How to finance your Manchester property investment

When it comes to property investment, your finances are very important. In addition to the money used to buy the property, you must also have enough money to maintain it. In this blog, we’re looking at how to finance your Manchester property investment.

Manchester's property market 

You can check out our blog on why now is the time to invest in Manchester property, but here is a brief overview. 

Manchester City Centre and surrounding areas have had fantastic market growth due to impressive developments. These developments have led to a thriving economy, increased property values and higher rental yields for landlords. 

Major cities in the North West have been experiencing strong rental demand for a few years now. This demand shows no signs of slowing down any time soon, which is great for buy-to-let investors. It’s very important that you choose the right property for your investment. Read our blog on how to identify high-yield investment properties in Manchester. 

Manchester is popular with young professionals, families and more. The city's population was recorded at 549,853 in 2021.

How to determine your budget for rental properties

Budget planning is crucial when it comes to investment properties. Investors should have enough money in the bank to cover the property price, improvements and other expenses. Many property investors do not start earning an income from their investments for a few months. 

To start planning your budget, you need to write down your savings, income and any existing financial obligations you have. Then, consider the property price and any improvements it may need. This will help you to find an absolute minimum that you can afford. 

It’s vital that you do not rely on this income in the beginning. Some new landlords have to wait a while to get tenants into the home, or they may need to pay out for emergency repairs and improvements. 

Many investors find it useful to have an emergency fund, which provides some breathing space if repairs are needed. 

Property costs to look out for: Buy-to-let opportunities

In addition to the cost of the property, there are some other financial obligations that you should be aware of. Some of these can include stamp duty, legal fees and home renovations. 

Stamp duty and legal fees are necessary to purchase a property, whereas some home renovations may be able to wait. However, it is easier to renovate a property when there are no tenants in it. You may have to sort out other accommodations for your tenants if the work affects their daily living conditions. 

In addition to these initial costs, there are ongoing costs to factor into your financial budget. These include the following. 

• Mortgage payments 
• Property management fees - read our blog on typical property management fees 
• Property maintenance 

Payment options for a buy-to-let investment property 

You should always have a good understanding of your payment options when you decide to purchase a property. Here are some payment options that you might consider. 

Cash purchase 

There are many benefits to purchasing a property in this way, but not many people can afford to do so. Some benefits include that the sale goes through quickly as there is less reliance on other people and there is no interest on payments.

Sellers often favour cash buyers and, therefore, may offer more flexibility on the property's price. They understand that the sale is going to be completed quicker which will also benefit them. 

One of the very few cons of this method of purchasing a property is that it ties up the investor’s capital rather than allowing for capital growth. However, most of the time, it is worthwhile as you can make an income on the property. 

Mortgage 

Mortgage payments are one of the most common ways to pay for a property, as they allow you to pay over a certain period of time. There are some eligibility criteria that you have to meet to have a mortgage. These criteria relate to age, income, credit history and deposits. 

There are many benefits to paying via this method, including tax relief and the potential for capital growth. You should ensure that you can charge high enough rental costs that they cover your mortgage payments. 

Other methods of purchasing a buy-to-let involve joint ventures and bridging loans. Speaking to a professional company before making any investment decisions is important. 

Tips before you purchase a buy-to-let property

• Ensure you have a good credit score 
• Conduct research into the loan-to-value ratio (LTV)
• Complete research into the UK property market and consider rental demand and yields 
• Only work with professional companies for financial advice 
• Research interest rates and offers 
• Plan ahead for emergencies when financing property investments
• Look into average house prices and amenities
• Consider the consistent rental income you need to make property investment worthwhile

It’s absolutely crucial that you understand the process of buying an investment property and what it means for your future. If you’re still not sure about the financing options or which one will work best for you, then please speak with a financial advisor. 

At Parello, we can offer trusted advice for your property portfolio and help you find the perfect investment properties in Manchester. Manchester is a prime location with an average rental yield of 5.59%. Manchester property prices average at around £256,000. We can provide guidance on property investment opportunities in the city centre and beyond.

Contact us today to find out more about our Manchester property investment opportunities. We’re more than happy to help.