This buy to let guide takes you through the steps of buying a property with the purpose of letting it out.

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. 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. 

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.

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’. This 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:

One of the more important tasks when renting out a property is finding the right kind of tenants. It could be counterproductive attracting tenants that require lots of your time and cause nothing but problems. Property location can dictate certain types of tenants, such as families seeking places close to schools and leisure facilities, or students close to a university.

Letting agents can assist in finding and vetting prospective tenants, securing references and performing credit checks for example. Their resource comes at a cost, but it can be money well spent if they avoid costly problems in the long run.

As a landlord, the property is your sole responsibility, and anything that needs repairing or maintaining falls to you to fix. You need to be easily contactable by phone or email, and it will help to have a network of affordable trade contacts who can resolve a variety of challenges at short notice. Be mindful that your responsibility extends to the outside of the property too, including gardens. It pays to consider low-maintenance setups such as patio instead of grass to reduce gardening costs, for example. 

Think whether you are up for the challenge of dealing with all types of tenants, even the most difficult ones. Ask yourself if you’re willing to have difficult conversations when needed, for example missed rent, communicating payment rises or issuing eviction notices to your tenants when the time comes. If you think this sounds a daunting concept, then a letting agent will be able to handle this for you.

Be prepared, and budget for the eventuality that there are periods of time when you are not collecting any rent. The housing market can be unpredictable, so it is wise to contingency plan for a period without income. Also consider how long you can last paying any mortgage and rates for before having to sell. 

Before diving in, because buy-to-let can be a medium to long term investment, ask yourself whether you can afford to tie up your money for a long period of time. Buy-to-let mortgage rates are constantly changing and variable by nature, but generally depend upon the following factors:

• Credit score 
• Amount of deposit put down 
• Level of risk in the loan for the lender
• Type of mortgage product recommended for your circumstances 

It’s always worth seeking advice from a qualified mortgage adviser before making any firm decisions. Especially as chances are you will be investing a significant sum into a buy-to-let venture. Your borrowing (and speed of paying back) will be dictated by the amount of rent that you can derive from your property. 

The amount you can reasonably charge for rent will be driven by the market itself. Compare prices online at Rightmove and Zoopla to get a feel for prices at similar properties.

It is always advisable to speak to a mortgage adviser for this stage. We will listen to your circumstances and help to recommend the most suitable mortgage products available to you, based on searches from a wide range of lenders. 

Broadly speaking, there are typically two main types of payment methods – repayment or interest-only.

Repayment mortgage or interest only?

In a repayment mortgage you would make monthly payments towards both the interest and the capital borrowed. By the end of the mortgage term you could potentially repay the entire balance. Whereas with interest-only mortgages, you would typically only pay the interest only, with the outstanding balance remaining.   

Majority of buy-to-let investors typically opt for the interest-only mortgage option. This can be useful if intending to sell the property at the end of the mortgage term, after which you would repay the mortgage capital outstanding. The benefits of interest-only mortgages mean lower monthly payments which can leave more disposable cash from the rental income. Additionally helping to cover any additional costs when occurring. 

Fixed rate or variable?

There’s also choice on fixed or variable rate mortgages. With the fixed rate, they remain stable regardless of interest rate fluctuations. For a landlord this could enable greater stability in managing cash flows. 

As always, the best course of action is to speak to an expert mortgage adviser. They will assess your situation and listen to your needs before recommending the most appropriate mortgages to suit your needs.

It’s important to keep your eyes open for the potential costs of purchasing a property for buy-to-let usage, so we’ve highlighted a few points to consider (but is not limited to):

When looking at potential buy-to-let investment locations, try to be as objective as you can, ignore emotions and find a property that can meet a set of defined criteria, to allow you to meet your business goals. 

Here are some of the topics you may wish to consider:

• Who do you want to rent to? 
• How long might it take to secure tenants around this area? 
• What is the rental market in the area like? Is it growing or declining? 
• Is there the potential to build in capital growth? 
• Will the rent you receive cover your costs? 
• Can you make improvements to the property in order to increase rental income or capital growth?
• Have you looked at any forecasts for property growth in the area?
• Should you rent privately or use a letting agent?

Firstly, we recommend to sit down and run through your finances. The objective of this is to compare the cost you’d pay for the property, against the likely rent you can collect from tenants. This will help you identify firstly if the investment is likely to be profitable, and over how many years. This is useful to take into account when looking at obtaining a buy-to-let mortgage.

A mortgage adviser could talk you through this so you have a clear idea of whether you can comfortably afford the mortgage on your own. When you’re ready to apply for your buy-to-let mortgage, we will be able to arrange an appointment that can help to fit around you. We are flexible and can offer face-to-face, online or over the phone. 

We are ready to share our knowledge and experience to help to find you the most suitable deals for your circumstances. We know that no two mortgages are the same, and we’ll aim to listen to your needs and recommend the most appropriate products. 

Searching the market

Searching the entire market yourself can be time-consuming. We can search thousands of mortgages and have regular contact with a wide range of lenders. With our help, you won’t necessarily need to search or contact each individual lender to compare mortgage terms and rates. We will aim to do all of this for you. 

We’ll explain the process in order to support you make a start in your buy-to-let journey. We will go through details of the different fees involved, what they are for, and take them into account when finding the right mortgage deal for you. We are also passionate about protecting your buy-to-let property, so our advisers will recommend a range of protection policies available to suit your circumstances. 

We have a duty of care for you too, and we are keen to point out that your home may be repossessed if you do not keep up repayments on your mortgage. 

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.