A Quick Guide To Purchasing A Buy-To-Let Property

A Quick Guide To Purchasing A Buy To Let Property

If you’re considering becoming a landlord, there are many elements to consider and understand before you purchase a rental property in Stockwell. The process of buying a buy-to-let property differs from buying a residential property that you will live in yourself, so it’s good to know what exactly to expect.

Of course, it’s a long-term investment that shouldn’t be made in haste, so if you’re reading this, you are probably looking for the right kind of information.

Our team at Your Home Managed are experts in buy-to-let advice, so here is our straightforward guide to purchasing a buy-to-let property in Stockwell.

What is Buy-to-Let?

First things first, the basics: buy-to-let is a property that is specifically purchased with the intention to rent it out to tenants. It’s an investment property that can generate a monthly income if the rent being charged is higher than the monthly buy-to-let mortgage payments.

A buy-to-let mortgage is different to a residential mortgage, and if you can’t afford to simply buy the property outright, you will need to apply for one.

When applying for a standard mortgage, your income is taken into consideration, whereas with a buy-to-let loan, the lender considers the potential rental income as your primary income source and considers your personal income as secondary. The interest rates also tend to be higher, and they may have larger upfront fees, so keep that in mind.

Moreover, deposits on buy-to-let mortgages are also typically larger than the deposit needed for a standard mortgage, so expect to put down at least 25%.

What kind of buy-to-let property should you buy?

The right property is important and can include factors such as the location in proximity to amenities and transport, as well as the neighbourhood and the demand in the area.

Much like when you’re searching for your own place to live, you should ensure you do adequate research into the area you want your buy-to-let property to be located in.

Consider what kind of tenant you want to target and include that in your research. If you’re trying to rent to families, your best bet is to find a property in the suburbs close to good schools.

If you want to rent to students, a property near a university with cheap restaurants and nightlife is key. Keep in mind, the type of tenants you have renting from you can affect your mortgage, as many lenders have restrictions on student rentals, for example.

Do you need buy-to-let insurance? 

The short answer is yes; you should have buy-to-let insurance (also known as landlord insurance). It gives you coverage for the building and the contents inside and any landlord liabilities.

Building insurance is often required by your mortgage lender to secure a loan and will compensate you if your property is destroyed or damaged. This will cover the repairs or rebuilding costs, so you don’t have to pay huge expenses out of your pocket.

Contents insurance will cover any furniture inside the property. It’s a smart idea to get contents insurance even if your buy-to-let property is unfurnished because you can choose what level of cover you require, and it can protect any curtains, carpets, and other furnishings that essentially come with your property between tenants.

If you choose to rent your property unfurnished or furnished, your tenants will be responsible for their own contents insurance to cover personal belongings when they move in.

Landlord liability is mostly your choice, but if you’re renting to students, for example, there may be a minimum level required. This covers you for any injuries or deaths of any tenants or visitors in your property.

Do you need to use a letting agent?

This answer is dependent on the budget you’re working with, how much time you have, and the level of involvement you wish to have with your buy-to-let property.

If you want a hands-off approach, it is a good idea to enlist the help of a professional, experienced lettings agency or property management service in Stockwell.

A property management company in Stockwell like Your Home Managed will help you carry out credit checks on your potential tenants, help you come up with a letting contract, chase late rental payments for you, help with any maintenance on site that needs to be done, and assist with mandatory safety and efficiency checks for gas and energy.

The fees to work with a letting agent typically include paying an ongoing fee to manage the property which varies, so it's always best to speak with your chosen letting agent to get a complete idea of costs.

Generally, utilising the services of a letting agent can take a big burden off your shoulders if you are a budding landlord!

You can read about our property management services and see a fees breakdown here, or please do call us on 0208 125 7780 for a chat.

Want to Learn More About Buy-to-Let Property?

For professional advice on purchasing a buy-to-let property in Stockwell, contact our expert team at Your Home Managed on 0208 125 7780 or email info@yourhomemanaged.com.

In the meantime, we’ve answered some of your common buy-to-let questions here:

Frequently Asked Questions About Buying a Buy-to-Let Property

How much tax will I pay on my buy-to-let income?

You'll pay income tax on rental profits (rental income minus expenses). Mortgage interest tax relief helps offset some of this cost.

What about capital gains tax when I sell my buy-to-let property?

Yes, you'll likely pay capital gains tax on the profit you make when you sell your buy-to-let property. There's an annual tax-free allowance to consider.

Is a buy-to-let property a good investment?

Rental yield (your annual rental income as a percentage of the property value) is a key consideration. It should cover your buy-to-let mortgage interest and other expenses.

Do I need to pay stamp duty on a buy-to-let property?

Yes, stamp duty rates for buy-to-let properties are typically higher than residential purchases as it's not your main home. Talk to a financial advisor about the specific costs involved.

What Next?

Rental Property Management in Stockwell

At Your Home Managed, we are your local property management experts in Stockwell. If you need expert letting agent or property management services to help market and manage your property, our experienced team can help.

Call us today on 0208 125 7780, book a valuation or browse our letting and property management services.

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