Buy-to-let is booming. Many people have turned to property as a form of investment in an economic climate which is unpredictable and which can boast only meagre interest rates on savings accounts.
If you are thinking of investing in a property in order to rent it out, this guide sums up the basic information you need to know before you make your decision.
The Basic Facts
Buy-to-let is pretty much as its name suggests – you buy a property in order to rent it out to tenants rather than to live in it yourself. The aim of this type of investment is to make money on both the monthly rental income you receive (which should more than cover your mortgage repayments) and eventually on the final sale of the property.
Researching potential rental properties
To get the most out of your buy-to-let property you should research the property market thoroughly before you buy. It will be worth speaking with estate agents in the location you choose to get an idea of the rent you will achieve on the property and for the kind of tenants your property may attract.
Even though you will not be living in the property yourself you should ensure that you treat the transaction like any other property purchase. Make sure that the appropriate searches have been carried out and that you have had a full survey of the property completed.
Buy-to-let mortgages are in many ways just like ordinary mortgages for owner-occupiers but with the following key differences:
Your ability to repay a Buy-to-Let mortgage to your lender is not based on your income but rather on the monthly income you will achieve on the rent;
Interest rates tend to be a little higher on Buy-to-Let loans;
You may require a larger deposit because the amount you can borrow from your lender in relation to the value of the property tends to be lower;
Administration and arrangement fees for Buy-to-Let mortgages tend to be higher.
Remember, investing in property is risky so you should not take out a Buy-to-let mortgage with a lender if you cannot afford to take on that risk.
The tenancy agreement is a contract between you, as the landlord, and your tenant. You therefore need to ensure that you have obtained good legal advice about your tenancy agreement and that you are aware of your rights and responsibilities under landlord and tenant law.
Obligations Going Forward
Buying a property to let is just the beginning of your role as a landlord. Once your tenants move in, there are a number of things you will have responsibility for including:
Ensuring that all gas appliances and electrics are safe and providing your tenant with the relevant safety certificates;
Maintenance and repairs to the property's structure and exterior, heating and water systems, bathroom installations and fittings;
Ensuring that all furniture meets fire safety regulations.
Depending on the layout of your property and how many tenants you intend to let to, you may need a House of Multiple Occupancy Licence (HMO). You should check with your local authority to see what their requirements are.
Finally, you will require both landlord insurance (building, contents and liability) and rent insurance to make sure that your investment is protected.
As you can see there are things to consider when it comes to investing in rental properties. If you decide to purchase a buy-to-let property, our conveyancing team at Fiona Bruce LLP will be happy to help you every step of the way, so feel free to contact us.
This article is for general information only and does not constitute specific advice. You should not rely on the information in this article. Fiona Bruce Solicitors recommends that you seek our specific advice if you wish to rely on the any part of this article. Whilst Fiona Bruce Solicitors makes every effort to ensure that the article is accurate, Fiona Bruce Solicitors excludes all liability for claim, loss, demands or damages of any kind whatsoever (whether such claims, loss, demands or damages were foreseeable, known or otherwise) arising out of or in connection with the use of this article or any other information contained on this website. Any information provided only applies to England and Wales.