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Buy-to let investments have been an investment phenomenon in the last few years. Recent times have been seen as a 'golden period' for potential landlords, largely due to the boom in UK house prices. But, with several interest rate hikes since November, the time when you could purchase almost any property and turn a profit on it may be about to end. People looking to buy to let will have to be in it for the long term to succeed and open their minds to new ways of investing in this arena.
Buying a property off-plan (buying before the property is actually built) has been seen as a simple way to get into buy-to-let in recent years. One of the reasons for the popularity of buying off-plan is the fact that owners can make a healthy paper profit as soon as the property has been built due to house price inflation. Buying off-plan also gives the property a structural guarantee
However, new developments can be flooded with buy-to-let investors and when these properties come onto the market at the same time the rental yields can be forced down as a result. Another alternative is cashback property - probably the future of buy-to-let.
Many off-plan developers now offer special discounts to try and tempt purchasers to invest. Cashback buy-to-let property is a way of enabling you to build up your property portfolio quicker than you would other wise by initially paying more upfront than your property is worth, and receiving a lump sum back after say two or three years which you can then use to purchase other property. This type of deal is called delayed cashback and means that you are, in effect, making a loan to the developer so that they can use your money to finance their business for the next two years. At the end of, for example, two years - it may not be far fetched to see a minimum 25% to 30% 'cash back'. If the developer is raising 40% more from you than a similar property is worth, then a mouth watering 50% 'cash back' may be in order.
What you have to remember is that, in the beginning you are essentially doing the developer a favour. You are providing interest free, risk free, finance for him with which to run his business. Secondly, by being an early buyer of their cashback buy-to-let property, you are providing credibility and are helping get the project off the ground - these things alone should be worth some kind of premium, a little extra when the time comes for you to see a return. These kinds of deals are becoming increasingly popular in domestic property markets - they are already well established overseas. In places such as Turkey and Bulgaria, cashback buy-to-let property is the norm. And as UK buyers catch on, buy-to-let could be entering a new phase of popularity.
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