How to get Started in Buy-to-Let

In the UK, private renting has become the norm for many people. By 2025, more than half of 20-39 year olds are expected to be renting privately, more than doubling since 2001.

Are you considering becoming a landlord in light of this? Getting started in the world of buy-to-let can be challenging, so we’ve compiled a few tips to help you succeed.

How do you become a landlord?

 

There is a commitment involved in being a landlord, but it could be well worth it. During the last few years, private rental prices have steadily risen in Britain, providing a nice passive income as well as asset protection.

Getting Started

 

Your first consideration should be whether your property would work as a rental. Make sure all your paperwork is in order and the state of your home is up to code. A property left to you in an inheritance might require some renovations.

It’s also important to consider whether your area has any rental demand. Families are looking to rent large houses in the suburbs instead of renting studios only in the big cities.

It is also a good idea to seek advice from other experienced landlords. You can discuss with them whether you want to rent out your property without furniture or with furniture, and whether you want to be hands-on or hire a letting agent.

Finally, make sure you register for self-assessment with HMRC so you don’t get in trouble with the taxman.

Questions to ask yourself

 

In your property, are pets allowed?

Can tenants smoke in the property?

Will you rent out my property furnished or unfurnished?

Tenants might be attracted to a property that allows pets, but pets can damage furniture.

How to buy your first property

 

If you aren’t able to buy outright, you’ll need a buy-to-let mortgage. This type of mortgage is used to purchase real estate for the purpose of renting it out to residential tenants for a profit, or at least to break even.

Depending on the rental income you expect from the property, you may be able to borrow a certain amount. Most lenders require your rental income to be between 25% and 45% higher than your mortgage payment. Other things to keep in mind are:

  • Maintain a good credit report
  • Some lenders may have lower age limits, but the maximum age is typically around 75.
  • You may need to provide evidence of personal income separate from rental income (usually around £25,000+).
  • In order to qualify for a buy-to-let mortgage, your loan-to-value ratio must be at least 75%, so you will need a minimum of 25% as a deposit.
  • Your lender may require that you own your own home, either outright or with an outstanding mortgage, though this is not always the case.
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Buy-to-let mortgages come with restrictions, such as the fact that you cannot live in your investment property without the lender’s permission.

A buy-to-let mortgage comes with costs. Generally, buy-to-let mortgages have higher interest rates than residential mortgages, and many lenders charge a product fee. It is also possible for your property not to be rented at times, so rent may not be paid. Ensure that you have financial backups to continue to pay your mortgage. Make sure you understand the tax implications for buy-to-let investors, both on rental income and when you sell.

Lastly, you can remortgage your primary residence to release equity to fund the purchase instead of getting a BTL mortgage.

What are the costs of being a landlord?

 

The majority of your costs should be covered by rental income, but you should also have a contingency budget in case things go wrong. A few cost factors to consider include:

  • You may be responsible for repairs if something breaks in the property. You may be able to deduct the costs of repairs you have paid for if you keep your receipts.
  • You might have to replace any old furniture that may be a fire hazard if your property is furnished. If your furniture becomes damaged or unsafe, you’ll need to replace it.
  • In spite of the fact that tenants are usually responsible for paying bills like electricity and gas, you will still be liable for insurance, and you will need a special kind of insurance to protect your home from the risks associated with letting.
  • In the event that you do not own your property outright, you will still have to pay your mortgage.
  • Ensure your property is up to code – You’ll need to make repairs, upgrades, and renovations to ensure your property is up to code.
  • Tenant agencies usually charge between 10 and 15% of the rent, but you won’t have to be on call for tenants.
  • To ensure your tenancy agreement is watertight, you should have it reviewed by a legal professional.
  • Being a member of a landlord association has many benefits, including a network of supportive colleagues that you can turn to for advice, and being accredited gives you a competitive advantage.
  • If you’re renting or selling your property, you’ll need an energy performance certificate, which can cost between £50 and £100. Each one lasts for ten years.

How to find the right tenant

 

In order to find the right tenant, what steps should you take once you have sorted out the paperwork?

Advertising

 

Getting your property ready for rent is the same as getting it ready for sale. Take away any personal belongings left in the property, as you might love something that is off putting to another, so try to leave your feelings at the door. In an unfurnished property, remove any furniture so people don’t get the wrong idea.

When tenants view your property, their first impression will be based on the photos you take. Rather than taking photos with your smartphone, consider investing in a professional camera.

If you’re using a letting agent, they’ll probably advertise on a big housing website, other options can be social media sites, or the local press. Think about what kind of tenant you want to rent to, and whether your property makes sense for the type of person you’re renting to, for example a single tenant is unlikely to want to rent a big property in the countryside.

Once you’ve sorted your advertising, people will want to come and see your property. You can either hold an ‘open house’ where people visit between set hours, or you can arrange appointments on a one-to-one basis. Before they arrive, make sure the place is tidy, and as you are showing them around take the time to explain any special features. Let them have time to explore on their own, and tell them where you’ll be if they have any questions.

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