becoming a landlord
More and more people are now living alone, which means more people are renting accommodation. Busy careers and the desire to travel extensively also mean that the average age of first-time buyers is increasing. As a result a wide range of mortgages are now available for people looking to invest in property to let. Buy-to-let mortgages offer home owners the opportunity to purchase additional properties which they can use to rent out to tenants. This additional investment can be used as an extra income or as a future asset. So is buy-to-let right for you? Take a look at this brief guide and find out how you can get the best return on your buy-to-let investment.
Why buy to let?
Over time, property is a sound bet for a good return on investment. The home you purchased ten years ago is likely to have risen in value way above the normal rate of inflation and in some cases prices have doubled over that period!
Investing in property therefore, can be a worthwhile investment, and if you rent out the property you will be able to keep up the repayments on your additional mortgage.
With more people renting rather than buying you shouldn't have much trouble finding tenants, but it’s worth checking beforehand that you're not purchasing a property in an area that already has more supply than demand.
It’s also easier now to evict troublesome tenants. The 1988 Housing Act has given landlords more power to evict repeat offenders.
Investment or Income?
Essentially, purchasing an additional property is an investment, which means you must decide whether you want to help that investment to grow or use it as additional income. If growth is your primary goal then city centre locations can offer high levels of return. However, as the majority of rental property is concentrated in city centres, competition for tenants is usually higher.
If you're looking to use your rental property as a vehicle for additional income, then consider suburban areas where properties will generally be cheaper and the rent lower, so relative returns are likely to be greater over the long term.
The Association of Residential Letting Agents (ARLA) estimates that, as a landlord, you should be able to claim gross rent equivalent to between 130% and 150% of the property's mortgage repayments (interest only).
Your responsibilities
As a new landlord your daily responsibilities will largely depend on the level of responsibility and work you agree with the letting agents. However, as the owner, you'll be responsible for the property’s upkeep, as well as building and contents insurance.
You must also make sure that any gas or electrical equipment passes safety checks and complies with relevant regulations. Remember too, that maintenance costs, such as cleaning, gardening and your agent's commission can be offset against tax.
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