Being a landlord is never easy. It is a complex investment with so much legislation, but it can be very profitable based on income and capital value if managed correctly.
Investing in buy-to-let properties is an excellent idea for landlords with a financial cushion to fall back on as it can carry risk and unforeseen costs. It can be nerve-racking being the owner of a property that someone else is living in, but just make sure you have all the correct knowledge. Better still, use a property management service to give you a helping hand, to help you gain that knowledge and get a feel for what it is like to be a landlord.
Managing the Property Yourself
If you plan to manage the flat yourself, you should ensure you have the time to do so; depending on how many buy-to-let properties you have will determine how much time is required. Don’t give tenants a reason to be disappointed with you as a landlord; you want to have a good relationship and help each other out. Get this wrong, and it could cause a bad relationship with tenants, affecting you later down the line. HMRC suggest that managing six or more properties would equate to a full-time job.
Before looking to purchase a buy to let investment, you should know all the costs involved. Stamp duty has an imposed 3% surcharge on buy to let properties in England, Wales and Northern Ireland. This surcharge is on top of the usual stamp duty rates. Use our Stamp Duty Calculator to work out your stamp duty cost: https://conranfinancial.co.uk/how-much-is-stamp-duty/.
If you’re purchasing a leasehold property, you’ll be responsible for the service charge and ground rent costs. You cannot charge the tenant for these. As of June 2019, the government imposed the tenant fee ban whereby landlords/agencies cannot charge for letting fees such as referencing costs, inventories etc. Overall making it more expensive for landlords to rent out a property; however, on the flip side, rents have increased over the years.
A significant deposit is usually required for a mortgage on a buy to let property, compared to a standard mortgage that buyers can secure with a deposit of as little as 5% of the property price. The minimum deposit for a buy to let mortgage tends to be around 25%.
Buy to Let Property as a First Time Buyer
If this is your first purchase, then you may not qualify for a mortgage, unfortunately. In theory, it is possible. However, lenders consider first-time buyers a risky group; therefore, the lender will look into detail at the applicant’s circumstances and why they wish to purchase a buy to let property without owning their own home first and access on a case-by-case basis.
We are experienced in dealing with both larger portfolio landlords and first-time landlords. We understand that if it is your first investment purchase, you need more information to make informed choices, and this is why the video we have created is perfect if you are new to this.
We hope it is helpful, and please do not hesitate to contact us for any further advice you may require.