If you are thinking of becoming a landlord and purchasing a buy-to-let property, here are some helpful resources for making this easier
Buy-to-let is much tougher than it used to be, after removing the tax relief and new rules in the UK property system that have seen a reduction in landlords’ rental income. However, for some Britons the idea of investing in property still appeals in a world of low interest rates for savings, volatility in the stock market, and Brexit.
After all, demand for rental property remains strong amongst the young , and while yields have fallen, there could still be money to be made in the buy-to-let sector. So if you are considering whether or not to purchase a rental property our Intasure guide to buy-to-let might be helpful for you.
In this article we look at the following:
Buy-to-let mortgages for new property investors tend to be similar to residential mortgages, although there are some important differences. Deposit, fees, and interest rates on buy-to-let mortgages are usually much higher, so you might need to research how much deposit you will need from a mortgage lender. In general terms, the average purchase price for a buy-to-let property tends to be less expensive than a main residence . Another important factor you should take into account is that your home may be repossessed if you do not keep up repayments on your mortgage.
As with any type of mortgage, the more you can put down as a deposit, the better the mortgage deal you could get. So a lower mortgage rate means lower monthly payments and a greater margin between your rental income and your mortgage costs. Higher rates on buy-to-let mortgages are expected, and you should be aware that a rise in a variable rate might affect your repayments. In addition, Bank of England has forecasted a rise in interest rates after March 2019 (post-Brexit) depending on the UK economy , and a new rise is likely to be expected in the middle of the year .
A minimum deposit for a buy-to-let mortgage might be close to 25% of the property’s value .
Furthermore, arrangement fees can add up to a bigger sum, but it might be worth considering using a specialist broker and mortgage advisor who can look across the buy-to-let market, and help you with the mortgage application.
Since April 2016 landlords have to pay an extra 3% stamp duty on property purchases. In fact, stamp duty can add up to a considerable extra amount on top of the initial buy-to-let investment. So it’s important to budget for this when deciding whether or not you can afford a mortgage and to become a landlord.
How much you have to pay now depends on whether the land or property is residential or non-residential or mixed-use and more information can be found on the stamp duty calculator of the Ministry of Housing, Communities & Local Government website.
After calculating the monetary worth of a buy-to-let mortgage, you should research the market and study the area to start looking at properties. Don’t forget this! As this is an investment and it’s not going to be your family home, you should forget your personal preferences and think moneywise about properties.
Other relevant factors are whether the property is located next to amenities and public transport lines, and how they might affect the rent price and the type of tenants that might want to live there. And you also need to think about what might happen if things don’t work so well and, for example, if you need to evict your tenants.
It’s important to know what sort of return a property might produce, and although the return on investment could be lower and tax bills higher compared with some years ago, potential profit margins remain significant. Nowadays landlords are investing in lower-cost properties and renting them out for more .
According to the National Landlords Association (NLA) the rent 79% landlords receive is just covering the interest on their mortgages. The association was looking at both sides of the affordable housing crisis, as taxing professional landlords out of the market “will simply drive up the cost for those who want to access decent rented homes. 
The world of buy-to-let can be overwhelming if you are thinking about investing in property for the first time, but nothing is impossible!
You can become a first-time buyer and buy-to-let landlord, although not too many lenders would lend to first-time buyers on a buy-to-let basis because they see this as a riskier option. However, opportunities are not limited to the buy-to-let market, as the main requirement is a higher deposit and studying the personal circumstances and buy-to-let deals at that time. Other common alternatives available for private property investors are purchasing a property jointly with a parent or potentially taking out a guarantor mortgage.
By answering some of these questions you will gain a better understanding of the industry and the return you might expect from your initial investment.
Buy-to-let insurance provides cover for your property and your liabilities if tenants are injured on your property and you are deemed to be a fault, for example.
Buy-to-let insurance is a specialist policy that provides comprehensive cover. Be aware that, standard home insurance might be invalidated if your property is let to tenants so please check any policy details in full.
A series of measures to curb the buy-to-let industry has made it more expensive to start in the private property rental sector in Britain, and is squeezing profits for private landlords. Nevertheless, buy-to-let and investing in UK residential property remains popular in a country where people might consider ISAs and pensions to be the most tax-efficient ways to invest.
*The opinions and views expressed in the above articles are those of the author only and are for guidance purposes only. The authors disclaim any liability for reliance upon those opinions and would encourage readers to rely upon more than one source before making a decision based on the information.
Published by: intasure