Buy to Let: Finding Your Property

Identifying tenants’ requirements and matching a property to these is the key to successful property letting. A mismatch of a large house in a city or a small out of town apartment may not affect long term capital growth; but could leave you with a property that is empty for extended periods and returns a low rental yield.

Test the water to establish letting potential prior to purchasing. A lettings agent (who is unconnected with the seller) may be able to assist with this or place a speculative ‘to let’ advertisement in the local property paper and seeing how often the telephone rings.

A good way of finding a property outside of your local area is through a property sourcing company. These companies provide a valuable resource to investors looking to build portfolio of property and who want to diversify their holding outside of their immediate geographic area. They do a lot of the legwork for you; finding property, assessing capital growth and rental potential and they often provide access to deals unlikely to be found on the open market.

Many of these companies specialise in off-plan property offering discounted deals on new buy-to-let property; with access to their due diligence process and rental expertise any membership fees can be recouped in your first purchase.

Buy to Let: Furnishing Your Property

Like matching a property type and location to your tenants’ needs, the same applies to the décor and furnishings. Remember, you are seeking to appeal to a wide audience so the golden rule is to keep it simple.

There are specialist landlord services companies that offer furniture packages, this can save a lot of hassle at a reasonable price and they can be purchased outright or leased for various sizes of rental properties.

If you are specifying off-plan décor or renovating a property a neutral approach will appeal to the widest audience: magnolia walls and plain, preferably dark coloured carpets. It is surprising how few properties are decorated for rental – so by doing this you can easily and cheaply gain an upper hand over the competition.

Buy to Let: Buying at the Right Price

In order to achieve the lowest possible purchase price for a property you need to ensure that you are in the best possible negotiating position:

Open market purchase:

Obtain a mortgage agreement in principle from your lender or broker – to show the seller that you have finance in place and are able to move quickly, and remember this property is an investment, not a home. Be prepared to walk away if you do not get the price you want.

Off-plan purchase:

Off-plan offers investment opportunities that are not available on existing properties. You can purchase off-plan properties with smaller deposits, deferred payments, no stamp duty and specialist mortgages so your ability to negotiate a below market price is often greater with a property of this type.

With either type of property be sure to invest in a high quality survey and read it. Ask for money off the agreed price for each and every defect that is identified: For new build properties you can engage a professional snagging consultant to negotiate the final purchase price.

Buy to Let: Insurance

Aside from the standard life insurance, which should be taken out on any mortgage, there are a number of specialist insurance products aimed at the buy-to-let investor.

It is the tenants’ responsibility to insure their own contents; however landlord’s contents policies are available to cover your own furniture, fixtures, fittings and appliances against instances of theft, fire or malicious damage.

Buildings insurance also remains the responsibility of the landlord, and you should ensure that it is noted on the policy that the property is let and that they are made aware of any periods where the property is not occupied.

Specialist insurance cover is available on things like mortgage interest when your property is unoccupied, tenant disputes and tax investigations.

A specialist mortgage broker could provide information and arrange policies on your behalf.

Buy to Let: Taxation

Letting a property is after all a business venture, and so you will have to pay tax on your profits – both on an annual basis, and on any capital gain you make on the eventual sale of the property.

Your own circumstances will dictate how you are best to calculate your profits and there are a number of different options open to you for doing this. As a general rule of thumb though, you may offset any fees and stamp duty paid on the purchase of the property, along with monthly mortgage interest, repairs plus wear and tear incurred on an ongoing basis against your rental income.

In order to ensure that you receive the best advice though, we would recommend that you consult with an accountant or a specialist tax consultant who will be able to look at your entire situation. There are advantages of looking at your investment in property as just one part of your overall personal situation.