The introduction of buy to let mortgages has led to greater flexibility for the private investor who is able to consider property as an affordable long-term investment, with a better return than currently offered by the banks.
Here are the most relevant things to consider the contemplating such a purchase:
- Consider your long term goal. It may be that you will buy a property to live in once you retire; you could want the highest income possible immediately for maybe you are looking for capital appreciation. It is important to strike a balance between yield and capital growth. The property you select will vary to suit your intentions. Get professional financial advice, because even if you have cash, it may be more tax efficient to use a buy to let mortgage.
- Carefully choose the location of your property and look for features such as the garage, parking, central heating, double glazing etc.
- When viewing a property, consider if you would be happy to live in the property in the current standard. The fabric of the building, the plumbing, gas and electrics should be in good working order. The decoration should be modern, neutral colours that are a blank canvas for the tenants and will work with their own belongings. Kitchens and bathrooms should be in neutral colours and in good condition that will not date. Carpets should be of reasonable quality – you can save money by having a more expensive underlay and a cheaper carpet.
- If you already own the property on a standard mortgage you will need to apply for a Mortgage Lenders consent before letting the property. You will also need to notify your insurance company.
- Once you have selected a suitable property, prepare a business plan with estimated income and outgoings, bearing in mind to build in agents fees, void periods, repairs, standing charges and insurance.
- Check the current EPC rating, currently, a property must be an E or above in order to be rented out. However, there are indications that this may become a D or above in the next few years.
- Should you go furnished or unfurnished. The greatest demand is for unfurnished, however, this will depend of the type and size of property. We can advise you on the best way to proceed.
- Remember if buying leasehold to expect ground rent and maintenance charges to be your responsibility.
- Landlords are always responsible for building insurance and any owners contents. The tenants are responsible for insuring their personal belongings.
- If living, or intending to move overseas, consider the tax implications
- Under current legislation, all tenancy agreements are deemed to be an Assured Shorthold unless otherwise stated. This is the most common form of agreement, the usual exception is a Company Let.
- Remember this is a business undertaking, try not to get too emotionally attached to the property. Be prepared to invest further money at a later date towards maintaining the property to a high standard.