What To Take Into Account Before Buying
Written by Ben Wilkie, editor of the Mortgage Magazine
An increasing number of people are viewing buy-to-let as a profitable long term investment, especially as interest rates are so low, it is a good source of income and there is also the long term gain on the value of the property. Students have and always will need rental property whilst the whole of the market is seeing an increase in rented property. The biggest reason behind the demand in rental property is due to the end of the 'job for life' scenario. People need to be free to move on to find work and do not want the responsibility of buying a property. Many mortgage lenders now see the potential in this market, so competition among lenders is also keener.
COVERING ALL ANGLES
Becoming a landlord will change the way you look at buying a property, and you will need to run it as a business. You will need to consider the overall profitability of the venture. Also you will need to work out the profit you are likely to make. There are a number of cost factors involved when entering the buy-to-let market, such as the survey and conveyancing fees, as well as landlord costs, such as letting agent fees, buildings insurance and ground rent. There will be legal obligations to consider, such as having the gas checked at least once a year and smoke alarms installed.
FINANCING THE DEAL
Competition is increasing the range, flexibility and affordability of buy-to-let mortgages. The interest rates on buy-to-let mortgages have been brought into line with the rates for owner occupier properties and most lenders will now take the rental income into consideration in repaying the loan. However you will need to produce a deposit of around 20 per cent, also which deal do you consider, such as fixed or capped deals, or flexible loans. Borrowers may go on to acquiring further properties, although lenders tend to limit the number of properties in a portfolio.
Getting the style, type and most importantly location, of your property right is essential for a successful buy-to-let investment. Make sure the property is in an area where there are plenty of students looking to rent. Perhaps buy within the area where you live, as you know the area. Wherever you choose, fully research the area. Also, use an experienced and local letting agent to help source the right property. When buying, look at the long term as you will eventually want to sell the property for a good price in years to come.
In an attempt to find the right tenants for your property entrust the task to an experienced letting agent - preferably a member of the Association of Residential Lettings Agents (ARLA) or the NALS scheme. (Universities often have their own leasing schemes where they will manage your property on your behalf should you not to wish to manage the property your self -ed) The advantage of an agent is their knowledge of the market. They can also promote the property; vet prospective tenants; and take out references. Most lets these days are arranged as an assured shorthold tenancy (AST), usually set for a minimum period of six months. Check local papers (or studentpad.co.uk) for an idea as to the amount of rent you should be charging.
(www.studentpad.co.uk can also help let your property as the official student accommodation web site for a number of Universities across the UK -ed)