Buy To Let Property – Our Top 5 Tips

For many people, the idea of investing in a buy to let property still appeals. This is despite stalled house prices, a stamp duty tax crackdown and an income tax raid on rent.

There still remains a trust in bricks and mortar. People may feel that they can add value to a home in a way they can’t to an investment fund.


Why Invest In Buy To Let Property?

As an income investment, buy to let property looks attractive, especially compared to low savings rates and stock market swings.

A world of low interest rates helps polish the attraction of buy to let. Returns on savings are low and mortgages are cheap.

But beware. At some point these low rates must rise and you need to know your investment can stand that test.

Also take into account that the 3 per cent stamp duty surcharge eats a large amount of your money. The loss of full mortgage interest tax relief has eaten into returns.

Despite all this, greater demand from tenants, rents that should rise with inflation and the long horizon for interest rate rises, mean many investors are still tempted by buy to let.


Risk and return

  • The amount of rent you can charge varies according to a number of factors.
  • Rents are not guaranteed.
  • If you can’t find tenants – or if you can’t charge the rent you expected – you might not be able to cover your mortgage repayments.
  • House prices could fall, and you might not be able to sell it for as much as you hoped.
  • If you have to sell and the sale price doesn’t cover the whole mortgage, you’ll have to make up the difference.
  • Major repairs or difficult tenants might increase your costs – and trouble – unexpectedly.

But of course, if the housing market does well, you might be able to sell your buy to let property for a profit.

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With all the above considered here are my 5 Top Tips for Landlords considering investing in Buy to Let property:

1. Consider situations that you might face as a landlord which could stretch your budget

Becoming a landlord is an investment, which does have some associated risks. It’s important to consider some of the possibilities when it comes to working out what you can afford after the initial investment is made. You’ll need to consider being able to budget for situations where you might be without rental income. During void periods between tenancies for example.

You might face a situation where the tenant can’t or won’t pay the rent, resulting in associated legal costs for you. It’s worth considering insurance, such as Landlord Rent Guarantee that can help to mitigate risk by covering missed rental payments and legal fees.

Other things to consider are unexpected costs, such as necessary repairs and renovations (before, during and after a tenancy) along with the expected costs such as letting agents’ fees and property maintenance.

2. Research and understand your legal responsibilities as a landlord

Becoming a landlord means taking on certain responsibilities, from a legal perspective as well as the wellbeing of your tenants. You’ll need to remember that having a buy to let property is like having your own business – you’ll need to declare income for tax purposes.

There are other legalities you’ll have to comply with too, some of which could need assessments or certifications. It’s important to check whether the local authority have any specific schemes or programmes for residential landlords that you might need to comply with, so it’s always worth contacting them to make sure. Current regulations include, but are not limited to, some of the below:

  • Gas safety certificates
  • Energy performance certificates
  • Protecting the tenant’s deposit
  • Serving prescribed information
  • Landlord license (certain areas only)
  • Fire resistant furniture
  • Legionnaires disease checks
  • Right to rent checks
  • Compliant plugs and sockets
  • Safe electrical appliances

Not complying with legislation can lead to legal proceedings and fines, it’s important to make sure that you’re prepared to invest the time, energy and money to ensuring you’re always legally compliant. If you’re unsure, it’s also worth considering a conversion with a letting or managing agent.

3. Understand your rights if things go wrong

It’s worth doing some research on legal matters, such as eviction notices, your right and responsibilities, tenancy agreements and deposit schemes.

Consider appropriate Landlords Buildings Insurance, Landlords Contents Insurance and Landlord Rent Guarantee Insurance to protect yourself and mitigate some of the risks you could face.

Don’t forget Tenant Referencing too, you’ll want to be safe in the knowledge that your tenants are who they say they are and won’t have any problems paying their rent.

4. Who do you want to rent your Buy to Let property to?

An important decision during the buying process is who you want your buy to let property to be rented to, and how much you’re going to rent it for. To understand this, you’ll need to do some research on your chosen area and the types of people that are renting properties there, as well as how much they’re paying.

Whether you’ll end up targeting families, students or professionals, for example, can determine what type of property you’ll need to invest in, what the rent might be and subsequently the rental yield for the investment.

5. What’s the best location to invest in? 

Before you set your heart on somewhere, it’s really important to carefully consider where you’re going to buy the property. Will it be in the town you live in, a nearby city or even somewhere further afield?

If you’re planning on using a managing agent it opens up the possibly of looking further afield.

Have a look around and do some research into the local market. Put yourself in the shoes of your target tenants and try to understand what it is they’ll be looking for from the area they live in. This could include accessible and regular transport links to major cities, vibrant nightlife, local sports clubs, good schools and neighbouring families or a large population of students – and remember, while the area may be to your taste, it won’t be you living in the property.


Simas Accounting & Tax


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