3 Tips For Purchasing a Buy To Let
With the way investment property mortgage interest is taxed having changed in April 2016 you may think that purchasing a buy to let property as an investment is not as attractive as it once was. However, what has happened is that the playing field has been levelled with the impact of the changes being far greater on multiple owner landlords, meaning the impact is less on single unit landlords.
The effect of this is that the market is a little more attractive for new investors. On that note, here are 3 top tips for anyone considering purchasing a residential buy to let property.
Know Your Challenges
Being a landlord isn’t just collecting the rent, you have a set of obligations which you are legally required to meet. You need to provide certain basic services for your tenant, you will also need to declare your income via self assessment, pay tax on the income and pay capital gains when you sell the property. You will also have running costs – cleaning, decoration, running repairs, management and agent fees. Also, don’t forget that not all tenants pay so you may have rental voids or a property handed back not in quite the same condition you last saw it.
Determine Your Demographic
Don’t go looking for a property before you have decided on your target demographic. Pick who you want to rent to then go looking for a property to meet those needs. A good example here is student accommodation.
If you are looking at student accommodation as your target market then the following would be key;
- Size of property and potentially an HMO
- University support of student placement in your property
The same applies to any demographic. Decide your target then look for the property to match. The standard of property will change if you are letting to socially funded tenants or privately paying, whether families or single professionals.
Pick Your Mortgage Carefully
Your home mortgage lender isn’t necessarily your best choice for your buy to let purchase. There are plenty of mortgage lenders out there and all have different approaches to property assessment, for example;
- Income cover ratios vary massively
- Interest only or capital repayment, each will suit different borrowers
- HMOs are considered differently to normal buy to lets, as are mixed use or semi commercial properties
- Some lenders will not lend to first time landlords
- Some lenders only lend in certain geographies
- Personal credit history can and can not be an issue
The best advice is to speak to a professional and get some advice on what mortgage deals are out there, use the services of a good independent investment property broker.
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By Dave Farmer