Buy to Let Mortgages: 10 Tips Every UK Landlord Should Know
It was not such a long time ago that buy to let was the favourite product of property investors. Things have changed quite a bit since then, but we think that buy to let is still a great way to invest your money if you know what to do. We have listed 10 tips every buy to let landlord should know. Here we go:
1. Research: Do you completely understand what a buy to let is? Have you got clear ideas on risks involved, the benefits and the potential returns? Do your research first. The internet has got plenty of information such as buy to let guides and buy to let information sites. Maybe you've got friends who are buy to let landlords? Speak to them. Ask them about the challenges they've had to face, the pains they've gone through. Do not forget that a buy to let may not be the most suitable investment for your situation. Have you thought about investing your money in shares or just in a simple saving account? Buy to let mortgage rates may be low at the moment, but there is a risk that house prices might drop in the forthcoming months. Is this is something you are willing to accept?
2. Understand who your tenants are: Who are you potential tenants? Get to know them, put yourself in their shoes and try to understand what they are looking for in a rental property. Young people are likely to look for a place that is easy to maintain, comfortable but not necessarily sumptuous. Families will probably already have some of their own furniture so you need to take that into account. Young professionals will probably look for neutral, modern properties.
3. Target the correct area: The "correct" area has got nothing to do with property prices. The "correct" area is somewhere where people want to live, and therefore rent your buy to let property. Think about your area. Where do students live? Where are the transport links? Where are the best schools?
4. Know the risks: Buying a buy to let property is not without risks. House prices have dropped in the recent years, is this something you have taken into account? Houses can be without a tenant for some time. Many buy to let investors do their planning assuming that the property will be empty 3 months in a year. What about repairs or accidental damage? Do you have money in the bank to cover the price of a new boiler? Be ready for all eventualities.
5. Try to negotiate: buy to let buyers have got a major advantage compared to next-time buyers: they are not involved in a chain, so do not have to sell a property to buy another. Remember that when you negotiate a deal with your mortgage lender.
6. Do the maths: You need to get a pen and paper along with a mortgage calculator and do some calculations. What is the cost of the potential properties you are interested in? What rent are you likely to get? As a general rule, mortgage brokers would like the rent to be 125% of the repayments at least, and will usually require a 10% deposit at least. The buy to let mortgage rates are usually higher than regular mortgage rates and have higher fees. Do some calculations, and make sure that everything works out for you.
7. Decide how much you would like to be involved: Buying a new house is just the beginning. In order to rent out a property, somebody has to organise the advertising, the viewings, and when the new tenants are in, be able to deal with repairs. If it's something you are willing to do yourself, you can use the services of an agent that will do that for you. It is worth contacting several agents to compare what is on offer.
8. Compare the market: Do not walk into the first bank you see and ask for a mortgage. Shop around, and consider using a mortgage lender specialising in buy to let mortgages. Try specialist sites such as Buy to let Mortgages [http://www.buytoletmortgagesdeals.co.uk] to find a local adviser. It costs nothing to ask for information.
9. Do not think too big too quick: You occasionally read about buy to let landlords who have managed to make a lot of money and accumulated a large portfolio. Chances that it happens to you are slim, so invest for income rather than short-term profit. Your returns should come from the rent of your property. As most buy to let mortgages are interest only, the loan won't be repaid. You need to make sure that your rent covers more than your payments so that you can accumulate a fund to deal with unexpected situations. Once you have included all your costs, tax, and payments, you can use the money left as a deposit for other buy to let investments, or maybe pay off the mortgage at the end of the mortgage term.
10. Don't restrict yourself to your local town: buy to let investors normally invest in houses in their own area. Bear in mind that your town may not be the ideal place for a buy to let investment. The advantage of a local buy to let property is that you can keep track of it yourself, but don't forget that you can use the services of an agent to do that on your behalf should you decide to invest further away from your area. Is there a town nearby that has got an airport, or a university? This might be a better choice for your buy to let property.
1. Research: Do you completely understand what a buy to let is? Have you got clear ideas on risks involved, the benefits and the potential returns? Do your research first. The internet has got plenty of information such as buy to let guides and buy to let information sites. Maybe you've got friends who are buy to let landlords? Speak to them. Ask them about the challenges they've had to face, the pains they've gone through. Do not forget that a buy to let may not be the most suitable investment for your situation. Have you thought about investing your money in shares or just in a simple saving account? Buy to let mortgage rates may be low at the moment, but there is a risk that house prices might drop in the forthcoming months. Is this is something you are willing to accept?
2. Understand who your tenants are: Who are you potential tenants? Get to know them, put yourself in their shoes and try to understand what they are looking for in a rental property. Young people are likely to look for a place that is easy to maintain, comfortable but not necessarily sumptuous. Families will probably already have some of their own furniture so you need to take that into account. Young professionals will probably look for neutral, modern properties.
3. Target the correct area: The "correct" area has got nothing to do with property prices. The "correct" area is somewhere where people want to live, and therefore rent your buy to let property. Think about your area. Where do students live? Where are the transport links? Where are the best schools?
4. Know the risks: Buying a buy to let property is not without risks. House prices have dropped in the recent years, is this something you have taken into account? Houses can be without a tenant for some time. Many buy to let investors do their planning assuming that the property will be empty 3 months in a year. What about repairs or accidental damage? Do you have money in the bank to cover the price of a new boiler? Be ready for all eventualities.
5. Try to negotiate: buy to let buyers have got a major advantage compared to next-time buyers: they are not involved in a chain, so do not have to sell a property to buy another. Remember that when you negotiate a deal with your mortgage lender.
6. Do the maths: You need to get a pen and paper along with a mortgage calculator and do some calculations. What is the cost of the potential properties you are interested in? What rent are you likely to get? As a general rule, mortgage brokers would like the rent to be 125% of the repayments at least, and will usually require a 10% deposit at least. The buy to let mortgage rates are usually higher than regular mortgage rates and have higher fees. Do some calculations, and make sure that everything works out for you.
7. Decide how much you would like to be involved: Buying a new house is just the beginning. In order to rent out a property, somebody has to organise the advertising, the viewings, and when the new tenants are in, be able to deal with repairs. If it's something you are willing to do yourself, you can use the services of an agent that will do that for you. It is worth contacting several agents to compare what is on offer.
8. Compare the market: Do not walk into the first bank you see and ask for a mortgage. Shop around, and consider using a mortgage lender specialising in buy to let mortgages. Try specialist sites such as Buy to let Mortgages [http://www.buytoletmortgagesdeals.co.uk] to find a local adviser. It costs nothing to ask for information.
9. Do not think too big too quick: You occasionally read about buy to let landlords who have managed to make a lot of money and accumulated a large portfolio. Chances that it happens to you are slim, so invest for income rather than short-term profit. Your returns should come from the rent of your property. As most buy to let mortgages are interest only, the loan won't be repaid. You need to make sure that your rent covers more than your payments so that you can accumulate a fund to deal with unexpected situations. Once you have included all your costs, tax, and payments, you can use the money left as a deposit for other buy to let investments, or maybe pay off the mortgage at the end of the mortgage term.
10. Don't restrict yourself to your local town: buy to let investors normally invest in houses in their own area. Bear in mind that your town may not be the ideal place for a buy to let investment. The advantage of a local buy to let property is that you can keep track of it yourself, but don't forget that you can use the services of an agent to do that on your behalf should you decide to invest further away from your area. Is there a town nearby that has got an airport, or a university? This might be a better choice for your buy to let property.
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