Letting out a property offers a way to top up savings in the current climate of uncertain pensions and volatile stockmarkets and is an opportunity to open up a fresh revenue stream as a landlord. It is also an option for vendors who are having trouble securing a buyer. Here are our tips on how to make the most of it.
Check local rental conditions, analyse rental demand and determine the types of property renting in your area.
Choosing an area
Location is a key consideration but not in the same way that it is for owner occupiers. Landlords need to consider accommodation in the same way that tenants – rather than owners – do. Good transport links are essential and it’s a good idea to consider newer properties, or at least ones in a good state of repair, to help keep the maintenance bills down.
Do your sums
The excitement of looking around houses can take over all too quickly. Before you view properties, write down the cost of the house and the likely rental yield. Buy to let lenders often require a deposit of between 15% and 30% and the rental income to cover 125% of the mortgage repayments. Some lenders may accept less but at the expense of a low interest rate. It is also important to have a contingency fund for when the property is not being rented and mortgage repayments must be met, as well as repairs which ought to be fixed quickly. Being a buy-to-let property owner will bring new tax implications and you should make sure you fully understand them by seeking the appropriate professional advice.
Consider how much involvement you want to have
You will need to find a tenant, deal with issues and collect payment. It is possible to do this yourself but if you’ve got a full time job you may prefer to hand the property management to an agent. For a percentage fee they will find tenants, deal with problems and will have relationships with plumbers, electricians etc. should repairs be required. If you decide to manage to let yourself, be prepared to put in some hard work - a buy to let property is far from being a hassle free income.
Choose your tenants carefully
A good letting agent takes away a lot of the hassle of finding a tenant and they will vet potential tenants by sourcing references from previous landlords, conducting credit checks and obtaining bank details. They will also organise the inventory and tenancy agreement on your behalf.
Repairs and maintenance
A landlord has a duty to repair and maintain the property at the start of the tenancy and at all times during the tenancy, including a duty to make good any damage caused by carrying out this work. Bear this in mind when looking for a property and when working out your finances.