So You Want to be a Buy To Let Landlord?
Accumulating a sizeable deposit
Since the financial crisis, the buy-to-let mortgage market has never been the same. A 25% deposit is now the norm for purchasing property. The best deals are demanding even more than that - a 40% deposit. Maintaining the costs Plan on the first day of each month being the day for a mortgage payment, whether the property is occupied or not. Also, keep in mind that tenants might not be stellar when keeping up with the monthly payments. Guess who is still responsible to the lender for the monthly mortgage. Everyone will have the financial hiccups now and then. Plan for it. It is a perfectly good idea to go ahead and have some insurance on hand to take care of any rental arrears. It is not out of the question to also be faced with unpaid utility bills, council tax, and building and contents insurance. Selecting the right lender Even though the past few years have been challenging, mortgage brokers are still the best choice for your lending needs. No one else can provide the expertise and knowledge of the buy-to-let market like a broker. A helpful starting point is lovemoney.com mortgages. Select the right type of property Choose a property type which suits your needs and the needs of the location. If the area you are researching for a possible purchase is populated with mainly families, look at property which will appeal to families. Location ultimately means everything Never overlook the most important rule in real estate - location, location, location. Only look in areas which have easy access to plenty of shops, bars and restaurants. These types of areas will be the first chosen to rent in. Be wary of new construction New properties lose value quickly. Take note of what a property has been valued at and what the builder or owner is willing to take. For example, if a property is valued at 300,000 pounds, but the seller is willing to take 250,000, watch your step. If something is too good to be true, it usually is. Spend time with some letting agents In order to understand the real story of what you can expect for rent, contact some agents and get a feel for a property. Look at a property wearing two different hats. First, pose as a possible tenant, then let a friend discover what the rent might be if you owned the property. This will just clarify the potential of a property and help avoid any future disappointment. A Tenancy Deposit Scheme must be followed When a deposit is taken from a tenant, it must be placed in a government supported tenancy deposit location. The deposit will then be protected. The scheme ensures tenants get all or part of their deposit back, when they are entitled to it. Tenants will also be more attentive to the upkeep of the property. This is mandatory within two weeks of taking the deposit. The method of protection for the deposit must be made to the tenant within this time frame. Assistance can be found at the Directgov web site. Understand Houses in Multiple Occupancy legislation When a single property is renovated into two separate dwellings, which share a common kitchen or bathroom, the Government sees that as an HMO. In this case, a special HMO license is required. A helpful reference for this license is the Communities and Local Government web site. Be aware of regulations A new register of landlords is on the forefront. If you don’t maintain a good record for returning deposits or carrying out repairs, you could be dropped from the register. Other requirements for landlords include written tenancy agreements and the regulation of private sector letting. A letting agent can make a buy-to-let more successful An agent can be seen as extra insurance that your venture will end up more successful. They can serve a minor purpose like filling your property with tenants. Or a major role, by fully managing the property and allowing you the time to make sure all bases are covered, legal and otherwise. Full management will typically run you about 10 to 15% of the rental income, but could be more than worth it. Stay current There is never a lack of work to be done when managing the property yourself. Just when you are in the middle of finding tenants, three air conditioners will need replaced, and so on. The point is, unless you have mountains of time and the acumen for fixing things, allow a letting agent to assist you. There is so much more to the job than just collecting rent. Plan the exit strategy in advance Since this is not a get rich quick plan, don’t treat it like one. Devise the plan to invest up and move on from the beginning. Those are the people who have a successful stint in buy-to-let.