Thinking of becoming a buy-to-let landlord?
Victoria Shaw (PA) has some tips for making a wise investment.
The buy-to-let market has seen renewed interest recently as more and more people decide to take the plunge and become a landlord.
The returns to be made can be lucrative in many areas of the country, especially when compared with relatively poor rates on savings.
New pension freedoms which came into force in April, giving people aged over 55 more flexibility over how they use their pension pot, may also prompt further interest.
According to a recent report from the Council of Mortgage Lenders (CML), buy-to-let lending for house purchase has performed more strongly than home owner loans for much of the year.
London, Birmingham, Bristol, Manchester, Leeds, Glasgow, Edinburgh and Plymouth have all been particular buy-to-let hotspots for landlords in recent months, according to recent research by Barclays Mortgages.
If you’re thinking of investing in the sector, it may also be worth bearing in mind that in the last Budget, it was announced landlords will see their tax breaks restricted.
Wealthier landlords receive tax relief at 40 per cent and 45 per cent - but this tax relief will be restricted to 20 per cent by April 2020.
From April 2016, a “wear and tear allowance”, which allows landlords to reduce the tax they pay, regardless of whether they replace furnishings in their property, will also be replaced by a new system that only allows them to get tax relief when they replace furnishings.
What makes a canny investment according to Barclays Mortgages?
Visit your prospective property at least three times before making an offer. Make notes each time as you’ll pick up things you missed on the first viewing.
Get an objective opinion - whether it’s a friend, relative or partner.
Find a tenant who’s right for you. This process is a two-way street, it’s important to offer your home at a price that will appeal to a long-term tenant, if that’s what you are looking for.
Managing a property yourself can help reduce costs, but it’s important to use local knowledge and take independent advice if you go down this route.
Create a detailed inventory to help monitor costs. It’s a good idea to cover minor flaws in your property so tenants know what they can and can’t ask to be repaired. Be as straightforward as possible with tenants. Personal touches like a hand-written welcome note, a bottle of wine and flowers will help to reassure tenants they have a welcoming and approachable landlord.
Location matters. Make sure the area you’re interested in has a demand for rented property. It might be worth considering university towns and areas on planned key transport routes. Speak to local letting agents about average rents and the amenities and features that will attract your target tenant.
Get covered. Some policies cover additional risks associated with letting, such as emergency repair assistance, landlord’s liability and rental guarantee. Make sure your tenants understand their responsibilities - such as insuring their own possessions.
Budget wisely. When you’ve found the right property, work through the figures to make sure the project looks profitable. In addition to any mortgage repayments, factor in costs like solicitors’ fees, stamp duty, letting agency fees, furniture, service charges and ground rent if the property is leasehold, together with ongoing maintenance and repairs. Plan for potential interest rate rises, and periods when the property may be empty.
