Are you considering a buy-to-let investment? Speak to our expert buy-to-let agents and find out where to invest and the potential yield your purchase could offer.
The benefits of buy-to-let
With over four million households occupied by private renters in the UK, it's easy to see why investment in buy-to-let properties is seen as favourable. Here are just some of the benefits of investing in buy-to-let property.
Long-term property is a good bet: Despite the uncertainty surrounding the housing market, long-term property investments are a good bet. Traditional bricks and mortar have a greater ROI compared with depositing savings in a bank. Average property values are still higher than they were 10 years ago, making long-term property a safer bet than flipping properties.
Still plenty of growth: We’re seeing an increase in growth in previously underdeveloped areas, such as rural towns and villages, as well as areas of cities that are tipped for gentrification. With more businesses allowing remote working, there are plenty of investment opportunities throughout the country away from large CPDs and commuter belt suburbs.
Generate a steady income: One of the main reasons to become a buy-to-let landlord is the steady stream of income that can not only pay the mortgage on the property but also provide you with an income stream.
High demand for private rentals: Renting is still popular and often a necessity for many people who can't afford to buy. This makes the rental market a competitive place to be for tenants; properties are often let within 19 days in the capital and around 24 days in the North East.
What to look for in a buy-to-let property?
When it comes to investing in buy-to-let properties, there are a number of things you should consider:
Your budget – Like any investment, you need to decide how much you can afford to invest. Once you know your budget, you can do the calculations to ensure the potential rental income can cover your costs.
Your tenants – Think about who you will be renting to as this will impact the type of property to invest in. For example, will you be looking to rent to families, students or young professionals?
You location – Where you invest will impact the types of tenants you attract. For example HMOs are better suited to CPDs and universities, whereas families will be looking for properties closer to schools.
Your rental income – A buy-to-let property is a financial investment, so taking the time to understand the local market will help you understand the potential income your property could yield. By understanding the local market, you can ascertain if the potential rental income will cover all your landlord costs.
What type of returns are there on a buy-to-let property?
When becoming a buy-to-let landlord, you'll need to consider the type of return you're looking for. For each property you'll need to decide whether you want a capital growth or rental yield as each has different advantages depending on what you're looking for.
Capital growth – The increase in the value of the property over the medium to long term. This suggests the property is an investment for future sale to either invest in another property that will have greater gains or to cash out and use the money for another investment.
Rental yield – The income made from the property. Yield is expressed as a percentage against the current value of the property. 5% is a good rental yield, although HMOs can achieve between 12% and 15%.
What are the responsibilities of a buy-to-let landlord?
As a landlord you have a legal responsibility to ensure your buy-to-let property is fit for habitation and your tenants are safe. You must:
Meet safety standards
Every buy-to-let property must have a fire alarm installed on every floor of the dwelling and carbon monoxide detectors must be placed in any rooms with a coal fire or wood burning stove. Gas appliances must be issued with a gas certificate and all furniture must meet safety standards and have the appropriate safety labels displayed.
All electrical items must be PAT tested to ensure they're compliant and the water supply must be working properly to ensure it's free from Legionella bacteria.
Have an EPC
All buy-to-let properties must have an EPC certificate and the rating must have a minimum rating of E. EPCs last for ten years, so you don't have to renew it for every tenancy.
Check for right to rent
Landlords have a legal obligation to ensure that tenants have the official right to reside in the UK. If you rent out a property to an illegal immigrant, the penalty is an unlimited fine and up to five years in prison.
For more information about the roles and responsibilities of becoming a landlord, visit our landlord page and discover how Hunters can help you.
How buy-to-let mortgages work
Unlike a home buyer’s mortgage, a buy-to-let mortgage is based on the expected rental income from the prospective property. Typically, lenders will need the rental income to be between 25–45% higher than your mortgage repayments.
In addition, lenders will require a deposit of around 25% instead of the lower deposits often found with a residential mortgage. Interest rates for buy-to-let mortgages are often higher too and many lenders will charge a product fee.
Why use an agent for buy-to-let?
Whether you own one buy-to-let property or a growing portfolio that requires managing, using an agent to manage your buy-to-let will free up your time – so you can look for more investment opportunities. Even more importantly, buy-to-let agents offer invaluable expertise about both the local and national housing market, ensuring you maximise your yield potential.
Here at Hunters, we live and breathe property, so why not use our expertise to take some of the stress out of managing your investment? Our buy-to-let property consultancy process includes:
Maximising rental income
We will review your current rental income and help to ensure you're getting the best possible yield. We can also advise on minimising void periods between tenancies.
Planning and supporting portfolio expansion
With a network of branches throughout the UK and with dedicated departments for Sales, Lettings and Management, we are perfectly placed to identify property hotspots, and the best locations for buy-to-let investment. In addition, we can help plan the sale of underperforming properties and recommend a course of action for re-investment.
Buy-to-let mortgage review
Our links with the professional Mortgage Advisers mean we can help you review your current portfolio. If you wish to arrange new funding, we can help you access the latest buy-to-let mortgage products and interest rate offers available. A Mortgage Adviser working with our Buy-to-Let agents will help you every step of the way, from choosing a lender, arranging an agreement in principle and completing a full application.
Letting and managing your properties
Our expert Lettings and Management departments can work together with our Buy-to-Let team to ensure the process of letting your properties is easy, stress-free and manageable. We want to get the best for our clients and our branches will often achieve rents above the regional average.
Why choose Hunters to help with your buy-to-let property
With offices throughout the UK, Hunters has the knowledge you need for not only your local buy-to-let market but the private rental market as a whole. It's this invaluable expertise that allows us to work alongside landlords like you to ensure you maximise your investment.
We understand that being a buy-to-let landlord is often time consuming with ever-changing rules and regulations, which is why we have a variety of landlord services available to suit your needs, creating a truly bespoke package.
Ready to see how we can help, find your local branch.