6 tips for buy to let investors


The rental market is booming.

Tight mortgage lending criteria is making it harder for house buyers to get a mortgage and saving the deposit required by most first time buyers these days is tougher than it’s ever been. As a result the buy to let market has seen something of resurgence, monthly rents are rising and in many areas the demand for rental property is outstripping supply.

Lower property prices have also tempted many would be landlords to dip their toe into this market, and those with existing portfolios are looking to expand.

We thought we’d use our experience in this market to come up with our six top tips for buy to let investors.

Need advice on buy to let mortgage advice?

Linda Wood independent mortgage adviser in Nottingham

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0115 933 8433


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1. Make sure buy to let is the right thing for you

Think about why you are buying a property to rent out.

Perhaps it’s part of your retirement strategy, perhaps you have spotted a bargain, perhaps you need some extra income and are fed up with low interest rates.

Whatever the reason take time, and indeed advice, to make sure that buying a property is actually the best way of solving your problem.

2. Buy the right property

This might sound obvious but buying an easily letable property, for the right price, which will provide an acceptable yield, is the recipe for success.

This is an investment, you won’t be living there, buying an investment property is very different to buying your own home, it requires less emotion and more of a business head.

Every landlord has their own target for rental yield, typically we see landlords looking for an annual yield of 6 – 7%, it is however important you get a better return that you would do from less risky investments, such as deposit accounts.

Bear in mind too that buy to let lenders will want to see a certain level of rent before they will offer you a mortgage.

Considering how easily the property will be let is equally as important. Think about your target market and make sure you buy an appropriate property. Targeting the family rental market but buying a property in a well known student area is unlikely to lead to an easy let.

Estate agents and letting agents will be able to help here, as will your experience of your local area.

3. Get the right buy to let mortgage

Unless you are in the fortunate position of being a cash buyer you will need a buy to let mortgage.

As usual when it comes to mortgages there are a huge range of options, fixed rates, tracker rates, loans with redemption penalties and those without, the list goes on.

You also need to keep a careful eye on the fees. As interest rates have fallen, lenders have increased their arrangement fees in an effort to maintain their margins. It’s not unusual to see arrangement fees of over a thousand pounds, even for a relatively modest loan, these need to be factored in when comparing mortgage deals.

4. Letting agents?

When it comes to finding a tenant you have two main options, do it yourself or use a letting agent.

Most letting agents offer two options, full management and tenant find. With full service your agent will find your tenant, vet them and then manage the property for you, collecting and distributing rent, carrying out regular inspections and handling any issues which arise and dealing with day to day maintenance.

Tenant find is just that, the letting agent will find you a tenant, carry out the normal vetting procedures and then hand the day to day management over to you.

Many people in full time jobs prefer the convenience of a fully managed service, however if you are retired you might like the challenge of managing the properties yourself. The choice is yours, but just make sure you are ready for those calls at 3.00 am if you decide to do it yourself!

Choosing a letting agent can be hard; price is of course a major factor, but check out what you get for your money. Does your agent use the main property websites such as RightMove? If they don’t will they take longer to let your property? How do they vet tenants? Do they take references? Do they do a credit check?

We’d suggest speaking to at least three agents; compare their prices, service and their tenant finding methods before you make your final decision.

5. Consider void periods

Despite the increased demand for rental property there will inevitably be times when yours is empty.

If you have a buy to let mortgage you need to make sure you have a plan to meet the monthly payments; just because your property isn’t let, your bank or building society will still want their money on time!

Perhaps you have spare income, perhaps you have other properties with surplus rental income, you might even use your savings, just make sure you have a plan.

6. Remember tax

Paying tax is a fact of life and if you make a profit on your buy to let property then expect to pay your fair share. Recent research highlighted the increasing amount of income tax paid by landlords as rents rise and interest rates remain low.

So what do you need to remember when it comes to tax? We could write a whole article on that topic, but you should at least remember the following.

Before calculating your annual rental income you can generally deduct the cost of running the property, including agents fees, insurance costs, repairs (but not improvements) and of course mortgage interest. The figure you are left with is effectively your net profit and will be added to your other income before calculating your tax due.

Remember though, it is only mortgage interest that you can offset against your income, not the entire payment if you have a capital repayment mortgage.

When you come to sell you again may have to pay tax if the property has risen in value. Simply put the profit is calculated by deducting the purchase price from the sale price, you can also deduct the costs associated with buying and selling the property. The figure you are left with is your profit which will be subject to Capital Gains Tax (CGT) if it is above the annual exemption for the year in which the property is sold.

Next steps

Whether you are a first time buy to let investor or an experienced landlord, following these six tips will help you make a success of your property investments.

Of course getting the right buy to let mortgage in place is crucial and this is where we can help. Our mortgage adviser, Linda Wood, is highly experienced in this market and is here to help you make the right choice. Contact Linda today on 0115 933 8433 or email linda.wood@investmentsense.co.uk

Your property may be repossessed if you do not keep up repayments on your mortgage.

For providing mortgage advice we will charge an application fee of £299 and we may also be paid a fee from the lender, any fee paid by the lender will be disclosed to you. Alternatively we will charge an arrangement fee of 0.5% of the loan and refund to you any payment received by us from the lender.

The Financial Services Authority does not regulate some forms of buy to let mortgages.