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Interested in Buying a Buy-to-Let?

With current low interest rates many people are choosing to invest in the buy-to-let market




Identify the area you wish to buy in and set yourself a budget - not forgetting the additional costs incurred when buying any home, like mortgage fees, legal charges and Stamp Duty. 



Choose the right buy-to-let property in the right area.  Look at local facilities such as schools, transport links proximity to shops etc.  Research shows that period properties tend to hold their value better than new builds and also that properties nearer to towns and cities hold their value better than those in rural situations.  Whatever you buy, it is prime property that holds its value better if the market suffers a downturn.


Bear in mind if you are not planning to use the services of a letting agent to seek prospective tenants for you and manage your investment (which will normally incur a percentage fee of the monthly rental) you’ll be looking after viewings and sorting out maintenance issues yourself, so distance from your own home will be a consideration to factor in.


Ask yourself the following questions:-


•What type of property are you looking to buy?

•A newer property that would be less maintenance or are you looking for something that needs renovation?  If the latter, how long will this take?  Every month the property is empty rental income will be lost.


•What type of tenant are you looking to attract?

  Students? Families? Business people? Company let?  Tailor your purchase to your prospective tenant.


•How many bedrooms? 


•Do you want a garden?


Identify the areas where the rental footfall is heaviest.  This is normally around universities, hospitals (as they have a lot of transient staff) and cities.  However in recent years with the recession and people finding it harder to get on the property ladder the rental market has become buoyant elsewhere.  The Government’s Help to Buy scheme may affect the rental market. 



Buy-to-let mortgages

If you intend to purchase a buy-to-let property you will most likely need a mortgage.  Buy-to-let mortgages are similar to those given to owner-occupiers and attract the same types of fees and charges.  However, interest rates on them tend to be higher and you’ll need a larger deposit.  Your ability to repay the mortgage will be assessed on the rental potential income of the property.  Many people purchasing a buy-to-let property tend to opt for an interest only mortgage as the interest is deductable from the rent when it comes to paying income tax. 


Although banks now have stricter lending guidelines - don’t borrow more than you can afford to repay.  Factor in what happens if the property isn’t let for a few months – would the mortgage still be affordable?


It is also worth noting that neither of the Help to Buy mortgage schemes will help those who want to become buy-to-let landlords, since you must live in the property to use the scheme.

There is an assumption that you can't go wrong investing in bricks and mortar. But given that most people borrow to invest in this asset, losses can be magnified in market downturns. 





Additional Expenses

It is worth bearing in mind that there can be additional expenses along with the obvious maintenance and repair bills. 


If the property has gas you will be required, by law, to have it inspected annually and provide your tenants with a copy of the certificate.  The landlord is also responsible for buildings insurance and service charges, these normally only apply to flats.


If the property is empty you may require the services of a lettings agent to find new tenants.  At Andrew Grant we believe that finding the right tenant for your property is crucial.  As one landlord recently said “you do forget the good tenants, but the bad ones are indelibly printed in your memory”.  Whether you choose to use an agent or not you’ll need to get the following information from a prospective tenant:-


A reference from their employer

A reference from their previous landlord

Proof of identity

Proof of current address

A deposit (normally 4-6 weeks rent) – which will be paid into a Tenancy Deposit Scheme - For more information please click here


You will also need to get their credit history.


An Assured Shorthold Tenancy is normally for a minimum of 6 months.  If your tenants decide to vacate the property after this and subsequently need the services of a letting agent you will incur another set up fee. 


There is also the issue that the property may be empty so you may experience “rental voids” which obviously mean a loss of rental income.  In these cases it is wisest to employ a good lettings agent who will know the market and whether the rental you are hoping for is achievable.



A Responsible Landlord will:-

Ensure property has an annual gas safety certificate (if applicable)

Look after property’s structure and exterior

Ensure furniture has fire safety labels.

Ensure electrics are safe

Look after general maintenance problems that may arise




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