Buy-to-Let Guide

There are a lot of benefits that come with being a buy-to-let landlord, although if this is your first time there is a lot to do before you can start letting out the property. In our buy-to-let guide we cover the basics to give you a clearer idea of everything that’s involved in the process.

What is Buy-to-Let?

Buy-to-let is a property that is purchased by an individual and let out to tenants to produce a regular monthly income which can be used to pay off the mortgage on the property or used to supplement an income.

Which locations should I be looking at to buy?

The important thing to remember when looking at locations is that you will not be living in the property, so personal preference doesn’t matter.

Look at what the area has to offer the type of tenants you want to attract. For example, when it comes to younger people, is there good access to nightlife either in the immediate area or close by? If you want a family to live in your property, are nearby schools of good quality and transport links reliable?

Towns like Biggleswade and Huntingdon tick these boxes and both have much current regeneration schemes improving infrastructure. This is also true of St Ives and St Neots and local market prices tend to be more affordable than some of the larger towns and cities found a short distance away.

Buy-to-Let Mortgages

You cannot take out a standard mortgage for a buy-to-let property. This is because the amount of money you can borrow on a buy to let mortgage depends on how much money rent revenue it can generate. In most cases, rental income will have to be 25% to 45% higher than your mortgage payment. While it varies depending on the lender, you will also need a minimum salary income of around £20,000 to £25,000 per year.

Choosing a property to let

When it comes to choosing a buy-to-let property, look for areas that make good business sense and that are usually in high demand. Focus on things such as good transport links, high quality schools, local amenities (shopping, nightlife, doctors etc.) and check to see if any regeneration is planned in the area as this is always attractive to prospective tenants.

The type of property you settle on will also depend on the amount of money you can borrow. Some areas are cheaper than others, so you may be able to secure a house which could attract working families. Alternatively, a flat or apartment may be more affordable for you, and this tends to attract single professionals or couples. Generally, the closer the property is situated to the centre of the town or city, the more expensive it will be.

Furnished or Unfurnished?

The next big decision to make is whether you should let the property furnished or unfurnished. There is no right or wrong answer here, as it comes down to preference, although going for the furnished option does require you to spend more money initially and on upkeep and maintenance.

Choosing the Right Tenant

If you are becoming a landlord for the first time, you may need some help finding the right tenant. Even if you have done this before, attracting and cross-checking tenants is a time-consuming process that requires a lot of work.

Once the property is ready, you’ll need to market the property on popular property search websites, including professional photographs and detailed descriptions to entice people to make an enquiry.

It’s also vitally important to vet the tenants, which will include right to rent checks, employment, identity and credit checks to ensure the tenant is who they say they are and that they can afford the rent.

If you work with a reputable estate agent, they can do all of this on your behalf. It’s a process they work with every day, and they will have an active database of prospective tenants who they can market the property to, which could save a lot of time and effort.

The agent can also arrange the tenancy agreement, take care of the deposit arrangements and become the main point of contact during the tenant’s stay, which means they deal with all the communication and collect the rent on your behalf, while you always have the final say about any decision related to the property.

Landlord Responsibilities

As the landlord there will be several legal responsibilities you’ll have to uphold. These include:

  • Providing an energy performance certificate (EPC)
  • Providing an Electrical Installation Condition Report (EICR)
  • Carrying out gas safety checks every year on the property
  • Keeping the deposit in a government-backed scheme
  • Repairing and maintaining the property to keep it in a liveable condition
  • Installing smoke alarms on every floor and a carbon monoxide detector
  • Not entering the property without the permission of the tenant
  • Following the legal process for any evictions that may be required