Buy to Let Investing Guide

You might be new to the buy-to-let market and unsure of where you would like take the leap. In most cases, people tend to invest in property close to where they live or where they know. Take a little time do your research on the areas that interest you and go and speak to some agents in that area.

When buying a property think of your target market and put yourself in their shoes of what they would be looking for.

A student – would want somewhere close to universities or public transport and a property that is comfortable and easy to clean.

A family – most will have their own belongings so may prefer an unfurnished property and might want outside space and parking. Schools within the local area might be a factor.

A young professional – this type of tenant tends to prefer a modern and stylish property with plenty of amenities nearby.

Make sure you know what you can afford. Most buy-to-let lenders would want the rent to cover at least 125% of the mortgage repayments.

You need to take in to account maintenance costs, what if your property was left empty for 1 or 2 months, your tenants stop paying rent, the mortgage rate goes up. You need to consider the costs incurred when buying too, such as stamp duty, solicitor fees and any mortgage setup fees.

If you’re buying a leasehold property you need to also think about service charge and ground rent and any applicable letting agency fees.

All these factors need to be considered when choosing a property to buy.

Becoming a landlord is a big step in anyone’s life: it’s exciting, hopefully profitable and, without doubt, hard work! When you consider that there are actually 108 separate pieces of legislation and over 300 regulations that govern private rentals to tenants such as: Right to rent checks Gas safety checks Contracts Inspections References Registering your deposit Chasing unpaid rent
So you need to also decide if you can do all this yourself or you would like an Letting Agent to do all this for your. Take a look at our manage or not to manage blog.

When buying a property to rent out, there are number of insurances you can take out: Landlords Buildings Insurance – This could be included in your service charge. Landlords Contents Insurance – This would cover your contents if there was a fire or flood etc. Rent Guarantee Insurance – If your tenant fails to pay rent, this covers any legal costs incurred and bailiffs cost. Landlords Liability Insurance – If one of your tenant’s trips and falls or hurts themselves while living in the property, they may have grounds to file a law suit against you.
For any of these insurances you would need to take up advice from a mortgage advisor or insurance company.

Speak to an independent mortgage advisor to see what the best rate they can offer. Click here to book an appointment with our mortgage advisor.

When becoming a property investor one of the most important things you must do before making a purchase is to research the market. You need to get an idea of the kind of price you will need to pay for a property and what the returns are likely to be in terms of rental income. A good place to start is on property portals like Rightmove and Zoopla (they will give you an idea of sale and rental prices in various areas) but you should also speak to a reputable estate agent who you can trust.

You also need to decide what kind of property you are looking for. Do you want something that is spick and span and ready to go, or are you thinking of renovating a property, with the hope of seeing greater returns on your investment? These are important considerations that will boil down, largely, to two things: time and money. Always think carefully: a beautifully finished property might look perfect, but will the potential rental income cover the mortgage? A do-er upper might seem like a fantastic opportunity, but will you still generate a profit once the work has been done?

At Julie Twist Properties, we have an extensive knowledge of the sales and the rentals market, meaning that we are well placed to advise you about investment opportunities, potential rental yields, and financial and legal matters relating to property investment.

To work out your annual return on investment, subtract your annual mortgage cost from your annual rent and then work this sum out as a percentage of the deposit you put down.

For a £100,000 property that could rent for £500 per month, you would need a £25,000 deposit and roughly £2,000 in buying costs.

£75k mortgage at 5% interest rate = £312.50 per month, £3750 per annum

£500 rental income x 12 = £6,000 per year

Difference = £2,250

Deposit + buying costs = £27k

Annual return on investment = 8.3%

And don’t forget tax, maintenance costs and other landlord expenses will eat into that return.

From April 2020, you won’t be able to deduct any of your mortgage expenses from your rental income to reduce your tax bill, you will instead receive a tax credit, and this will be based on 20% of your mortgage interest payments.

Property investment can be a very successful way to invest your money. It’s one of very few investments which make both a monthly income and have the potential to increase in value significantly. However as with any investment there are always risks, below are some factors you should consider when thinking about investing in property: Properties are very illiquid meaning that if you need to release some capital then you are most likely going to have to sell the entire property or re-mortgage it. Selling property can take some time even if there is a high demand. In periods of low demand, it can take years leaving the owner without access to their capital. Re-mortgages can also take time and there is no guarantee that one will be granted. Tenants have rights and can affect the property’s re-saleability. Property purchase comes with a lot of costs such a solicitor’s fees and stamp duty. Selling also come with legal costs, agents fees and Capital Gains Tax. Rental income is taxable at your marginal rate and could push you into a higher rate tax bracket depending on your other earnings. Because of the high costs of properties most people have only one or a very few properties, therefore you are putting “all your eggs in one basket” which increases your investment risk. f tenants cannot be found due to market changes or economic situations then you could be faced with no income and mortgage repayments which can be further exacerbated by falling property prices. You are responsible for maintenance which can be costly and there are significant legal requirements for landlords. If mortgage rates rise the rental income may no longer cover the costs.

stamp duty survey fees solicitor’s fees agent’s fees service charges (for leasehold properties)
So, you need to factor in a buffer to cover those costs if your investment is going to be a successful one.

It is also important to remember that mortgages can be more complex to come by these days—even though lenders are selling more products than during the recession, lending rules have become stricter, which means that you need to be able to prove you can afford the mortgage alongside your other living costs. For buy-to-let mortgages, this normally means that the average rent for the type of property you want to buy needs to amount to around 125% of the cost of mortgage repayments. It is always best to speak to a mortgage adviser to find out what you can afford and to make sure you get the best deal.

There are also other costs associated with property ownership, such as maintenance bills. You need to have a contingency plan to make sure you can continue to make mortgage repayments if there are any void periods. Again, taking some financial advice can help you to avoid problems before they even arise.

When becoming a property investor one of the most important things you must do before making a purchase is to research the market. You need to get an idea of the kind of price you will need to pay for a property and what the returns are likely to be in terms of rental income. A good place to start is on property portals like Rightmove and Zoopla (they will give you an idea of sale and rental prices in various areas) but you should also speak to a reputable estate agent who you can trust.

You also need to decide what kind of property you are looking for. Do you want something that is spick and span and ready to go, or are you thinking of renovating a property, with the hope of seeing greater returns on your investment? These are important considerations that will boil down, largely, to two things: time and money. Always think carefully: a beautifully finished property might look perfect, but will the potential rental income cover the mortgage? A do-er upper might seem like a fantastic opportunity, but will you still generate a profit once the work has been done?

At Julie Twist Properties, we have an extensive knowledge of the sales and the rentals market, meaning that we are well placed to advise you about investment opportunities, potential rental yields, and financial and legal matters relating to property investment.

This is the income returned on an investment. This is calculated by working out your annual rental income and dividing it by the property price and equates this into a percentage.

For example:

For a property price of £100,000, the rental income is for example £500 per month which is £6000 per annum.

The gross yield would be 6000/100000 X 100 = 6%

However your net yield would be taking into account any expenses such as service charge, ground rent, letting fees etc. For example if these came to £2000 per annum your actual income per annum would be £4000.

Your net yield would then be 4000/100000 X 100 = 4%

This will all depend on where you buy a property so would need to check on the local council website.