|
|
|
|
Private Landlords - Choosing Property
Before investing in property, on a "buy to let" basis, it is wise to seek the advice of one, or more, letting agents in the area in question. A member of ARLA ("Association of Residential Letting Agents"), for example, may be able to advise you on particular property types that are in demand, or the best location(s) for letting property.
When considering a property for investment, you need to have a fair idea of the type of tenant that you are trying to attract, and make sure that the property is, in fact, suitable for a tenant, or tenants, of that kind. You need to adopt a pragmatic, objective point of view. Older properties, particularly those with a high proportion of woodwork, or large gardens may appeal to you personally, but will present a much greater overhead, in terms of maintenance, than some other property types.
Investment in an area that is popular for letting, and is likely to remain so for the foreseeable future, can be of benefit in several ways. Capital growth over time, while not guaranteed, is highly likely, void periods – periods when the property remains empty between tenants – and rental values will increase steadily over a period of time. Generally speaking, you should be looking for a rental value that is between 130% and 140% of monthly mortgage repayments. Indeed, some mortgage lenders may insist that the projected rental income from a property is, at least, 125% of the mortgage repayment; this extra percentage is to cover additional expenditure, such as maintenance, insurance and service charges.
Buy to Let Mortgages
A "buy to let" mortgage is a mortgage loan specifically designed for prospective private landlords. The landlord uses the loan to purchase a property and rents, or lets, it to a tenant or tenants. The revenue realised from letting is often sufficient to cover the monthly mortgage repayments and the maintenance charges associated with a property, while the property owner can also benefit from any capital appreciation of the property, itself.
Buy to let mortgage products are very similar to standard, domestic mortgage products, with one or two important differences. The "Loan to Value", or "LTV", figure is likely to be restricted to 80% by most mortgage lenders, so that a deposit of, at least, 20% of the total purchase price needs to be raised beforehand. Interest rates, too, are slightly higher than those of standard residential mortgages, but still a far cry from the expensive, "commercial" mortgages that were the only option for buy to let investors not so long ago. Buy to let mortgages are typically available for terms of between 5 an 45 years.
Managing Property
As a private landlord, you have a "duty of care" to maintain your property in a safe, habitable condition. There are also a number of rules and regulations regarding the safety and maintenance of a property, not least those relating to gas and electricity supplies and appliances, with which you are legally bound to comply. Failure to comply with these regulations will make you legally liable for any damage, or injury caused to your tenants while they are on the premises.
In addition, although a poorly maintained property may not necessarily be illegal, it is unlikely to lead to much in the way of tenant demand, or realise its full rental potential. Tenants who do express an interest may not be of the required calibre, and any that take up residence may not stay long, or be keen to renew the tenancy.
The legal requirements are straightforward enough, but if you feel that compliance is too time consuming as task, you can always employ a management agent, or company, to deal with it on your behalf. A management agent will, obviously for a fee, make sure that the necessary checks and certifications are carried out on a property, as and when necessary. This can provide peace of mind, particularly for new or inexperienced landlords.
Insurance
It is vitally important to note that standard, residential insurance policies are usually not suitable for buy to let properties; in fact, many such policies include clauses which explicitly nullify cover should the property in question be rented out. It is necessary, therefore, to arrange cover that is specifically designed for private landlord. This, however, should not be a difficult process. Many insurance companies, nowadays, offer a comprehensive "private landlord" package, which includes not only buildings and contents insurance, but other options, such as landlord liability insurance, emergency repair assistance, legal protection and rental guarantee insurance. Legal protection insurance covers landlords for loss of rent if a tenant refuses to pay and may also cover the costs of legally evicting a tenant. Some insurance policies may even cover hotel bills if a tenant refuses to leave at the end of fixed tenancy term.
Landlord insurance is not, in fact, a legal requirement, but if a property is bought with a mortgage loan, the lender will usually insist that it is insured. Common sense dictates that a property, of any kind, and particularly one that you rent out, effectively, to strangers, should be insured, in any case.You should also make sure that your tenants understand that they are responsible for insuring their own possessions.
If you would like one of Global Financial Limited's independent mortgage brokers to supply you with a no obligation quotation then simply fill in the form and a broker will phone you to discuss the finer points as you would not want to sign up to a mortgage that is not quite what you wanted.
|
