Is buy to let right for you?
The idea of buying to let can bring out the Rumpelstiltskin in us.
It sounds like an opportunity to spin gold out of straw: get a house, move a tenant in, let their rent pay the mortgage, give them a decent place to live, and pocket a tidy profit.
Get it right and buying to let can be a good investment: a win-win for you and your tenant.
But rental properties - and the Buy to Let mortgages you need to purchase them - aren’t without their complications.
In the coming weeks we’ll give you all the handy information you need to become a successful landlord: providing the lowdown on everything from finding the right property, Buy to Let mortgages, how to make your property more desirable, vetting potential tenants and landlord insurance.
We begin our four-part series with the things you need to consider before going down the buy to let road.
Our expert guide is Tina Hayton-Banks, Head of Customer Services for NMS (Nottingham Mortgage Services) - a subsidiary of The Nottingham - which offers advice to would-be landlords and searches the whole of the mortgage market to find them the best mortgage deals.
“Buying to let is a big commitment and you need to go into it with your eyes open,” says Tina. “You need to know what you are getting into before you start the process.”
The first thing you need to consider is whether a rental property is the right place to put a substantial chunk of your money.
Those looking for monthly income from their investment are likely to be disappointed, says Tina. Buying to let works better for those looking for mid to long-term investment.
“Not many people make a living out of buy to let properties,” she explains. “Those who do tend to have a large portfolio of properties.”
A minimum of 25% of a property’s purchase price is likely to be required by a lender as a deposit to secure a mortgage. Rental income from the property - once you have paid the mortgage, covered insurance premiums, made repairs and saved a little to insulate you from those fallow months between tenants - is not going to be substantial.
Here is another thing to bear in mind: you need to already be an owner-occupier to get a Buy to Let mortgage. Lenders will not consider someone not already on the property ladder as they want to see you have a track-record in making mortgage repayments.
If buying to let sounds like an option you want and are able to pursue, now is the time to get started on some serious homework.
It begins by working out what kind of property you can buy on your budget, what type of tenants you want - and making sure they are a good fit for one another.
We’ll help you to answer those questions in Part 2 of our buy to let guide.
Read our series of buy to let stories