Why should you start letting property?
With high loan-to-value mortgages (LTV) causing many buyers, in particular first-time buyers, to postpone investing in property, the buy-to-let (BTL) market continues to be buoyed, in part thanks to favourable BTL mortgage rates, making letting a property a viable way to invest and potentially make money.
Before you start letting a property, there are a number of factors you should consider.
Letting with a mortgage
In most cases, a buy-to-let purchase is done with a buy-to-let mortgage. This is commonplace, but if you wish to let a property that has an existing owner-occupier mortgage, make sure you receive consent from your lender and insurance provider.
Income v Expenses
The main reason you will probably be considering investing in property is to make money. There are two main ways in which you can do this via buy-to-let, the rent itself from the tenants, and through capital gain of the property value.
You must consider that through turbulent times it is possible to lose money if the value of your property decreases, you have long void periods or your outgoings are higher than the rent received. Like any form of investment, there are financial risks involved so it's worth speaking to an agent about this risk before purchasing and letting a property.
As with any property purchase, there are a range of fees associated with your purchase you must factor into your budget regardless of whether you’ll be letting a property:
- Stamp Duty
- Property Survey
- Legal Costs
- Valuation (lender)
- Mortgage fees
- Income tax
As well as those fees paid largely up front before your purchase, you must also consider the ongoing charges you'll have to bear as the landlord:
- Our fees (fully managed service)
- Interest on your mortgage
- Safety checks
- Rent insurance
Is letting an HMO property different to a non-HMO?
A House in Multiple Occupation (HMO) is a term used to define one that is owned by a private landlord and shared by multiple people. HMOs have different standards to non-HMOs, so getting good letting advice from a local agent before you proceed with an HMO is essential.
What is an HMO?
- A property is considered a House in Multiple Occupation if:
- Five or more people occupy the property
- Occupiers share facilities, such as lavatories and cooking areas
- The property can potentially house two or more households, no matter the number of storeys
What’s the difference between an HMO and non-HMO property?
The main difference between an HMO property and a non-HMO is that tenants can complain to the local council. If the Environmental Health Department of the local council does find fault with the standard of the HMO property, the landlord can be compelled to rectify the problem and the landlord and any property managers can be prosecuted – the council can even take over the property.
What are your landlord responsibilities with an HMO?
As well as your statutory legal responsibilities as a landlord you must ensure:
- Electrics are checked every five years
- The property should not be overcrowded
- Adequate cooking and washing facilities
- Communal areas and shared areas are clean and in good condition
- Smoke detectors installed
Full HMO regulations can be read here