Are you considering investing in a buy-to-let property? It could be a worthwhile investment that sees the mortgage on the property paid off by tenants while it continues to increase in value. However, there is much to consider when buying a property to let, read on to find out more…
Put simply buy-to-let is where you purchase a property with the intention of renting it out to generate an income.
When you buy a property to rent out, there are financial implications to consider. Not least of all is whether you could afford the repayments should the property be left unoccupied. This is an important consideration, even the best properties can spend time left empty, so be sure you are able to cover any costs should this situation occur.
When deciding on whether a property makes a good financial investment, consider the yield it could generate. To work this out you will need to divide the annual rental income by the purchase price, divide this figure by 100 - the result is the gross yield percentage. As a comparison, the average UK yield is around 5%.
You will also need to consider the tax implications of purchasing a buy-to-let property. Not least of which is the cost of stamp duty, which can be significant. For buy-to-let properties, within every stamp duty band, 3% extra is added on.
There are also income tax implications, to ensure you are declaring, and claiming everything you are entitled to, consider getting advice from an independent financial adviser.
Other financial implications to be aware of include the cost of repairs, replacements and upgrades to the property over the time you own it.
If you need a mortgage to fund the purchase of the property, you will need a buy-to-let mortgage. These mortgages tend to differ from standard mortgages in a few ways, typically in that the deposit required and the fees associated with the mortgage are likely to be higher. Lenders will also probably look to ensure that the rent you can charge for the property covers the mortgage plus some profit. They will also want to know that should the property be left untenanted for a period of time, that you can afford to cover the mortgage payments.
Contact an independent mortgage adviser for advice on the buy-to-let mortgage options available to you.
When it comes to buy-to-let properties, the work doesn’t end once the property is yours. Far from it, as a landlord, you have responsibilities to 8your tenants.
As a landlord, you will need to annually check that the gas and electrics are safe and provide a copy of the safety certificate to the tenants. The property must also have an up to date Energy Performance Certificate.
The property must also have fire alarms fitted and where there are gas appliances, carbon monoxide alarms must be installed. If you are letting your property out fully or part-furnished the furniture will need to comply to fire safety regulations.
Also, consider the neighbours of your rental property, they are unlikely to want to live close to a property that is poorly maintained, so be sure to keep on top of any gardening and outdoor maintenance work.
Bearing in mind the time that being a landlord can take up, it may be wise to choose a property within your local area. Not only will you be on hand should anything go wrong, but living locally will give you a better understanding of the local property and rental market and could make finding the right property easier.
If investing in a buy-to-let purchase makes sound financial sense to you, be sure to undertake expert legal advice when purchasing a property. The team at Smith Partnership Move are experts in property matters and are on hand to help and advise you every step of the way. Call 0330 123 1229 to find out more.