Buy To Let

Choosing the right buy to let property

Location, type and the condition of the prospective property are the three most important factors to look at when choosing a buy to let property.

It is a good idea to ensure that you research the area carefully and ask a local agent for advice. For instance in some locations family homes are in demand, but in others it may be a one bed flat.

To ensure you can cover your mortgage payments and make your buy to let purchase a successful investment clearly you will want to keep your property rented as consistently as possible. Make sure your research covers the local demand for rental properties and ensure that your purchasing decision is based on all relevant factors.

B2L
ARLA

The Association of Residential Letting Agents www.arla.co.uk can provide tips for you on what to look out for when choosing a buy to let property. The website will also provide valuable information for all types of landlord whether first time landlords or experienced investors.

How much will my buy to let mortgage cost?

Buy to let mortgages are not provided by all lenders. They are considered to be a higher risk than a normal residential mortgage so buy to let mortgage rates can be a little higher than their residential counterparts. The initial deposit required for buy to let mortgages is also higher. You will need a minimum 20% deposit for a BTL property (dependent on personal circumstances) although most lenders will lend up to 75% of the purchase price/valuation whichever is lower.

You also need to factor in the associated costs of the purchase which typically are items such as survey and legal fees. Some lenders may charge a product booking fee which will also be due at the outset. There may also be service charges to consider in a leasehold property. If you plan to use a letting agent, you will have to factor in that cost as well - fees can be between 10% plus of the rent.

Don't forget to add on the cost of insurance - not just for buildings and contents, but also against loss of rental income if the property stands empty, possible damage by tenants or for legal fees if you need to evict a tenant. Any rise in the value of a rental property, unlike your home, is liable for capital gains tax.

You should check the HMRC website for details or consult a qualified accountant to see how this may affect you. However, you will be able to set some of the maintenance and running costs off against tax. Mortgage interest payments of buy to let properties, for example, can be set against rental income.