Your Guide To Buy To Let
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.
The Mortgage
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 at Villager Homes 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. Villager Homes 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.
Maximize 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.
Tenant Type
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.
Check the Rules and Regulations
As you prepare to invest in a rental property, it’s important to understand the rules and regulations that landlords must follow.
Key Rules and Regulations
As you prepare to invest in a rental property, it’s important to understand the rules and regulations that landlords must follow. Here are some key considerations:
Energy Performance Certificate (EPC) Rating: As of April 2018, all rented properties must have a minimum E rating on their EPC to be legally let out. If your property has an F or G rating, you will need to make some improvements before renting it out. To learn more about EPCs, read our blog.
Gas Safety: It is important to ensure that the gas equipment you supply is installed correctly and safely by a Gas Safe registered engineer. The engineer must check the equipment’s safety annually, and you must provide your tenant with a copy of the gas safety certificate within 28 days of the check.
Electrical Safety: It’s essential to ensure that the electrical system in your rental property is safe, including light switches and sockets. If your property is furnished, you must also ensure that all appliances provided to tenants, such as toasters and kettles, are safe to use.
Fire Safety: A smoke alarm must be provided on every floor, and a carbon monoxide alarm must be installed in any room with a fuel-burning appliance. For houses in multiple occupation, fire extinguishers should be provided.
Deposits: When a tenancy begins, the tenant will pay a deposit, usually equivalent to around 6 weeks rent. As a landlord, it’s your responsibility to place the deposit in a tenancy deposit scheme within 30 days of receiving it. Failure to do so and provide the tenant with the scheme details within this 30 day period can result in you being liable for up to 3 times the amount of the deposit.
Taxes: Landlords are required to pay various taxes on their properties and earnings. To learn more about landlord tax and what you need to pay, check out our guide.
In addition to these regulations, landlords have a legal responsibility to treat their tenants fairly. To learn more about private renting regulations, visit the Gov.uk website.
We hope this guide helps you navigate the world of buy-to-let investing. At Villager Homes, we are committed to helping our clients succeed in the rental market. Contact us today to learn more about our property management services.
