Buying to Let

In this section:

Do plenty of research
How to suceed in the Buy to Let arena
Letting Agencies
Do it yourself
Buy to Let mortgages

As we all know, purchasing a property to let can be a good investment or it could be a financial disaster. Making the wrong move can leave landlords with financial difficulties with mortgage payments if there is no rent coming in from the property. However, making a good, sound investment on the right property can result in a modest extra income and a stable investment asset.

Do plenty of research

Investing in a new property needs careful planning and research - it is not an instant road to riches and an obvious mistake could be extremely costly. Before you head into the marketplace makes sure that you:

Have a deposit available and ready to invest on the property - this is usually about 15-20% of the property value.
Invest some time and money on the fixtures, fittings and décor within your new property to raise it to a standard where you can be confident it will attract tenants.
Are able to and budget for property maintenance.
Are able to withstand any potential short-term fluctuations in the property market.

How to succeed in the Buy to Let arena

Location is crucial! This is one of the most important factors that a tenant will be looking for. Desirable properties are conveniently located for public transport, local amenities, restaurants and bars and have parking facilities nearby. If you are buying to let in the student market, proximity to the university is also a major selling point.
Consult the local letting agents and in order to find out which areas and what types of property are in demand. The letting agents will also be able to advise you about potential rent income from any property in their locality.
Charging too high a rent will put off prospective tenants - research the market conditions thoroughly. Remember that rent is not the mortgage and if the lettings market is sluggish you may not succeed is covering your entire monthly mortgage amount - this depends on the size of your deposit and mortgage.
It may sound obvious but a well-maintained and attractive property will be much more in demand than a run down property.
If you decide to let the property furnished, again speak to the letting agent to find out what features make a property desirable to tenants.
If you have the money, time and inclination, you may consider investing in a property that needs some work. You'll be able to customise it to the needs of your tenants.
If you do not have the time or interest to buy a property that needs a lot of work, a newer property may be more suitable. However, it is worth remembering that even new properties will need maintenance and this will increase as the property ages.
When you are looking at properties to buy, remember to be objective. We all have our own personal likes / dislikes but you remember you will not be living in the property. The tenant may only be staying 6 or 12 months too so choose decoration which is clean, simple and uncluttered, will serve you and incoming tenants well. Do not opt for decoration or features that may be “controversial”. Think about the property from a tenant's point of view.

Letting agencies

Using a letting agent can be a good way of entering the letting market if this is your first Buy to Let property. Before signing up make sure that the agent is reputable (refer to the Association of Residential Lettings Agents) and check locally to see if their rates are competitive.

The benefits of using a Letting Agency include:

Experience in the lettings properties and good local market knowledge
An agency will be able to expose your market to a far wider target audience of tenants by using websites like www.Look4aProperty.com
Reduce your administrative burden. Agents will usually handle vetting tenants (checking references), inventory, drawing up and handling tenancy agreements and handling the financial transactions such as deposits/bond money and collecting rent.

Agents usually charge between 10-20% of the rental income as their fee.

You can search for the nearest Letting Agent to you using the Look4aProperty Estate Agent Directoy.

Do it yourself

If you have the time and inclination you can save money by renting your property directly to a tenant. If you are going to take this approach then you need to make sure that you have done plenty of thorough research first. The R.I.C.S (Royal Institution of Chartered Surveyors) have a free guide called "Letting Your Property" which provides helpful advice to prospective landlords. There are several books available and other websites with advice for Buy to Let Landlords as this market continues to expand. Your local bookshop or library will be able to assist. Do not rush into letting your first property unless you have researched and taken expert advice first.

Buy to Let mortgages

There are increasing numbers of mortgage lenders who have loans and mortgages tailored specifically to the buy to let market. These mortgages:

Will lend up to 85% of the purchase price of the property
Are usually about 0.5% to 3% higher than standard residential mortgage rates
Typical mortgage types are Tracker, Fixed, Discount, Capped and Cashback. Repayment, interest only and part repayment, part interest only are common product terms
Are co-ordinated by ARLA (Association of Residential Letting Agents)

Before committing to an investment loan like this, it is advisable to review your current and long-term situation and make sure that you know exactly what you may be getting yourself into. You should ask yourself:

Will I be able to cover my mortgage repayments and insure the property if I have no money coming in from rent?
Can I afford to lose money/take a loss if the housing market slumps?
Will taking out a mortgage on this property affect my chances of getting a mortgage if I decide to move house at a later date?
Again do your research and if you are not sure take expert advice.

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