Purchasing a property to let is an ‘exciting’ option for many people looking to improve their current – and future – financial situations. Mark Pereira, director of Resonate Property, talks unLTD readers through some key considerations.
Purchasing a property to let is a popular consideration for many people looking to improve their current financial situation with additional rental income or to improve their pension value.
Although the prospect of gaining an additional monthly income – and perhaps a more diverse investment portfolio and greater financial freedom – is exciting, there are numerous responsibilities involved with being a landlord and these should be thought about carefully before taking action.
The many considerations range from making the investment itself, to knowing what taxes are going to apply and receiving maintenance requests and calls FROM tenants. Buying a property to let is not just an investment – you are starting a business.
Below we discuss some key considerations when purchasing a buy-to-let property.
As with any investment, whether that be buy-to-let property or investing in stocks and shares, it’s a good idea to begin with a plan for your finances, along with clear aims to work towards.
The purchase price to own the property is the single largest financial outlay when becoming a landlord.
There are numerous tangible and intangible factors that contribute to house prices, including the type and age of the property and its location, the wider economic situation at the time of purchase and what development is happening in the local region.
You should dedicate a lot of time to deciding which property and location will help you reach your aim.
Rental yield – There are vast differences between properties when it comes to rental return. The rental yield represents how much money you receive in rent when considered as a proportion of the price paid for the property. Working with a local property investment expert can help you identify which properties and areas will provide the best rental yields.
Maintenance and ongoing costs – Once your property is set up, you’ll have day-to-day costs to think about. Some of these might include landlord insurance, management fees, service charges, maintenance, property certifications, and licences. It is your responsibility to ensure the property is safe for your tenants.
Finance – Another consideration for entering the buy-to-let market is getting a mortgage. There are many options for financing property including the use of your cash, an interest only mortgage, or a repayment mortgage. We would highly recommend seeking the advice of a whole-of-market mortgage broker who can assist with your decision.
Alongside the consideration of costs, you must make the property suitable and attractive to prospective tenants, manage and maintain it and ensure it meets the minimum legal standards in the UK.
Working with an established property investment service provider will smooth your journey into buy-to-let ownership while ensuring you make the most of the opportunities.