The concept of buying to let property can be very appealing from an investment point of view. However, it’s crucial you learn what’s involved. In the following post we are going to discuss some things you need to consider before you make the move to buy to let.
Understand Exactly What It Entails
Take the time and make the effort to learn what is involved when you buy to let, so you can avoid any common mistakes. You should also think carefully about the fact that becoming a landlord, although it has financial benefits, involves legal obligations that if you fail to comply with, mean you could be committing an offence.
Some of the things you need to be aware you will be responsible for include:
- The Property is clean and in good repair
- You conduct annual safety checks
- You hold the deposit in the correct manner
- How to recover unpaid rent and how to evict tenants, if necessary
What is the Yield of the Investment?
Although it’s considered a long-term investment, you should yield profit from buying to let. So, you need to work out if it’s worth it, as well as calculating and factoring the costs involved, such as stamp duty, the option of hiring an estate agent to act as your property manager if you don’t want to be a hands-on landlord and advertising your lettings.
Think about the Potential of the Property
There are some things the same as buying a property to live in and buying one to let, but there are some things you need to carefully consider.
- Who currently owns the property?
- Are there any recorded problems with it?
- What is included in the purchase price?
- Does the property have any safety certificates, guarantees, warranties and contents and will any be transferred to you when you purchase it?
- Are you allowed to rent out the property?
- If it is rented out by tenants now, when does their tenancy run out?
Understand Who Your Target Tenant Is
You need to know your target tenant market. This will help you to make relevant changes to the property to make it more appealing. For instance, the needs of university students are different to a professional couple or small family.
Secure the Best Mortgage
While it’s normally the case mortgages for buy to let properties are different and can be higher, it’s important you don’t commit fraud looking to save a little money. Avoid lying to the mortgage lender about how you are going to use the property.
Always Have a Legally Binding Written Tenancy Agreement
Don’t make the mistake of trying to cut corners and avoiding a tenancy agreement. In England and Wales, this is important because without a proper signed tenancy agreement, tenants could be entitled to rights you’d never want them to have. Such as not having a legal right to evict them, even if they avoid paying rent.
Investigate the Best Insurance Deals
You need to invest in both specialist contents and building insurance for your buying to let property. Don’t try to cut corners by paying out for residential insurance, because you won’t be covered for losses if anything happens to the property.
Don’t Forget Stamp Duty
As of April, in 2016, the law related to Stamp Duty changed on secondary properties. Stamp Duty is paid on first properties that cost more than £125,000, whereas it could be over £40,000 on second homes.