Letting a property and becoming a landlord can be an attractive and exciting venture, but there is more to renting out a property than you may realise. Here is a helpful guide to finding a buy-to-let property.
A buy-to-let is exactly what you may expect; it is a property that has been purchased with the intention of letting it out.
If this is your first buy-to-let property, your focus is probably on the price, but there is a lot more to think about before looking for the right property. We have listed a few key things to think about before starting your search:
Consider the type of people you want to rent your property to. Are they students, working professionals or even families? It is important to have the type of tenant in mind so you can look for suitable qualities in a home, such as location, space and rental costs.
Your potential tenant options may include:
Becoming a landlord is not simply a case of getting a mortgage, buying a house and finding someone to live in your property – you are essentially running a business, which means you may be looking at getting a different type of mortgage, be subject to certain types of tax and will need to follow rules and regulations to rent out the property.
A few of the legal responsibilities a landlord must deliver include:
Tip: Research all the responsibilities involved with being a landlord and use the services of an estate agent or a legal advisor to ensure you fulfil all required legal obligations.
With a buy-to-let property, there are more costs to factor in than the initial price of the house.
The best property to let will be a house or flat that is cheap to buy and mortgage, which provides a relatively good return, factoring in the additional costs to prepare your let property.
The main expenses and running costs associated with a buy-to-let property include:
Tip: Get quotes of all of the costs involved before investing in the property purchase and create a financial plan to understand how much money you can set aside for maintenance, repairs and void periods. It is advisable to set aside between 1-3% of the property value each year for repairs.
The size, location and value of the property are all determining factors of the cost of rent. Be sure to evaluate whether the initial and running costs of the property are worth the monthly rental income.
Tip: Get in touch with a financial advisor while you are buying and setting up the property let to help you understand all the costs involved and how much income you are likely to make.
It is important to factor in the costs of any void periods. A property with a high mortgage may provide an excellent return while you have a tenant, but you don’t want to be in a financially difficult position with the mortgage if the property is empty for a long period. Therefore, ensure you only purchase a property where you can afford a void period and consider getting Landlord’s insurance to protect you.
Tip: Setting money aside and considering getting Landlord’s insurance will help you with any unexpected costs or void periods.
If you are buying an additional home as a buy-to-let property, you will be required to pay a surcharge according to Buy-to-Let Stamp Duty rules.
Check the Stamp Duty Calculator
Tip: Calculate the SDLT cost of purchasing a property to understand the total cost and get in touch with a financial advisor to understand all tax benefits that apply to you.
As mentioned, different types of tenants will be looking at different locations to suit their needs. Consider the following to find the right location:
Tip: Do not think about purchasing a property for yourself. Instead, focus on a location that best suits the need of your ideal tenant.
The current state of the property could have a dramatic effect on the additional costs of preparing the home for letting. Here are a few things to think about:
Other features of the property will appeal to different tenants. Here are a few property features that will affect your property’s appeal:
If you are looking for a buy-to-let property or would like further advice on how to start your journey into a property investment, get in touch with your trusted local Guild Member, Ashbourne Estate agents today