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Research before you invest.

AUCTION experts are advising new buyers to make sure they are prepared before dipping their toes into the property market.

According to property lending specialist Auction Finance Limited, new investors need to know the basic sums that can help.

One of the most popular mortgage information searches is buy to let advice (www.unbiased.co.uk).

Conditions for landlords have been buoyed by low interest rates and strong demand.

Chris Baguley, director of Auction Finance Limited, which provides funds for auction purchases, explains: "The financial criteria for buying a property as a secure and profitable investment is quite different from buying your own home to live in.

"Before investing your money into any unfamiliar sector, whether it's equities or antiques, you'd want to learn the ropes.

Property investment should be treated the same.

"If you're a newcomer, you need to learn and understand the rules that govern the conduct of auctions. Every property investor needs to get a grasp of the basic sums."

Chris Baguley offers five sums to ensure investors get a profitable home: 1. Gross yield - This is the rental income expressed as a percentage of the purchase price.

Gross yield = rental income / purchase price 2. Net yield - The fees added to the rental income expressed as a percentage of the full purchase price. This will tell you the return after fees, repairs and running costs.

Net yield = (rental income - costs) / purchase price 3. Interest cover - The difference between actual rental income (less costs) and total mortgage repayments Interest cover = net rent / interest costs 4. Net rent cover -This tells you how low your rental income can drop before you're making losses. It's the interest against the net rental income expressed as a percentage.
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Title Annotation:Features
Publication:Huddersfield Daily Examiner (Huddersfield, England)
Date:May 20, 2010
Words:286
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