7 Buy To Let Mortgage Investment Tips For Beginners
The world of buy to let is one that many of us dream about. Buy a property, rent it out, and watch the cash roll in. Then buy a couple more properties, and boom! You can give up your day job as here you have your own lucrative buy to let portfolio.
Is it really that simple? Being a landlord is time-consuming and costly, and you run the risk of being taken off guard by political law changes as lawmakers want to squeeze more tax from landlords.
Here’s our top seven tips on what to look for in a Buy To Let mortgage investment:
#1 – Market Research:
Our first tip for buy to let mortgage is to research the market. Is now the best time for you to make a financial investment? Is there a high market in the private rented or housing association sectors that outweighs the supply?
Before you buy to let mortgage investment, make sure you consider all of the variables. In the long term, this will save you time, effort, and tension. If you are not sure how to buy to let mortgages work, you can visit a BTL mortgage broker near you.
#2 – Location:
Consult a local estate agent to find out what is and isn’t in demand. Discuss what you should expect in terms of rent, the neighbourhood, and the average property price in the city.
- Do not choose the most affordable or most costly locations.
- You should keep an eye out for new and promising rental areas.
- It could be worth searching a little further afield, as long as you can get to and commute to the place in question quickly.
- In order to avoid expensive errors or miscalculations, you must be able to respond and be responsive.
Also Read: Top 10 Reasons A Buy To Let Mortgage Application May Be Rejected
#3 – Target Your Tenant:
Our next Buy To Let mortgage advice is to choose your ideal tenant early on.
Renters include students, young families, and young working professionals.
Big houses near a university, for example, can quickly be turned into an HMO (housing with multiple occupancy).
This raises the property’s net rental revenue when more rooms are filled, resulting in more rental income..
Don’t hesitate to do background checks on prospective tenants.
In this field, references and credit checks are crucial.
You can’t rely on someone’s word that they’ve had a steady job for the last ten years with no holes in their salary or that they have a perfect credit score.
These checks represent the type of lifestyle your tenant is used to and is likely to continue when residing in your house.
Worst case scenario, you’ll have to deal with the hassle of evicting a tenant that can’t afford their rent. It can be both a costly and time consuming process.
#4 – Do Your Calculations Properly:
Begin by creating a budget; what can you realistically afford?
Can you afford the deposit needed for a buy to let mortgage, which is usually about 25%?
What kind of rent is the property going to generate?
You want your annual rent to cover 125 % of your mortgage payment to be minimum.
You would also account for maintenance expenses in the budget (typically 10 percent of the gross rent for maintenance, arrears, void periods etc).
Also Read: Local Mortgage Broker in Canary Wharf (E14)
#5 – Risky Business:
The next tip on our Buy To Let checklist is to understand the investment’s risks.
Will your investment hold up if the price falls again?
What if anything goes wrong with the house or you can’t rent it out?
You could find yourself with an empty property that you can’t rent.
#6 – Know Your Additional Costs:
There are several factors that you might not have considered at first, so understanding the extra costs is one of our Buy To Let mortgage tips.
Will you manage to repair a furnace if it broke down or redecorate a room if a pipe burst?
Can you afford it if the tenant defaults on the rent?
You’ll also have to think of a number of insurance options.
Also Read: 5% Deposit Mortgage Scheme in the UK for First Time Buyers and Homeowners
#7 – Tax:
The last of our buy-to-let tips is to be aware of your tax obligations.
Do you notice that there is already a 3% stamp duty levy, and that mortgage interest will no longer be deducted from rental income?
All of these would need to be investigated and considered before making a buy to let purchase.
Consider meeting with one of our London and Essex based independent remortgage advisers. Our mortgage advisors are familiar with the guidelines used by lenders and can help you match mortgage offers to find the best one for you. Mountview FS will assist you in determining the right remortgage choices. Call us at 02080950120 for more details or send us an email at info@mountviewfs.co.uk for more information.
