A Landlord’s Guide to Buy-to-Let Property
Buy-to-let investments are a constant feature of the UK property market nationwide. With the potential for significant long-term return on investment, buy-to-let is a popular investment and business opportunity people are pursuing. But what is a buy-to-let property?
WHAT IS BUY-TO-LET?
Before we get into more detail, it is important to fully understand what buy-to-let is.
In its simplest form, buy-to-let is where an investor buys a property specifically to rent out to tenants, rather than living in the property. It is a very different process to buying a property to own as a home. Owning a buy-to-let property and renting it out effectively means you’re running a small business.
HOW DOES IT WORK?
There are two options when purchasing a property to use as a buy-to-let – you can use cash or take out a buy-to-let mortgage (which will be covered later).
Once you have purchased the property, registered as a landlord and received approval to rent the property out, you can start to earn profit from tenants. Potential profits on your investment fall into two categories:
- Rental Yield: the rent you receive from tenants minus any maintenance fees, running costs or agent fees.
- Capital growth: the profit you earn from selling your property for more than you paid for it. The growth in the price of your property is defined by the performance of the property market in general.
It is important to highlight that you will not receive a guaranteed profit from a buy-to-let investment, and the success of your investment is at the mercy of wider market trends and the number of tenants looking for a property. The success of your investment is determined by a cocktail of the work you put in and factors out of your control.
Buy-to-let mortgages are different from the regular home mortgage, they are designed specifically for landlords who are buying a property to rent. There are some similarities between two, but there are also some key differences. Here are the answers to some common questions.
Who can get a buy-to-let mortgage? Those who…
- want to invest in property (houses or flats).
- understand the risks of investing in property.
- earn £25,000 + a year to get a lender to approve your loan.
- have a good credit rating.
How do they work?
- Buy-to-let mortgages often have fees which tend to be much higher.
- Interest rates are often higher and most mortgages interest only. This means you don’t pay anything each month. However, by the end of the term, you repay the original loan in full. This is not to say they are not available on a repayment basis.
- Instead of viewing your salary as the basis for your loan, the lender will view the potential rental income of the property as your primary source. Your annual salary will be considered as a secondary factor. Lenders will typically want the anticipated rental income to meet at least 125%.
WHAT TYPE OF BUY-TO-LET PROPERTY SHOULD YOU BUY?
In short, there is no universal answer that is applicable nationwide. Finding the best property to invest in for potential returns is determined by several factors under your control. The most important factor is that you choose a property in the right location, so you can attract the ideal tenants for your property.
With years of experience sourcing properties across the North East, NEPI removes this worry from you. We offer a one-stop-shop that covers all aspects of buy to let investment from arranging the correct mortgage, sourcing, in-house refurbishment and a highly skilled independent lettings business to ensure your property is well managed and income maximised.
BUY TO LET OPPORTUNITIES
We have a small selection of our buy to let opportunities here. However what is shown is a small representative sample, the full range of opportunities available at any one time is likely to be considerably larger. Our stock is constantly changing and so we would encourage you to get in touch – whatever your particular needs, we’re likely to be able to fulfil them
When choosing the correct property to invest in, it is vital to take into consideration the likelihood of securing a mortgage loan, maintenance costs, and the general running of your property. Property management is an important element of the letting process and you can get some professional help with the management of your buy-to-let property.
Now you’re informed about buy-to-let properties and the potential opportunities available to a prospective landlord looking to invest in the property market. Through highlighting key points of potential profit avenues and the strict points needed to obtain a buy-to-let mortgage, hopefully, you’re now more informed and able to easily navigate your future investment plan.
2 South Terrace
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