Considering Investing in a Buy-To-Let Property?

09 May 2024

Is Buy-To-Let Good For You?

Are you looking to invest in property and become a landlord? This guide examines critical factors to consider.

Researching is vital; you must treat this property as a business venture. Remember to focus on the practicalities and understand how the figures stack up.

The Market

Before you begin, familiarise yourself with the buy-to-let market:

  • Fully explore whether this will be the most profitable return on your investment.
  • With the rise and fall of interest rates, it may be that a high-rate savings account, for example, could provide a better return.
  • Remember that selling a property investment isn’t a quick sale, unlike stocks and shares – you need to think long-term.
  • When calculating whether this is right for you, you’ll need to assess both the level of rental income and the capital growth (the amount of money you will make when you sell the property).
  • Be honest with yourself about the risks involved with buy-to-let investment.
  • If you know someone who owns buy-to-let properties, ask for their advice.

Contact your nearest Woolley & Wallis office to learn more about investing in buy-to-let properties. They can suggest areas with the highest demand, the kind of tenant you can expect to attract, and the average rent you can expect to achieve.

The Budget

Set your budget clearly from the beginning and stick to it.

  • Establish a maintenance fund for boiler repairs, redecorating between tenants and professional cleaning services.
  • Factor in unforeseen expenses such as emergency plumbing or drainage problems.
  • Be prepared for void periods or an initial delay in getting a tenant.
  • Set yourself a healthy reserve, potentially up to six months’ rent.
  • Using a reputable agent such as Woolley & Wallis to manage your property will cost you money but potentially save you time and hassle. A letting agent will offer advice on legal and compliance regulations.
  • Remember that you will be liable for income tax on your profit.
  • Understand what can be offset against your tax bill. Accountancy fees, building and contents insurance, and property repairs and maintenance can be included.
  • Factor in Stamp Duty They are an essential element to take into consideration.

The Mortgage

You will require a specific buy-to-let mortgage. Since this property won’t be your permanent residence and you intend to let it, it is assessed differently from a residential mortgage.

  • Typically, there are several critical factors to a buy-to-let mortgage:
  • Unlike a residential mortgage, which is based on your income, the lender will assess the likely income from the property.
  • Despite the difference in assessment, some lenders may stipulate a minimum salary.
  • You should expect a higher interest rate than a residential mortgage. This is to cover the risks involved when renting out your property.
  • The deposit required for a mortgage is likely to be higher than for a residential mortgage. On average, it is 20% of the property value.
  • Although not part of the mortgage process, conveyancing costs can also be slightly higher.
  • Shop around for the right deal.

Tenancy Deposit

When letting a property under an Assured Shorthold Tenancy in England and Wales, you will need to pay any deposit into one of three tenancy deposit protection schemes:

As a landlord, you must pay the deposit into one of these government-backed schemes within 30 days of receiving it. Provided that the tenant meets the terms of the agreement, doesn’t damage the property and pays rent/bills, the scheme ensures the tenant gets their deposit back. It also means the scheme protects the deposit should any dispute arise. For more information, visit https://www.gov.uk/tenancy-deposit-protection

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