Ten buy-to-let tips

Posted on: 27 August 2013 by 50connect editorial

Property sales have increased to the highest rate for three and half years, but what does that mean for buy-to-let investors.

Buy-to-let investmentAs an investment buy-to-let looks very attractive when compared to returns that can be realised from low saving rates and a volatile stock market. However a surge in property sales and rises in house prices has made investing in rental property and getting value for money a real challenge.

Here are our top ten tips to ensure   

1. Choose the right property

Make sure the property is in an area that is well suited to letting. Take advice from local specialised letting agents on the suitability of the area and types of property that are in demand. Always treat entry into this market as a medium to long-term investment.

2. Get the right financing

As with the normal residential mortgage market, there is a wide range of products to choose from in the buy-to-let area. Ask for advice and take time to consider which is the right mortgage for your circumstances.

3. Consider the hidden costs

Give consideration to the amount of maintenance the property is likely to need and what this may cost. As landlord, maintenance will be your responsibility. Make sure that the rent not only covers the mortgage, but the 'hidden costs' of maintenance and insurance as well.

4. Think about your finances

This may mean having a reserve fund to dip into every now and then.

5. Choose a letting agent

You can opt to manage the property yourself but, for a fee of up to 15% of the gross rental income, a letting agent will take care of tasks such as finding tenants, collecting the necessary references and rent.

6. Put the right tenancy agreement in place

Always have a tenancy agreement in place before a tenant occupies your property. Your letting agent or solicitor can help you with this.

7. Ensure you have the right insurance

As the owner, you are responsible for insuring the structure of your property, which will include any permanent fixtures and fittings within the property. Check your policy as many buildings insurance policies exclude buy-to-let properties, although some lenders now offer specific policies to cover your needs. In addition to insurance, local authorities require you to comply with fire regulations; this could mean putting in fire doors, boarding floors and smoke detectors. Ring your local authority for advice and a fact sheet.

8. Sort out your tax position

If you become a private landlord your tax position may be affected. Any profit you make when you sell the buy-to-let property will be liable to Capital Gains Tax (CGT) charged at the highest rate of income tax. It may be worth putting the property in joint names to make the most of two personal allowances. Rental income is also taxable but remember that the mortgage payments are tax deductible.

9. Before tenants move in you must produce a detailed inventory

If you are letting a furnished property, always make sure the tenant signs a detailed inventory of all the contents. This will help safeguard against any missing or damaged items that could be uncovered when the tenants leave.

10. Always get a deposit

Always get a deposit from your tenants before they move in. This will protect you against any damage caused by the tenants or a default on the rental payments.


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