Buy to Let Tips

Being a landlord should be considered as a business venture with an aim to run an efficient and profitable service. It is important that you assess a) the investment potential b) risk c) your own skills to be able to successfully run a buy to let business.

Deciding to Become a Landlord

Initially, the following should be considered:

• Have you got the time?
• Are you ready to carry out the appropriate research?
• Are you happy to take the responsibility on issues of safety?
• Are you happy to seek third parties for advice?
• Are you prepared to accept an element of risk?

It is also important that you:

• Understand the potential profitability of your proposed property
• Are aware of your legal obligations and any safety issues
• Are aware of any tax implications
• Get advice from a solicitor, tax specialist and mortgage broker to find the best buy to let mortgage deal available, we can help with this

Could you Profit from a Buy to Let Property?

Carefully calculating the costs and returns of a buy to let property is important to carry out before making the decision to purchase. A good initial guide is to make sure that your turnover (i.e. rent) is in excess of the costs of buying and maintaining the property. To do this, on average, your rent should be 25-30% higher than your running costs.

If You Decide to Purchase a Buy to Let Property

You need to be aware of all the costs involved, such as mortgage arrangement fees, broker fees, survey fees, legal fees and stamp duty. You will also need a deposit, which is typically 25% of the property's value, although a higher deposit may be required if purchasing a property that lenders perceive as higher risk, such as city centre flats. We will be able to advise you on this.

The Running Costs of a Buy to Let Property

The greatest cost incurred is usually the mortgage. We will help you find the best mortgage deal for your circumstances and review it on a regular basis. If you are considering using a letting agent you need to be aware of agent set-up fees and ongoing management costs, as well as the cost of buildings insurance, gas safety certificate, as well as ongoing maintenance costs. Don't forget to take account of the fact that the property may be empty for periods, during which time you will not be receiving rent.

Calculating the Returns

There are other types of investments you could consider and it is important to know how you property portfolio is perfoming against these options. This can be done by calculating the return on your investment - both on an annual basis and over the time that you intend to hold the property. The return is usually referred to as 'yield' and the way this is calculated can differ. The two most used methods that you need to consider are: Annual gross yield and Return on investment.

Annual Gross Yield

This is expressed as the net income as a percentage of the capital investment.First, calculate your net rental income (the total rental income minus any letting costs). Then divide this figure by the amount of money you invested in the property including your deposit and any property purchase costs. The average annual gross yield for a buy to let property ranges from 4-10% depending on the type of let.

Return on Investment

Is an expression of the total return, including all income and capital growth minus costs, as a percentage of your capital investment.

How to get More Information on Buy to Let Mortgages

To find out how we can help and advise you with your Buy to Let mortgage requirements, simply contact us today to arrange a free consultation.