, holiday buy to lets can be a great investment. In addition to the money you can earn from letting your holiday home, you can also take advantage of the tax advantages that can be gained from owning a holiday let.

Again location does play a big factor in how well your holiday let will do and holiday lets have been known to achieve 25% increases in just one year. To take advantage of the tax breaks then you will of course have to meet some rules, for example your holiday let must be available for let for at least 140 days throughout the year and you must actually let it for at least 70 days during the year.

When you have taken all this into account then there is nothing stopping you from going ahead with your dream of owning a holiday let. The final step is to find yourself a specialist broker to take car of your mortgage and find you the best deal.

Recent research from the Association of Residential Letting Agents shows that 40 per cent of existing landlords are planning on making more acquisitions during 2008. But, potential landlords should consider many different factors before committing to letting a property. Performing a full risk assessment and being realistic about the finances required to pay for and maintain the property is essential.

Unless you own a property outright, then you need to consider the best way of financing its purchase. Until recently there were thousands of different buy-to-let mortgage products available throughout the UK, but since the credit crunch, many have subsequently been withdrawn. Those that remain have tighter lending criteria and therefore come with quite stringent conditions. Ensure that you shop around before committing to any lender, and don’t settle for the first offer before checking out others. It may also be wise to opt for a fixed rate buy-to-let mortgage as you can plan your expenses for a fixed period with a degree of certainty.

Being able to withstand a period of non-occupation, or non-payers is also an important consideration. If you can only afford to enter the buy-to-let market based on 100% occupancy of the property, then unless you are extremely lucky you will come unstuck at some point. Many experts recommend incorporating an average two months of non-occupancy when calculating your costs. Also, if you are employing a letting or property agent you will need to include their fees in your costs.

Insurance is vital. If you don’t own the property outright, your lender will insist that you have buildings insurance to protect their asset, and similarly you should seriously consider landlord’s insurance to protect you and your investment. That applies especially if you have a portfolio of properties, or if your property is one of a number in the same apartment block where there are other landlords. Indeed, you and your fellow landlords could pool your purchasing power to leverage a better deal from insurers. Buy-to-let insurance is a specialist product and some insurers in that sector offer complimentary add-ons such as tenant referencing services, which are very useful when it comes to assessing potential tenants.

Buy-to-let insurance can also protect you against owner liability claims, and no-one should seriously think about becoming a landlord without being adequately insured – both against liability claims and for protection of property.

Another important consideration is ensuring that you put aside a sum for regular and emergency maintenance. Things will go wrong and it is best to provide for it up front. Having adequate insurance will also help in emergency situations. Older properties generally require more maintenance so consider that before buying.

So, if you are thinking of becoming a landlord, make sure you assess all the risks, do your research and ensure that you are realistic about what to expect.

Conceived in the USA back in the 1980s, the apart- or condo- hotel concept of marrying second homes with investing in property has now skipped across the Atlantic and matured to appeal to a new breed of investors.  In the traditional buy-to-let role it’s the owner who has to put in the hard graft of attracting, vetting and possibly evicting tenants, not to mention collecting the rent and carrying out maintenance and ad-hoc repairs.  Apart-hotels are now threatening to kick traditional buy-to-let where it hurts as one of its key selling points is that it’s managed and marketed on the investors’ behalf and therefore hassle-free.

Sometimes called ‘serviced apartments’ in the UK, Apart-hotels are springing up all over urban centres and coastal resorts at an impressive rate, in what Jones Lang La Salle describes as Europe being “in the midst of a hotel transaction boom”.  Previously we had the timeshare boom, a vehicle that was great for lifestyle and regular usage but wholly ineffective for investment as owners faced low liquidity of assets, high depreciation, restrictions on resale and no actual real estate ownership.  Today via the Apart-hotel model, participants own the freehold of a quality real estate asset with the added value of high rental returns. All of this is then underpinned by capital appreciation.  Additionally Apart-hotels tend to give higher levels of income than traditional holiday homes but the real deal-maker for the investor is the complete absence of headaches as a branded hotel management company takes them all on.

For an Apart-hotel to work and be able to compete against traditional luxury hotel chains all the ingredients have to be right. Optimum locations, comprehensive facilities, a respected developer, strong brand awareness and of course good on-site management are just some of those ingredients.  But in reality, Apart-hotels are carving their own niche in the marketplace rather than taking on traditional hotel chains head-to-head, as their offering to the holidaying public is very different.

 
Ian Hayes, Sales Director of Owner Invest said:

‘Although quite new in Europe, our buy to let Apart-hotel products are quite literally flying off the shelves because they are so attractive and easy to understand. The pricing is affordable for many, the rental returns attractive, capital appreciation, free usage, great locations and the investor owns the freehold. They’re also tax efficient. The hardest question that we come across time and again from potential buyers is that it sounds too good to be true. I can quite categorically say that it’s not!’

The clue is in the name, Apart-hotels are more ‘apartments’ rather than ‘rooms’ and even the largest traditional hotel suite would be hard-pushed to compete.  With generous square metre sizes relaxing, entertaining, dining, working and sleeping can be done in separate areas enabling the children to sleep whilst Dad watches TV and Mum enjoys a glass of wine with friends.  An equipped kitchen also allows the flexibility of eating in thus saving money and releasing guests from strict hotel meal timetables – a lazy late breakfast in bed is now a possibility.  Likewise a washing machine saves on laundry costs or taking home a case full of dirty linen. 

An Apart-hotel feels like home-from-home.Marbella Royal Suites for example, has come about through a partnership between Owner Invest and hotel management team Kasamia.  This resort ticks the boxes for 1) Location – Benahavis is just ten minutes from Marbella and Puerto Banus and the resort overlooks the sweeping fairways of El Paraiso golf course. And in an established tourist destination such as the Costa del Sol, passenger numbers for Málaga International Airport in 2007 are up a mammoth 43% on 2000 to 13.5 million and resort and hotel occupancy rates remain encouragingly high. 2) Comprehensive facilities – Multiple swimming pools, fitness centre, Spa and business centre, 3) Good on-site management – Resort management team Kasamia, the brains behind Accor and Club Med, use distribution networks built up over many years to maximise occupancy rates and returns and are also responsible for maintaining the investors asset to an immaculate state of repair and cleanliness. More info about the Royal Suites buy to let opportunity can be found here

Similar to other Apart-hotel resorts Marbella Royal Suites has all-inclusive fully-furnished pricing, an absence of bills and annual charges and eight weeks personal usage each year.  Its also SIPPs eligible if the investor doesn’t require the personal use. You can find out more about using Self Invested Personal Pensions to purchase investment products such as these on www.ownerinvest.com/sipp
Operating on a seven-year leaseback scheme, owners receive a 50% net share of rental income on a ‘pooled’ basis – so even if their particular unit is unoccupied, others will be.

Prices start at 99,000 GBP for a fully furnished 1 bedroom apartment. 2 bedroom apartments are available from 168,000 GBP and, according to the valuation by Spanish bank Banesto, are already worth 235,000 GBP arriving with 30% capital already built in.

 
Buy to let Apart-Hotels could be the simplest yet most lucrative real estate investment on offer today.