Buy To Let

These mortgages are designed for property investors and private landlords, who do not intend to live in the purchased property. Buying additional property for the purpose of letting it to earn rental income can be risky and complicated, since there is no guarantee that house prices will rise, nor that rental income will be uninterrupted.

That said, letting a second property to tenants could return respectable financial rewards over the longer term, but it’s important to properly consider the risks, as well as rewards, involved in ‘Buy to Let’ first.

When buying a rental property, you need to decide whether your investment objective is income or capital growth. Are you looking to cover the monthly costs and perhaps make a profit to supplement your income? Or, are you looking to make a profit later upon the sale of the property, with the assumption your property’s value will increase in value over time? The decision may affect the type of property you purchase, its location, and the risk involved, since there is no guarantee that property prices will rise.

Additional Costs

As well as mortgage costs, potential landlords should carefully consider the costs of owning the rental property itself. These additional costs may include:

Property Maintenance – The upkeep of the property itself, such as repairs to appliances. Redecoration may be required before a property is let to new tenants.

Letting Agent Fees – Though it varies, letting agents normally charge around 10% of the monthly rental income for managing tenants. If you need full management of your property, it is not unusual for these costs to be much higher, typically around 15% of the monthly rent.

Ground Rent/Service Charges – These costs only apply to leasehold properties.

Legal Insurance – In the event of non-payment of rent, anti-social behaviour, or damage to the property, you may need legal insurance. This can be used to cover costs involved in pursuing eviction.

Buildings/Contents Insurance – The property will need buildings insurance. Any furnishings provided as part of the rental agreement will also need to be insured with a suitable contents insurance policy.

Furnishings – If the property is to be let as furnished, then you’ll need to consider the initial cost of providing the items needed to furnish the property.

Appliance Safety and Inspection – Certain appliances will need to be regularly inspected and serviced to ensure they are safe to use and compliant with current regulations. Examples include gas boilers and gas fires.