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Becoming A Landlord

More people are now living alone, which means more people are renting accommodation. Also, the average age of first-time buyers is increasing. In response to these factors, wide ranges of mortgages are now available for people looking to invest in property to let. Buy-to-let mortgages offer homeowners the opportunity to purchase additional property that they can use to rent out to tenants. Many people use this additional investment as an extra income or as an asset for the future. So is buy-to-let right for you? We hope this guide helps you get the best return on your buy-to-let investment.

Why buy to let?

Over time, property can often offer a great return on investment. The home you purchased ten years ago is likely to have risen in value above the normal rate of inflation, with some places now fetching substantially more than their original value.

Owning more than one home, therefore, can be a worthwhile investment, and renting the property in the meantime helps make sure that you're able to keep up the repayments on your additional mortgage.

The trend towards renting rather than buying also means that you shouldn't have much trouble finding tenants. However, check beforehand that you're not purchasing a property in an area that already has more places to let than people looking to rent.

In addition, changes in the 1988 Housing Act have given landlords more power over troublesome tenants - a factor that has dissuaded many prospective landlords in the past - with the facility to evict repeat offenders now more easily available.

What you want out of it

Essentially, purchasing an additional property is an investment, which means you must decide whether you want to help that investment to grow or use it as an income.

If growth is your primary aim then city centre locations can offer high levels of return. However, the majority of rental property is concentrated in these areas and competition for tenants will be higher.

If you're looking to use your rental property as a mode of income, then suburban areas are worth greater consideration. Whilst properties will generally be cheaper and the rent lower, the relative returns are likely to be greater over the long term.

The Association of Residential Letting Agents (ARLA) estimate that, as a landlord, you should be able to claim gross rent equivalent to between 130% and 150% of the property's mortgage repayments (interest only).

Working with an agent

Once you have decided on a property, the next step is to find a letting agent to help you consider promising locations and draw up the relevant documentation.

Unless you intend to become a landlord on a full-time basis, developing a portfolio of properties and using them as your main income, it is likely that you'll also use the letting agent to find suitable tenants and collect rent.

Agents normally charge around 10%-15% of the agreed rent, depending on the level of responsibility they take. It is advisable to budget for this when you make your initial purchase and consider rent amounts.

In order to keep yourself protected, you should find a letting agent who is a member of ARLA. As members, they must join a bonding scheme, which will protect not only your rent but also your tenants' deposits, should the agent misappropriate these funds.

Your responsibilities

Your daily responsibilities as a landlord will largely depend on the level of responsibility you agree with the letting agents. However, you still own the house, and you'll be responsible for its upkeep, as well as insurance on the building and any contents that you own.

You must also make sure that any gas or electrical equipment passes safety checks and complies with relevant regulations. Remember too, that maintenance costs, such as cleaning, gardening and your agent's commission can be offset against your tax.

Preparing for the risks

There is no doubt that buying a property to let can be a worthwhile investment option. However, it is important to remember that buy-to-let also comes with risks attached.

You need to make sure that you can fund the mortgage that the property demands. Whilst the rentals market is strong, you must still consider the possibility of having no tenants for any period of time, with mortgage payments still being required.

The state of your property is also worth careful consideration. Places that need renovation, or those in run-down areas, may be cheap to buy but they could be expensive to refurbish. In addition, when you look to sell the property in the future, you may not get the return on investment you expected.
The key to getting the most out of a buy-to-let property, as with most investments, is in long-term plans. Housing markets constantly fluctuate as the economy changes, but the trend has often been growth. By taking the right advice and making the right choices, the property you buy-to-let now should provide strong returns in the future.

 

All material on this website is provided for information only, and is not intended to form part of any offer or contract. Our policies and practices may change at any time without notice. Details of properties are provided from information received, and their accuracy cannot be guaranteed

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