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Buy to Let: 10 Tips for Success

Finding a buy-to-let mortgage is a lot easier than it used to be, as more lenders are entering the market. But the actual process of becoming a landlord/landlady isn’t quite so straightforward. Here are some tips to smooth the path.

1. Look carefully into the rental potential of the area before committing yourself to a buy-to-let mortgage. City centre areas often attract the highest rents. However, in some city centres, there may have been so much new build for the buy-to-let market that supply exceeds demand.
2. Remember too that if you buy in an area where property prices are booming, your profit on re-sale may be reduced. It’s a gamble – if you buy in a currently down-market area, it may be the next property hotspot, or the property may prove virtually unsaleable. Find out all you can about property trends.
3. If letting the property will involve a change of use – for instance, to multi-occupancy accommodation – make sure planning permission is available before committing yourself to a buy-to-let mortgage.
4. Don’t just go for the first lender you find for your buy-to-let mortgage – for instance, your existing lender. Without shopping around you can’t be sure you are getting the best deal. Shopping around can be time-consuming – finding an independent buy to let broker can simplify the process.
5. Make sure your application for a buy-to-let mortgage includes all the relevant details. Many applications come unstuck at the last minute because of undisclosed information. For example, if the developer is offering a discount and you base your application on the full price without mentioning the discount, you could be in trouble.
6. Regularly review your finance facilities. The buy-to-let mortgage deal you get may have been the best at the time, but your lender may “forget” to let you know about a new and better product they bring in three months later.
7. Consider looking for a property within easy travelling distance of where you live. Having to make regular trips of several hours to deal with problems, repairs, complaints etc. may quickly erode your enjoyment of your new venture! If it is at a distance, think about using a lettings agency. This will reduce your profits, but will enable you to relax and forget about day-to-day problems.
8. Remember that the purchase of the property is not your only expense. You will need buildings insurance and there will almost certainly be repairs, refurbishments and alterations that need doing. And don’t forget that your buy-to-let mortgage will need paying whether you have a tenant or not. You may need to think about a mortgage protection policy – consult a broker to find the right type.
9. Once you have your buy to let mortgage and your property in place, it’s tempting to grab the first tenant that comes along – the last thing you want is “down-time”. But this could be a costly mistake. Get references from an employer, and a previous landlord if applicable, and ask for a credit check. Insist on an up-front payment of a deposit (equivalent to at least a month’s rent) plus at least the first month’s rent in advance. Draw up a legally binding contract and go through all the fixtures and fittings together before the tenant moves in, so there is no argument about what condition they were in. If the tenant is unhappy about any of this, find another tenant.
10. Put utilities – gas, electricity etc. – in the tenant’s name. If they fail to pay their bills, you are less likely to be cut off, and the utility company can chase them and not you for the payment.

Getting a buy-to-let mortgage can be the start of an exciting and profitable adventure, or of a horrible nightmare. Following these tips can help you make sure it’s the former.

Mortgages – Buy To Let A Wise Bet

Buy-to-let is often seen by private investors as an interesting alternative way to make their money grow. Certainly it offers the chance of double benefits for the owner. There is the income from letting the property and the hopeful increase in the value of the property.

Unlike the mortgage which you raise when you buy your home, which is based upon your earnings, a buy-to-let mortgage is normally based on the income which can be generated from the letting of the property. There are many specialists in buy-to-let mortgages and a good broker will be aware of the prerequisites and terms which apply to them and will guide you to the right lender for your own circumstances.

The right property in the correct location is all-important. If your main aim is for growth in the value of the property then obviously you need to look at where you think the next “value-spurt” is going to be. Something like the Commonwealth games in London will pull up an area with all the developments and if you can get in early on this type of area there should be strong potential for property value growth. If income is your main aim, then University towns and cities are good hunting-grounds and you’re assured of a regular, although changing, stream of tenants, over the years.

Lenders like to see where their repayments are coming from and should be happy if you could produce some projected figures showing a gross income of around 135% of the property’s mortgage costs. This should cover the costs if things don’t go quite as smoothly as planned.

Costs over and above the mortgage repayments will include the upkeep of the property, any renovation work, furnishings if these are included in the contract and the cost of testing (for safety regulations) appliances and maintaining them. If the property is leasehold there could be ground rent and then there are possible service charges. Add to this any letting agent’s fees, typically 10% of the monthly rent and another 5% if you go for a management service. Don’t forget buildings insurance.

As far as a letting agent is concerned, they will earn their fees by searching for and vetting suitable tenants and collecting the rental. This could be valuable if you’re not renting in your own area, but is something many small landlords manage for themselves. Remember to allow for the time when there is no income from the property, between lettings, for example. At one time students use to pay rental on a per term basis, but nowadays it’s become more usual to pay for an annual occupancy.

Whilst everything goes well for the vast majority of private landlords, things can go wrong and it’s possible to find the whole project is more time consuming than you first thought. House prices have doubled in the past ten years or so, who knows how long this will continue?

In the event of bumps in the market, a landlord would still have the income from letting to cushion the blow and the property would still be there as a long term investment.

For all the advice and information that you need, the best approach is to find an on-line mortgage broker. They have access to all the latest mortgages from a range of lenders. As soon as they have your information they’ll scour the market for the best possible deal, on the most favourable terms.