Your guide to buy to let
Buy to let is a much talked about term. It refers to buying a property with the intention of letting it out rather than living in it yourself. Getting started on a buy to let is an exciting prospect but there are many things to consider before and after buying your rental property.
Buy to let mortgages are slightly different to residential mortgages, as you do not intend to live there yourself.
Instead of basing the mortgage on your salary, the lender will look at the potential rental income of the property as your primary income source. Many will then also take your personal income into account. The deposit required for a buy to let mortgage is also slightly higher, at between 25% and 30% is required as a down payment. For some of the lower interest deals the deposit could need to be 40% or more.
As of April 2016, those buying second homes will have to pay an additional 3% stamp duty. This applies to homes that are bought with the intention of using them as a buy to let property, as well as second homes, holiday homes etc.
Location, location, location
When looking for a property, you will need to be thinking about who your potential tenants will be, as they will all be looking for different things in a property.
Student tenants, for example, will want to be close to the centre and/or the university and to pay as little rent as possible. Family renters, however, may want to be close to good schools, local amenities and have more outside space, while young professionals and commuters will typically want to be close to local transport links.
Certain areas and property types attract a higher demand, so check what is in high demand from tenants in your area to figure out where you should invest. Our lettings teams will be able to advise you on popular locations for renters and the most popular property types in the area.
Crunch the numbers
Once you have a house in mind, you will need to get it professionally valued to get an idea of how much you will be able to charge in rent. You can do this before you buy or after purchase. Andrews offer a full market appraisal service to help you establish how much rent you will feasibly be able to charge. To read more about how to maximize your rental profits click here.
Maximise your property's perceived value
Ensuring that your property is well-maintained and decorated to a high standard can make a marked difference to how much someone is prepared to pay for it. A well maintained property can also help attract tenants who will look after it and maintain it well. Again, refer to your target audience to see what requirements they have and how you can make your property the perfect fit.
Not only do you need to be thinking about the location of your buy to let and who this will attract, but the type and décor of the property will also be important when attracting tenants. Students will require a more basic home − clean and comfortable but nothing too extravagant or luxurious. Whereas young professionals will be looking for a step up from their student days with a more well-presented property. Families will have lots of their own belongings, and so a blank canvas is sometimes ideal.
Allowing tenants to be able to make their own mark on a property, be it decorating or the removal of furniture can make it feel like their own. Making a rental property feel more like home will mean tenants are more likely to stay for longer, which is great news for you as a landlord.
Check the rules and regulations
There are other regulations landlords must adhere to. Aside from the stamp duty changes, as of April 2018 a rented property is required to have a minimum of an E energy rating on its Energy Performance Certificate (EPC) to be legally rented out. If your property has a rating of F or G, you will have to make some improvements before you are able to let it out. To find out more about EPC’s read our blog. You also must consider:
- Gas- ensure the gas equipment you supply is installed correctly and safely, and by a Gas Safe registered engineer. A registered engineer must also check the safely annually, and you will need to provide the tenant with a copy of the gas safety certificate within 28 days of the check.
- Electrical- ensure that the electrical system is safe. This includes light switches, sockets etc. If you are letting a furnished property, then you must also make sure that the appliances are safe to use, such as toasters, kettles etc.
- Fire- A smoke alarm must be provided on every floor, and a carbon monoxide alarm in any room with a fuel burning appliance. If you are letting a house in multiple occupation, fire extinguishers should be provided.
To find out more about private renting, check the Gov.uk. website. Landlords are also required to pay various taxes on their properties and earning. To read our guide to landlord tax and what you need to pay, click here.
As a landlord, you have a responsibility to ensure that you are treating your tenants fairly under the law. When a tenancy begins, the tenant will pay a deposit that usually equates to around 6 weeks rent. This deposit must be placed in a tenancy deposit scheme within 30 days of you receiving it. If you do not do this, and provide the tenant with details of the scheme within this 30 day period then you are liable for up to 3 times the amount of the deposit.
All things considered, investing in a buy-to-let property can have huge benefits if you are willing to put in the effort required to become a successful landlord. Find your nearest branch to discover more about what Andrews can do for you.
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