Buying an investment
property is very different to buying a property for yourself.
There are several things you need to do to ensure you become
a successful landlord and make the most of your property
investment.
01.
Research the market
Buying a property to
let is not something to rush
into. Even if you borrow a substantial
part of the purchase price of the house
it is likely to cost you a considerable
amount to set yourself up as a landlord.
Speak to letting agents in the area Were
you want to buy to find out whether there
is demand for rental properties and how
much income you can expect. The agent
should be able to tell you about the
most popular properties and areas for
tenants.
Compare buy
to let mortgages, click
here.
02.
Do your sums
Once you have an idea of the
kind of rent you can achieve you can
work out how much you can afford to spend.
Most lenders will ask that rental
income is at least 130
per cent of your monthly mortgage repayments.
This means you can borrow around 77 per
cent of the expected income. Once you
have an idea of this from an agent you
can work out how much you can afford
to borrow.
Use
our mortgage calculator to see how much
you can borrow, click
here.
03.
Compare mortgages
When you have an idea of how
much you can afford to repay each month
you can start looking at mortgages. Manv
lenders will offer mortgages of up to 75
per cent loan to value (LTV) for buy-to-let
purchases, but it is possible
to borrow as much as 85 per cent LTV.
There are lots of special offers around
so you can take advantage of a fixed
rate or discount in the early years.
Bear in mind that the rental income may
not rise quickly from year to year, so
if you choose a discount you need to
be sure you can still make the repayments
after the special offer has ended, or
if rates increase.
Compare buy
to let mortgages, click
here.
04.
Find the right property
With a good idea of how much
you can spend and the types of property
that are popular with tenants you can
start looking for someWere to buy. Remember
that you're not buying a house to live
in yourself so it doesn't matter if the
property isn't the type of place you
would choose to live in. It is a good
idea to look for someWere easy - and
cheap - to maintain.
Compare buy
to let mortgages, click
here.
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05.
Apply for a mortgage
Having found the property you
want to buy you need to apply
for a mortgage. This process
will be much the same as when you apply
for a standard mortgage, but on top of
the usual paperwork you may be asked
to provide a letter from a letting agent
detailing the kind of rental
income you can expect. You may
also have to agree to use an agent to
manage the property.
To
apply for a buy
to let mortgage online, click
here.
06.
Recruit a letting agent
Some lenders insist you use
an agent to manage the property;
others leave it up to you. For a fee
of around 15 per cent of the gross rental
income you can employ an agent to find
tenants, check out their references and
collect the rent. The agent should also
be able to help you draw up an appropriate tenancy
agreement and will help you
compile an inventory before you let the
property.
You can find a local letting agent by visiting www.thepropertyguide.co.uk/agents/
07. Buy the right insurance
As a landlord you
will need buildings insurance to
cover the structure of the property.
Make sure the policy covers buy-to-let
properties or is a specific landlord
insurance product. If you are
providing furniture or white goods you
may want to buy some contents cover.
Legal expenses cover is another one to
consider - it will cover your costs should
you need to take a tenant to court.
To
compare landlord insurance quotes click
here.
08.
Buy the right insurance
Rental income is taxable - it
will be added to your other earnings
and is subject to income tax. However,
there are a number of expenses that can
be offset against the rent you receive
to reduce your tax bill, including letting
agency fees, mortgage interest costs
and, Were the property is furnished,
a 10 per cent allowance for wear and
tear.
For more information on Income Tax,
please visit our Income
Tax Advice page
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