Property is often seen the best investment in the country. With literally millions of success stories, TV programs dedicated to the subject, and a property market that looks (to the casual observer, at least) to be in constant growth, surely bricks and mortar is where it’s at?
In fairness; all of that can be true, but thinking that becoming a landlord through buy-to-let is going to be an effortless investment leading to untold riches is a sure-fire way to failure.
Navigating a buy-to-let mortgage and then managing the difficulties of being a landlord in order to make money takes planning and effort – and no small amount of experience. Thankfully, we have the latter and are here to help you.
Here are eight tips to help you understand the pros and cons of a buy-to-let mortgage as investment.
8 Top Tips for Buy to Let
How to Succeed with Property Investment
1 - Understand the costs
2 - Calculate the tax
There’s always someone wanting a piece of your pie! HMRC will be looking to take their cut, so make sure you have calculated the tax impact of being a landlord.
Stamp duty land tax
Buying a property will incur a substantial stamp duty cost that will run into thousands of pounds. It’s a one-off fee that means it is considered somewhat differently than ongoing costs by many, but it is still a significant impact on your investment.
Income tax and mortgage interest tax relief
Changes to mortgage interest tax relief that happened in 2017 means that the income tax due on rented out properties is considerably higher than it used to be, and will make a difference on your overall profit.
However, by incorporating your landlord business you can save significantly on these tax concerns. Read our guide on mortgage interest tax relief to find out more on both the changes and the ways you can make a saving.
Stamp duty land tax
Buying a property will incur a substantial stamp duty cost that will run into thousands of pounds. It’s a one-off fee that means it is considered somewhat differently than ongoing costs by many, but it is still a significant impact on your investment.
Income tax and mortgage interest tax relief
Changes to mortgage interest tax relief that happened in 2017 means that the income tax due on rented out properties is considerably higher than it used to be, and will make a difference on your overall profit.
However, by incorporating your landlord business you can save significantly on these tax concerns. Read our guide on mortgage interest tax relief to find out more on both the changes and the ways you can make a saving.
3 – Consider the need for tenants for every month
When your property is ticking along nicely, with respectful tenants who pay on time each month, it represents the very best in investment opportunities, but you can’t be sure it is going to remain that way for the whole time. Dry months when you are between tenants (or even worse, problem tenants that don’t pay and become a burden) are very likely and all those outgoings still keep rolling around even with nothing coming in to cover them.
Plan for periods without tenants and be prepared to adjust agency fees and advertising to minimise the time your property spends unoccupied.
Plan for periods without tenants and be prepared to adjust agency fees and advertising to minimise the time your property spends unoccupied.
4 – Find the right location
5 – Plan on renovation
Profit on a buy-to-let property comes in two places; the monthly income from rental, and the overall growth of the property value. By purchasing a property that will benefit substantially from renovation, you focus heavily on the latter and can be a little more flexible with the former.
Renovating is an investment in itself. If you have a lot to do you may need to make sure your mortgage covers the costs – speak to us at The Mortgage Hut about getting a mortgage with renovation in mind.
If you do your additional developments well you could put a large amount of additional equity into the property, not only making it worth more for a final sale, but increasing the desirability in the meantime and improving your rental options.
Renovating is an investment in itself. If you have a lot to do you may need to make sure your mortgage covers the costs – speak to us at The Mortgage Hut about getting a mortgage with renovation in mind.
If you do your additional developments well you could put a large amount of additional equity into the property, not only making it worth more for a final sale, but increasing the desirability in the meantime and improving your rental options.
6 – Haggle
7 – Look to auctions
With a mortgage in principle, you will have the purchasing power to go to auctions and make safe snap decisions. The savings that can be gained by buying property at auction rather than through a traditional agent process are often considerable.
Just don’t get too far into the auction spirit and make poor bids. Know your top-end going in and don’t cross it, no matter how tempted you are.
Just don’t get too far into the auction spirit and make poor bids. Know your top-end going in and don’t cross it, no matter how tempted you are.
8 – Speak to The Mortgage Hut
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