Guide to buy-to-let investment Part 1

Is buy-to-let right for me?

Firstly, property investment isn’t a decision to be taken lightly, and must be well considered before putting two feet in. Many believe it to be an easy path to making money, however it is a business in its own right and you must approach with your eyes open, not focussing purely on the financial gains associated to it. If your objectives are clear to begin with, you are more likely to get what you seek from your property.

Key tips to become a successful landlord

• Plan your finances - know from the offset what your intentions are. Will your money be used as your regular income or will it be set aside as capital growth?

• Conduct research – find out the applicable laws around buy-to-let, and if needed, appoint a letting agent to keep on top of the rules and regulations.

• Get advice – speak to a mortgage adviser and an accountant to get a full picture on your financial situation and the options available. The property investment market can fluctuate depending on economic conditions so it is important to speak to a mortgage adviser to protect your finances and sufficiently insure your property should the market worsen.

• Exit plan – it is wise to consider how you will exit the buy-to-let market should you need to. Creating an exit plan alongside an entry plan will allow you to settle finances in a tax-efficient manner.

Actions to avoid:

• Diving in to a property – only purchase a property after due consideration. Take professional mortgage advice and understand the tax implications, responsibilities and costs involved with becoming a landlord.

• Having insufficient financial protection – plan for the worst-case scenario, talk through protection policies available with your mortgage adviser.

• Being out of the loop with laws and regulations – always keep an eye out for new laws that you must adhere to.

• Not understanding what being a landlord entails – from a moral and legal standpoint – you must keep the property in good condition and maintain a paperwork trail accordingly, and being prepared to work with your tenants for whom it is their temporary home.

What does being a landlord entail?

It’s important to be aware of all that a landlord has to do – it should rightly be considered as a job itself rather than seeing yourself purely as a property investor.

Finding the right property

Consider carefully what you are looking for and choose wisely. A newer property will, in theory, give fewer maintenance issues, yet an older property has much potential for adding value through investment in the right places.

It is also worth considering desired occupancy levels – if you are housing more than three separate, unrelated tenants, it will be classed as a ‘House in Multiple Occupancy’, which can incur higher fees and solicitor costs. Additionally, you may find that tenant changes are more frequent.

If you intend to house over five tenants in one property, then this will need to be registered and be subject to the following conditions:

• The house is suitable and offers comfortable living standards for the number of tenants living there.

• Either yourself, as the private landlord, or the letting agents you’ve chosen, needs to be ‘fit and proper’. This means a clear criminal record and no history of having previously breached any landlord laws or code of practice.

• You need to send your annual gas safety certificate to the council.

• When requested, you can provide safety certificates for any electrical appliances.

• You install and maintain smoke alarms in the property

There may be a fee for mortgage advice.

We have made reference to investments in this guide, however please note that we do not provide legal / tax advice. Please ensure to seek independent tax / legal advice if this is required.