Buy to Let as an Investment.

How much deposit do I need?.
The minimum deposit is generally around 15% but can be significantly more. The majority of lenders, in the buy to let market, base the amount they will lend on projected rental income as assessed by a surveyor. This is often called the "rental cover" and is the percentage of a monthly rental amount based on a certain interest rate. This is best explained by an example.

Case Study.
Joes’ purchase of a buy to let investment property
Joe wants to buy a £200,000 property to let out as an investment. He wants to put down a15% deposit and borrow £170,000. Say he finds a mortgage which has a rental cover of 125% based on an interest of 4.75%. The amount of rent that the property will have to achieve to borrow this amount will be £841.50 a month. If Joe than compares it with another mortgage which has a rental cover of only 110% but based on an interest rate of 6%, the rent required would be £935.00 a month. This illustrates that interest rate upon which the mortgage is based is as important as the percentage uplift.
Note the interest rate used by the lender is necessarily the initial discounted or fixed rate offered!

Buy to Let Rental Cover.
Understanding the concept of rental cover and how it works is crucial if you are not to waste money and time. It is all too easy thinking you can borrow 85%, 80% 75% only to find the lender wants you to put down a larger deposit than what you have budgeted. Merely focusing on the lowest interest rate in finding a buy to let mortgage is not enough. On numerous occasions we have found potential buyers disappointed in not being able to proceed with a purchase simply by selecting a lender and a mortgage without truly understanding the lending criteria. The formula for calculating the necessary rental income is different with each lender and might not even be the same with different mortgage products from the same lender. Couple that with frequent changes by lenders of method used and it is not surprising most borrowers find the amount lenders will actually lend bewildering.
An experienced broker who knows this market will be able to guide you to the right lender and product with realistic expectation of what deposit you might need on a buy to let property.

Rental Assessment
The assessment of the rental income by a surveyor or letting agent can produce very different figures depending on whether the lender's criteria is based on a single family let or one that allow sharers both professionals and students on a single assured shorthold tenancy.

How many investment properties can I buy?
The short answer as many as you want as long as each property you have is self financing. A few lenders base how much they will lend on personal income but the vast majority do not. The great appeal of lending based on rental income is that as long as the buy to let properties are self financing, you can borrow much more than if based on your personal income. Thus a person earning £30,000 per annum can own 4 or 5 house borrowing say a £1 million based on property value of say £1.5 million.