If you are considering becoming a landlord and getting a buy to let mortgage, there are several things that you need to think about. The following advice will need to be considered before you make the decision to rent out a property, to ensure that your are making the right decision.
As there are many responsibilities and costs that are involved with becoming a landlord, extensive research should be undertaken before any decisions are made. Investing in a buy to let property not only involves a lot of risks, but it carries a lot of responsibility too, particularly where your tenants are concerned.
Before arranging the mortgage that you will need, it is important to research into different elements of the investment, such as what type of property you are looking to buy, where you would like your property to be located, what type of tenant you would like to attract and also how these factors will affect the money that can be generated from the investment.
It is essential to make sure that you have enough money in reserve, as there will sometimes be months where you have no rental income from the property. A problem that many first time investors face when investing in a buy to let property is the fact that there can be months without any income, mainly because it can be difficult to find tenants for your property.
For this reason, we suggest that investors have between 3 to 6 months worth of mortgage payments in reserve, so that they know they are able to pay the monthly mortgage payments even if they don’t have any tenants. Having a cash reserve will also be beneficial for if there are any repairs or improvements that need to be made to the property, as sometimes these can be costly.
When receiving monthly rental payments, you and any joint landlords will need to pay income tax on the profit that is made. However, the total tax amount that you pay can be reduced by offsetting management costs against the total rental income from the property. There are several costs that can be included in this, such as ground rent, water rates, management and legal fees, buildings and contents insurance, repairs, maintenance of the property and also mortgage interest.
Although a buy to let property investment can be very profitable for the landlord, it can take a lot of time and organisation in order for the money to be generated. A landlord is responsible for the management of the property, which could mean that there are a lot of hours spent, particularly as there are many different responsibilities that you take on when becoming the landlord of a property. An alternative option that you could take would be to pay an agent to manage the property, saving you a lot of time in the long run. However, although it will mean you no longer have to spend so much time with the ongoing management of the property, it does mean that the agent will need to be paid, of which is often a percentage of the monthly rent.
When renting a property out on an Assured Shorthold Tenancy (AST) in England and Wales, you must ensure that their deposit is placed into a secure and protected deposit scheme. There are 3 official tenancy deposit protection schemes backed by the government, and they hold the deposit that you receive from the tenants in your property.
In the event of needing to evict your tenants, there are several procedures that need to be followed. To evict your tenants in the correct way, you will need to be aware of your rights and also the things that you need to do. If there is a dispute in relation to an eviction, the official deposit protection scheme will keep hold of the deposit until the dispute has been settled.
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