Is a buy to let a good investment?

This guide discusses the things to bear in mind if you're considering becoming a landlord and getting a buy to let mortgage. We will cover the five common mistakes made by new property owners and five must-dos for smart landlords, designed to give you the best possible start on this side of the property market.

What are the main reasons for getting a buy to let mortgage?

Ultimately, owning a buy to let property is an investment and one that has the potential to generate both an income and capital gain. A buy to let mortgage lets you borrow the money you need to buy the property; the rental income generated then goes towards meeting the mortgage repayments.

It's not always guaranteed income and there's a lot of work involved … but if done right, it can become a successful long-term investment.

If you're considering investing in a buy to let property, think about what you want to achieve from it. Are you more interested in generating an income or capital gain? Is it to supplement your pension in retirement? Having a clear strategy will help you make the right decisions.

What to look into before you fully commit to a buy to let mortgage

So is a buy to let a good idea? Well, there are two crucial things you need to look into at this stage:
  1. The current state of the housing market
  2. The latest and best deals on buy to let mortgages
Let's break these down one at a time.

How to study the current state of the housing market

Never base your decision to become a landlord on the housing updates you read or hear about in the news. These are often nationwide or region-wide reports, and you want to study the market at a local level.

There are ways you can do this online but if you want to be absolutely sure, get in touch with a letting agent.

How to find the latest and best deals on buy to let mortgages

The good news is, you're already in the right place for comparing buy to let mortgages.

You can see some of the latest deals on this page and give us a call to get fee-free advice from us on your options from this point.

It's our job to stay tuned into the buy to let mortgage market and give you the best guidance possible on choosing a deal.

You can even get us to call you if you prefer – just click the arrange a call back button on this page. We'll call you at a time that is convenient for you to get the ball rolling.

And while getting a good buy to let mortgage deal is all about being clued up, it's also about watching out for the common pitfalls. Read on for a low-down of the risks and common mistakes to watch out for – follow our advice and you'll be well on the way to be a successful landlord.

5 Risks that every potential landlord needs to consider

  1. We mentioned earlier that you need to consider the financial implications of the investment before you make any sort of commitment. There are costs involved, both when buying a property and ongoing once you're a landlord and it's important to have cash set aside to cover these.
  2. It is never guaranteed that your rent will cover the mortgage repayments and there may be times when your property is unoccupied by a tenant … or they're refusing to pay. You should have a cash buffer set aside to cover any rental voids – enough to cover at least a few months' mortgage payments.
  3. Mortgage rates can rise. Would you be able to afford your mortgage if interest rates do rise? If not, it may be worth considering a fixed rate mortgage.
  4. A property investment isn't like buying shares which can be sold quickly. Selling your property is a long process. Even if you have an interested buyer from the beginning, it can take a little while to get the money in your hands, so to speak.
  5. As with a residential mortgage, if you fail to make your repayments on time or at all, your lender may reclaim the property from you.

5 Common mistakes made by new landlords

  1. Falling in love with a property you'd love to live in yourself. The number one rule here is that your property needs to meet the market requirements and match the desire of your target tenant.
  2. Furnishing the property with second-hand furniture or hand-me-downs. There's a high chance these will breach the furniture and furnishing regulations.
  3. Buying a property that needs a heavy makeover or ongoing maintenance. Large gardens, old roofs, vintage interiors – they all require a lot of upkeep … and do little to enhance your rental value.
  4. Leaving the property under the supervision of a friend or relative while on holiday. Your tenant relies on you to respond to problems immediately – they're paying you for that service. This is why a lot of landlords go down the letting agent route, so there is always a reliable contact looking after the investment.
  5. Failing to secure a tenant's deposit in a government deposit scheme. This can leave you exposed to the tenant prosecuting you for a much higher value than the deposit's worth.

3 Must-dos for smart landlords

  1. Stay longsighted. Your investment is long-term here and the benefits can be great. It is not a get rich quick scheme.
  2. Work out a reasonable rental fee that not only covers your mortgage repayments but also any fees you're paying in relation to the management of the property (i.e. paying a letting agent). On top of that, account for your own profits – some of which ought to be banked to cover any repair costs which may crop up. Our calculator can show you how much rent you should charge.
  3. Invest in your kitchen and bathroom to ensure they're both at their affordable best. These are the main rooms a tenant will look for when choosing a rental home – because they're not going to invest any money into these rooms themselves.

What now?

It's time for you to decide where you're at in terms of readiness to go for this and get a buy to let mortgage.

The best place to start? A chat with one of our expert advisers.

Call us free, let us know what you need help with and we'll support you in every way we can. There's no obligation and no fee for our advice.

Please note: although L&C is authorised and regulated by the Financial Conduct Authority (FCA), the FCA does not regulate most Buy to Let mortgages.

 

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