What is Buy to Let?

Buy-to-let is when a landlord purchases property for the specific purpose of renting it out. The income generated from the rent will ideally cover the mortgage repayments. If no mortgage is held then, of course, the rent collected is gross profit. Ultimately the properties' rental income will cover the mortgage repayments on the property and give a profit margin on top.

Interest only

Some international banks offer interest only mortgages, which can be attractive to a buy-to-let investor, however this is not common in Estonia. With an interest only mortgage you may find it much easier to cover the interest only payments with the rental income, leaving a higher profit margin. However, one must remember that the capital does need to be paid for, so setting up a capital repayment account would be a wise move early into the venture.

Yield

Before purchasing a buy-to-let property, be sure to calculate the projected yield in order to see if it adds up financially.

Net Yield = Annual rent – Annual Costs / Property Value.

An average to healthy yield should be 5% to 8%. Any less that 4% and you start to get on slippery ground.

Think with Your Head

Think with your head and not your heart! Agents and developers can be very good at transferring positive thoughts and forecasts about their properties and developments, so be careful not to take their judgements too seriously and do your own research of projected yield.

Guaranteed rental incomes and other enticing schemes on new developments should be considered carefully. In many cases the prices are simply stacked to accommodate the scheme- not all developers follow this principle, but many often do.

Buying in Bulk

If you are an investor fortunate enough to consider purchasing bulk off-plan buy-to-let properties, be sure to negotiate a discount with the developer. 5 to 10 properties should secure a discount of around 15-35%. Even if the developer is not willing to accommodate such a discount, they will most likely be willing to "talk"discount, so make sure you negotiate. Such discounts could mean an increase in rental yield by as much as 70%.