Top 7 Tips for Buy to Let Mortgages
- Author Laura Ginn
- Published November 28, 2013
- Word count 692
There is a growing number of first-time buy to let landlords in the UK. With buy to let mortgages offering attractive rates, rent prices hitting new highs, and house prices setting records, landlords are seeing impressive returns.
This doesn't mean, however, that success on the buy to let market is easy and requires little effort. If you are new to the buy to let game then you might want to take a look at the tips below to ensure that your investment pays off.
- Realize that you are taking a risk
Purchasing a buy to let mortgage is an inherently risky endeavour. This doesn't mean that you shouldn't do it or that by being smart and working hard you can curb some of this risk, but you always need to be aware of it in order to encourage yourself to play it safe with your money.
Think about whether rental income is going to be enough to cover monthly mortgage payments, or what you are going to do during times of gaps in tenancy. Having savings to fall back on can be a big help.
- Find the right mortgage
There are a lot of competitive deals on the market right now, so make sure you pick the best one. Don't just stay with your current bank of there is a better deal somewhere else. You are also going to need to decide between a tracker and a fixed rate mortgage. With interest rates low, now is a good time to take advantage of a tracker, but if you are worried about financial security, then a long-term fix is probably better for you.
- Choose the right location
Location really is almost everything when it comes to real estate. The location of your property is going to be a huge determining factor in whether or not you will be able to attract tenants. Does the property have access to transportation? Is it near shops and schools and other services that the prospective renter would like to be near? These are the sorts of factors that you are going to need to consider.
- Choose the right type of property
Most first time landlords are choosing to purchase either flats or two-bedroom houses, as this will appeal to the widest possible market, especially young people. Family houses are more risky for the first time landlord, but depending on the area and on what you can afford, they can nevertheless be a good choice.
If you can attract a family to your rental property, then you will be less likely to have to deal with tenancy gaps and you might even save money on maintenance! Speaking of maintenance...
- Take maintenance costs into account
You need to remember that as the landlord you are going to be responsible for the upkeep and maintenance of the property. You need to provide tenants with and energy performance certificate, make sure all appliances are in proper working order, and that the property complies with fire safety regulations. All of this may get costly, so you need to calculate this into your spending and savings and budget accordingly.
- Keep taxes in mind
Your buy to let property is going to incur two unique taxes: an income tax on the rental income you receive, and Capital Gains Tax on the profit you make if you ever sell the property.
However, you can also save money by deducting a lot of allowable expenses from your taxes, such as mortgage interest payments, utility bills, insurance premiums, and letting agent fees. Speaking of letting agents...
- Use a letting agency if you don't have the time to do everything yourself
Managing a property is hard work. It is going to require advertising, dealing with tenants, assessing the property on a regular basis, and performing the aforementioned repairs. If you do not have the time to do all of this yourself, then you need to consider using a letting agency.
If you do choose to work with a letting agency then you also need to take account of letting agents' fees. This can be as low as 7% of your rental income, and so may be worthwhile for you.
Eva Kurilovaknows that many people are buying property in the hope that they can let it out to tenants as a means of gaining a regular income. To find out more about buy to let mortgages visit uswitch.com/mortgages/buy-to-let-mortgages/ and see if this is something that you could see yourself doing in the future.Article source: http://articlebiz.com
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