| Over the last few years, private individuals have been offered buy-to-let mortgage schemes as an alternative form of investment. A buy-to-let mortgage is a loan for an individual to purchase a property for the explicit purpose of renting it out. Many people see buy-to-let schemes as an alternative to a pension. Obviously, there are pros and cons associated with any business or property venture, so it is best to plan carefully and to speak with a professional advisor before taking the plunge. Some factors to think about before making your decision: Analyse the market you are buying into and make a decision on what properties are attracting the largest rents and which properties are least vacant. You need to find a property that suits the local rental market. Also make sure that the property will be low-maintenance and will not require a lot of repair workType of property Before committing to purchase a property, you will need to determine if you sufficient finance available either out of your own savings or with the help of a mortgage lender. It might prove helpful to speak with several banks or a mortgage broker about the types of finance available to a person in your specific situation. It is important to remember that the lending criteria for buy-to-let mortgages are often more restrictive than residential mortgages. While it is possible to secure a residential mortgage for up to 100% of the purchase price of your home, buy-to-let mortgages are rarely available for greater than 85% of the purchase price. In all your financial planning, remember that your property will be at risk if you do not keep up on payments on any mortgage secured on it. Purchasing a property close to where you live is kinder on the administrative and management side of the project: you won't have to travel every time a problem appears. Always remember that rents can fall as well as rise, so your projections for income must err on the side of caution. It is probably best to deduct two months income from your annual total to get an indication of what you are likely to earn. Nationwide, annual rental yields average out at around eight or nine per cent of the value of the property. However, that is the gross figure. For a true indication of your income you will need to deduct maintenance costs, insurance, tax and agents' fees. Costs You may want to consider employing a letting agent who will perform some of the associated and time-consuming tasks of buy-to-let such as: - legal paperwork
- finding tenants
- repairs and tenant issues
Letting agents do charge significant sums in yearly management fees to perform this work (and up to 10% of rent). Letting agents One of the reasons why interest in property has grown is that pensions are increasingly being seen as offering poor value. The fact... | 
