Introduction
During the property boom years buy-to-let was one of the UK's most successful short and long term investments, attracting would-be landlords in droves. With house prices now in the doldrums and fewer mortgages around, buy to let may not be the gold-rush it once was, but for those prepared to take a long term view on their investment, there are still opportunities to be had.
Welcome to
Buytolet.org.uk, the website that guides you through buy to let investment maze.


What is buy to let?

Buy-to-let is a type of residential investment where you buy a property, typically with a mortgage, and rent it out.

When you purchase a property to let out, you are no longer simply a home-owner but a landlord with all the responsibilities that comes with running a small business, such as looking out for your tenant's healthy safety and filing tax returns.


Buy to let - is it worth it?
While buy-to-let is no longer the hot potato it once was, for investors with pockets deep enough to raise a large deposit it is still appealing, especially compared to miserly savings rates and stock market instability.

A note of caution though - many investors who bought a buy to let in the boom years struggled as mortgage rates rose (before the Bank of England slashed the base to 0.5 per cent) Remember, it is only a matter of time before interest rates rise again!

That said falling house prices, increasing rents and improving mortgage conditions are all providing attractive market conditions to tempt investors back into buy to let once again. Remember; like any investment, buy-to-let comes with no guarantees, but for those who have more faith in bricks and mortar than stocks and shares it might be worth a go.
Research the market
If you are new to buy-to-let, it pays to gem up on all aspects of this investment and take a reality check; what do you know about this market? Are you looking at it with rose tinted glasses, be aware of the risks as well as the benefits.

Are you quite sure buy-to-let is the investment for you? At the end of the day our money might perform better in another type of investment. Remember; buy to let means tying up capital in a property that could plummet in value. This is in comparison to a possible 5% annual return gain on a fixed rate savings account.


You might also get a healthy return from an investment in funds, shares or an investment trust - paying around 10 per cent tax on income and getting tax-free capital growth via an Isa - with the flexibility and peace of mind of knowing you can sell up immediately should you wish.

Give some careful thought before going gung-ho into buying a property. Do your homework, if you have friends, family or acquaintances who have invested in buy-to-let, talk to them about their experiences.
Be informed
It is important to thoroughly research the neighbourhood you want to buy a property before parting with your money.


This can be done via a specialist letting agent or if you want to save money on fees, do the hard graft yourself by gathering information from estate agents, local websites and newspapers, other landlords and even the local borough council.


The questions you need answering are: is there a demand for rental property in your chosen area, how much rental income are you likely to achieve and if there are any local developments planned that might enhance your investment, or on the flip side of the coin, blight it.
Finding Your Tenants
Think long and hard about the type of tenant you want to live in your property. Do you want single people or families? Bear in mind that each will have different needs. For example, young professionals and students might be looking for bars and café society close to colleges or universities, while those with children are most likely to be attracted to a safe and leafy neighbourhood in a good school catchment.


Try to be objective when viewing a property, remember it should appeal to your target tenant rather than your own personal tastes!


Be flexible, agreeing to allowing your tenants to make their mark on a property, such as painting a new colour scheme/decorating or removing unwanted furniture will give it potential in their eyes and make it "more homely". At the end of the day, anything that encourages tenants to stay for the longer term is all good news for the landlord! If peace of mind that you will receive your rent cheque in time is at the top of you agenda, you should take out specialist landlord insurance protecting against your tenant failing to pay the rent, typically known as "rent guarantee insurance".


It is possible to pick up a policy like this for as little as £50, as standalone product or as part of a more tailor-made landlord insurance policy. Click on our insurance heading for more details or visit: landlordinsurance.com
Choosing a good location
Always take into consideration how close your property is to local amenities such as shops, transport, schools, parks and pubs and restaurants. As a general rule of thumb, properties situated within close proximity to good quality amenities are far easier to rent out than those off the beaten track.
Be realistic
Experts say buy to let properties typically lay vacant for around 7% of the year. Therefore it is imperative to have an emergency fund in place so that you can meet mortgage repayments and costs during void periods.


Never invest if you can't afford it or if you are sailing close to the wind financially.


As with all investments, there are no guarantees that your property will rise in value or yield a healthy return.


Buy to let is subject to the vagaries of the stock market, rising interest rates and a temperamental property market. Remember, an increase in mortgage interest could negate any profits you make on your investment.


It is also worth bearing in mind that you will have to pay income tax on any profit you make on your buy to let investment, and you will be liable for capital gains tax (CGT), should you sell the property in the future.


It's a simple truth: never dip your toes into the buy to let market unless you can afford it. Doing so could cause you a major headache; leave you seriously out of pocket and in the worst case scenario lead to repossession and even bankruptcy.
Do your maths
Before you start your search for a property, tot up the costs by taking the price of the house you want to buy and the rent you are expect to achieve.


Since the financial crisis, many lenders are now insisting on 25% deposits or significantly larger sums and offering rates far above residential mortgage deals. Bear in mind that the most attractive deals come with large arrangement fees, so always check the small print before signing on the dotted line.


When considering a mortgage rate, remember to allow for any future rate increases in your financial projections. Remove your rose tinted glasses and look at the serious implications of any increase in interest rates, can you afford it if this were to happen?
Have I missed the boat on buy to let?
People who already have one foot in the buy to let market should now be reaping the benefits of lower interest rates and the reduction of the base rate to 0.5%.


For those looking to invest in buy to let today the climate is very different to the property boom years, mortgage deals are more expensive and harder to find and experts warn this is a tricky time to enter the market.


However, it seems that investors are not being put off, with a recent surge in the number of people taking out buy to let mortgages.


Falling property prices and a mind-set that invests for rental returns rather capital growth has resulted in but to let once more becoming an attractive investment option once again.


If you are tempted into buy to let, you should remember you will need a fairly hefty deposit and the days have gone for making a quick fortune.


But for those willing to embrace the reality that their property value may slip over the short term, and who can guarantee their property meets the benchmark of at least 75% to 85% loan-to-value and returning 125% of monthly mortgage payments, buy to let could still prove to be an attractive investment.
Shop around for the best deal on the market
While it might be tempting to wander into your local bank or building society and sign up for a buy to let mortgage, taking the easy route will leave you significantly out of pocket. Take your time to shop around and find the ideal buy to let mortgage. This laissez fair approach to investing is the reason why banks make billions of pounds in profit out of us each year!
Don't be too ambitious
During the property boom years, for all intents and purposes buy to let seemed a licence to print money. A plethora of television shows and newspaper articles featuring buy to let millionaires with large portfolios made it seem a no-brainer to invest your money in property.


Sadly, the days of double-digit house price rises is over, so always ensure you invest for income not short-term capital growth.


One way to judge different property values is to use their yield: in other words the annual rent received as a percentage of the purchase price. For example, a property delivering £10,000 worth of rent that costs £200,000 has a 5% yield.


Do bear in mind, if you are purchasing your property with a mortgage, rent-to-property price yield will not be the return you get.


One way to calculate your annual return on investment is to subtract your annual mortgage cost from your annual rent and then work this sum out as a percentage of the deposit you have put done.


Here is an example:


£100,000 property with a rent for £500 per month:


£75k mortgage at 5% = £312.50


£500 rent x 12 = £6,000


Difference = £2,250


Deposit + buying costs = £27k


Annual return = 8.3%

Remember to factor in tax, maintenance costs and other landlord expenses into the final figure.


You should consider rent as the essential return for buy-to-let investment. Typical buy-to-let mortgages are provided on an interest-only basis, so the money borrowed will never be paid off.


If you are able to achieve a rental return significantly over the mortgage payments, then once you have established a generous emergency fund, you will be able to save or invest any additional cash you make.


It is worth bearing in mind, however, that people seldom buy a property outright and buy to let comes with many additional costs, such as maintenance, mortgage, agents, void periods – ensure you have all these costs covered or they will eat into your returns.


As soon as mortgage, costs and tax are taken into consideration, you will want to start accruing rent so you can put the money down as a deposit on your next buy to let investment or pay off the mortgage when it reaches the end of its term.


This way you will have gained from the rental, paid off your mortgage and can enjoy your property's entire capital value.
Don't be afraid to look further afield
It is all too easy to remain in your comfort zone and only look for properties in an area you are familiar with, but you could be missing out on a golden investment opportunity.


While there are plenty of plus points to managing a property close to home, in casting your net further you can ensure your property benefits from a whole host of amenities, such as an excellent school catchment, good transport links, shops and restaurants. It will always be easier to rent out a property that is close to good facilities.
It pays to haggle
As a buy-to-let investor you hold the same bargaining cards as a first-time buyer so always negotiate a discount.


If you don't need to sell a property to buy another one and you're not caught up in a chain, you are a safer bet – something that's worth its weight in gold from a sellers point of view.


With such fantastic bargaining power always ensure you negotiate a discount. Make a low offer then hold your nerve – don' let your heart rule your head and never get talked into paying over the odds for a property no matter how much you love it.
Know the dangers
Before making any investment you should take a long, hard look at the downside too. It's all too easy to get caught up in the excitement of buying your dream property but remember house prices are falling and if this continues it will affect your property's capital value too.


Ask yourself this: what will happen if your property falls into negative equity and you can't afford to remortgage?


Just because your investment property is in a good area, it is not immune to void periods and price slides. It is worth considering what you would do if your property sits empty for more than two months. Never invest in buy to let unless you have a significant financial buffer and can cover the cost of repair.


Remember your property will need repairs, regular maintenance and what would happen if the worst happens? Can you afford to install a new central heating system or plumbing?
Hands on versus letting agents
Choosing the ideal property and moving in the tenants in is only the first step, think about how you will manage the property after that.


It may be that you are happy to be a hands on landlord available to your tenant at a moment's notice, but it you have a full time job or your time is precious, you may want to consider the services of a letting agent.


While a letting agent will charge you a management fee, you will have the peace of mind of knowing your property and tenants are being looked after at all times. An agent will deal with any problems and have a reliable network of plumbers, electricians and other workers on hand if things go wrong.


If you prefer to save money on fees and rent the property out yourself, be ready to forsake weekends and evenings for viewings and repairs.
The reluctant landlord
It might be you are forced into renting out your home because of job relocation or because you cannot sell your property for the price you want.


Always notify your lender if you decide to let your home, as failure to do so might breach the terms of your mortgage.


Lenders have different criteria for allowing their customers to rent out their home so seek advice from your bank or building society for the options available to you before taking the first steps.


Your mortgage lender may allow you to keep your existing residential mortgage. Some mortgage companies insist on certain measures, such as specifying the type of letting agreement you have with your tenants or the rent you must realise in relation to your mortgage payments.


You must also notify your insurer of your decision to let out your property as this will impact any home policies you might have. It is essential to do this, as failure to do so could lead to an insurance claim being turned down in the future.


It is worth shopping around for specialist landlord insurance, such policies can be tailored to meet your personal needs and include useful cover such as "emergency repair" or "rent guarantee" to protect against your tenants not meeting their rental obligations.


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