A buy to let is a property purchased with the intention of renting it out to tenants. You can make a hefty profit as an investor of a buy to let property, you just need to make sure you plan appropriately and weigh up the income with the costs. It also imperative to seek tax advice before embarking on a buy to let investment.
Successful buy to let investing in the current housing market is not without its challenges, like all investments, there are risks associated with investing in the buying to let market, increased taxes, greater regulation and higher cost are all realities of today’s private rented sector.
Being a landlord requires a lot of time, planning and capital. You need a thorough under-standing of your capacity, aims and finances to ensure that your strategy is realistic and aligns with your budget.
There are 4 main differences in buy to let mortgages:
- Rent Potential – the decision as to whether or not a mortgage will be offered is usually based on the rent you will earn as well as your income. In some cases, your income is not ever considered.
- Interest Rate – buy to let mortgages have slightly higher interest rates.
- Larger Deposit – typically a minimum of 20% or 25% of the property’s value is required as a deposit.
- Tax implications – we recommend you seek independent tax advice. Stamp duty land tax has a 3% surplus charge for any residential investment purchase. https://www.stampdutycalculator.org.uk/
When buying a second property to let, you will need to decide whether your primary objective is income or capital growth. In other words, are you looking to make a profit month on month or are you looking to make a profit through increased equity from the second property if it increases in value over time? The decision may affect the type of property you purchase, and the location.
When you manage a property there are many costs involved in addition to the monthly mortgage repayments. As a guide, you should be aiming to achieve a gross rent of about 135% of the rental property’s interest only mortgage repayments in order to cover your costs should anything go wrong.
We are buy to let specialist, we guide a range of clients from First Time Landlords to experienced Landlords to help them obtain the very best buy to let mortgages.