If you’re looking to make a financial investment this year, you may already be thinking about securing a buy-to-let property.
Despite inevitable fluctuations in the market, bricks and mortar remain an attractive proposition to many.
Essentially, whether the property is to be a medium or long-term investment, the idea is to cover the mortgage and costs with rental fees as well as best case scenario, to make a profit by the property’s increasing value.
Simple? In many ways, yes. But let’s take a closer look . . . and discover everything you need to know about buy-to-let.
Find your finance
Once you’ve decided the best option for you is buy-to-let, the next step is to assess how to finance this and usually it’s by applying for a buy-to-let mortgage.
This allows you to buy your property now without saving up the full amount – the rental payments then cover the mortgage and other costs.
Buy-to-lets are not the same as conventional mortgages. The three main differences are: you’ll need a bigger deposit, you’ll face higher fees and you’ll pay a higher rate of interest.
Most buy-to-let mortgages are also usually offered on an interest-only basis, which means repayments cover only the interest owed – the amount borrowed will not go down.
For approval, you’ll need an excellent credit history and evidence of sufficient earnings.
When planning your budget, don’t forget to factor in things like tax and maintenance costs.
As always, we recommend using an independent financial or mortgage adviser to get the best advice.
Do your research
When it comes to choosing your property, be sure to compare prices in the area you wish to buy.
Also check out the location for amenities, such as good transport links, schools, shopping outlets, restaurants and leisure facilities.
Their importance will depend on what kind of tenant you’d like to attract: city centre commuters, students, young families or retirees.
This is important as you need to match the kind of property you can afford with a location people will be happy to rent in.
Know the rules
Ensure you comply with all relevant legislation. For example, there are safety musts,
including supplying an electrical installation condition report, a portable appliance test and an energy performance certificate.
There’s also a duty to protect your tenant by keeping the property free from health hazards.
As a landlord you must register with the local authority (even if you use a letting agent). You should also keep them up-to-date with tenant’s details.
And don’t forget to get landlord’s insurance. You’ll be responsible for major repairs, but, when you draw up your written tenancy agreement, pinpoint who’s responsible for what.
Finally, if you take a cash deposit, you’re legally required to protect it in a government-backed scheme. This is to safeguard deposits from being unfairly kept by rogue landlords.
Accept a helping hand
If you’d rather not give up your free time to sort possible maintenance issues, consider using a management agency to handle the letting.
They will charge a fee but offer advice and deal quickly with any problems – being in the business, they’ll also have contacts in plumbing and electrics.
If you’re keen to source a property, s1homes has top contenders all across Scotland.