Buy to Let

"Buy to Let" is the industry terminology for purchasing a residential property which you let to a tenant and receive rent. Until about 10 years ago, a Buy to Let mortgage was virtually unheard of, however landlords were still able to purchase properties and rent them out, but if they needed to borrow money it was typically treated as a commercial venture and incurred higher fees, interest rates etc.

With the advent of Buy to Let mortgages as we know them, this has completely changed and the majority of lenders consider an individual, or even a limited company, purchasing a residential property to rent out to private tenants or in some instances to tenants claiming housing benifits.

Changes in the mortgage market and competitive interest rates have made buy to let properties an attractive proposition for private investors and if a prospective landlord purchases wisely, it is possible to expect the return on capital to potentially be 10% per annum. This does not necessarily include the escalating value of the property over the period.

Prospective landlords tend to purchase a property firstly for immediate income or secondly for growth.

Due to costs of owning a property, including ground rent, mortgage payments, insurances, general maintenance etc, it is advisable that your gross rents should be approaching 125% of your monthly mortgage repayments.

Becoming a landlord is not all plain sailing however and no matter how carefully you choose your property, the area where it is built and vet your tenants it is always possible to lose money.

1. The tenant stops paying rent.
2. Significant property repairs are needed.
3. Professional fees such as legal or accountancy.
4. Using a 3rd party to collect rents.
5. There are possibly many other reasons

Before buying a property obtain as much information about the rental market in the area, asking letting and estate agents questions such as:

1. Is the rental market buoyant?
2. How much should you receive?
3. Are there any significant changes likely in the area
   

Vetting Tenants

Always vet your prospective tenants :

1. Credit check them.
2. Ask for references e.g.
• previous landlord/lender
• employer
• bank
3. Arrange to complete paperwork at their home, this allows you to assess if they are likely to look after your property.
4. Insist on a property bond.

Helpful Hints

1. Know your rights as a landlord.
2. Ensure your Assured Shorthold Tenancy Agreement (AST) is legally watertight and covers you for all eventualities
   (e.g. do you want pets in your property?).

For more information on buy to let mortgages fill out the online form or telephone the number below.

Your property may be repossessed if you do not keep up repayments  on your mortgage

Buy to Let Mortgages are not regulated by the Financial Services Authority