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Buy to Let for beginners
Buy to Let for beginners
The UK rental market is booming and with demand still trumping supply, there’s no denying that buy-to-let is appealing. However, as with any other investment, it requires a lot of thought and consideration to ensure that your opportunities are maximised and that risks are minimised. In this blog, we take a look at what you need to know when choosing a property to let and everything in between.
Why do it?
Being a landlord has a number of benefits associated with it. Not only can it be a very profitable choice but providing you have a suitable property and hard-working letting agent, little effort is actually required from you. Some landlords choose it as a full-time job whereas other use buy-to-let properties to save for a rainy day.
How much money will I make?
Landlords make money two ways; the yield and capital growth. Yield describes the difference between outgoings and rent. Capital growth is how much the property value has increased by and will allow you to expand your portfolio should you want to. Every rental market in the UK is different so do your research and decide what location will have the best opportunity for you.
How shall I finance my purchase?
Buying a property is probably the biggest purchase you will ever make and it shouldn’t be taken lightly. As well as the initial property price, you’ll need to consider legal fees, stamp duty, maintenance and renovation costs. It’s likely that you’ll need a mortgage so we recommend meeting with a mortgage advisor to discuss options.
There are lots of buy-to-let mortgages out there but usually you will need the rent to cover 125% of the repayments, borrow no more than 60-75% of the property’s value and you’ll need to be able to afford a deposit of around 25%. As a beginner, the idea of mortgages may be daunting but your provider will look at forecasted rent as well as any other income.
Are there any legal requirements?
As a landlord, you have a number of legal responsibilities but don’t let this put you off. While it might seem that there are constant changes to lettings legislation, utilising the skills of a letting agent will ensure you’re always up to date. Nowadays, landlords must prove the property is gas and fire safe as well as provide an EPC with a rating of E or above.
Which location is best?
For buy-to-let landlords, the perfect location combines income yield and capital growth. Generally, commuter towns are fantastic places to search as there’s always going to be demand from young professionals. Harrogate and Huddersfield are local commuter towns so why not see what they have to offer?
What type of property should I buy?
This largely depends on what you want to get out of your investment and what type of tenant you are looking for. Firstly, you need to decide whether you want your buy-to-let property to give you a high annual yield or high capital growth. While lots of landlords look for a property that does both, it can be difficult.
A property with a high capital growth potential will likely be in a desirable area which is more expensive to buy in and will have higher mortgage repayments. These factors will reduce your yield. Once you have decided on what sort of capital growth and rental yield you’re after, you can think about tenant and property type.
Should my buy-to-let property be near where I live?
There’s no right or wrong to this question. While it may be helpful to be nearby if you’re new to letting, it can reduce your options when it comes to buying. Can you afford to by nearby? Do you plan on being a hands-on landlord? What’s the competition and demand in the area like?
How do I get a bargain?
Right location and the right time. The best way to pick up a bargain is to buy in an area which is currently cheap but will increase in value in years to come – but this is much easier said than done. However, look out for areas that are having major redevelopments and close to big cities.
How can you help?
At Cassini Properties, we have helped hundreds of landlords save money on letting properties. We work with multi-property landlords to first-timers and can find tenants, deal with paperwork and manage properties. Why not get in touch today to see how we could help?