First Time Landlord Guide

Becoming a landlord is what many individuals aspire to become. This guide is for first time landlords or those considering becoming a buy to let landlord. The information may also be useful for existing landlords.

It is important to do some research when thinking of becoming a first time landlord, so that you understand what will be involved, understanding various pieces of legislation, whilst understanding the legal responsibilities.

Investing in property can be very different to traditional investing such as stocks and shares. The value is not directly linked to stock market performance so if shares dip, there is not necessarily an equally negative correlation with a rental property.

Property is a tangible asset that you can influence an increased value of, whilst obtaining great returns from. Good quality tenants, reduced void periods and property improvements can all directly affect its value. As a landlord, you have more direct control over this type of investment.

Investing in a buy to let property provides landlords with regular income which can be managed through Roebucks.
 

What makes a good buy to let property?

When searching for a buy to let property there are a number of factors we would recommend looking at:

Average Rents

What do comparable rental properties achieve in the same area? This is crucial for calculating the rental yield you will receive your potential investment. Contact Roebucks before offering on a property and we can provide you with our thoughts on a realistic rental figure for you.

Job Market

As a landlord you can set what criteria a tenant has to meet to move into your property. Many landlords require tenants who are in employment due to restrictions on their mortgage or insurance policy. Look to see if there are many major employers coming to the area and invest in property ahead of potential price increases.

Schools

Many tenants will consider if there is a school located nearby to their home to be. It is important for attracting the family market and as a rule, the better the school reputation, the higher the rental value. 

Potential Risks

A property can become a great asset and the rewards of being a landlord can be fruitful. As well as generating a regular income stream, there are opportunities for tax deductions and it can help you achieve long term financial freedom. However, there are potential risks to consider which should be considered.

Property Value

The value of a buy to let property can reduce as well as increase, which may likely have a greater short-term impact as historically over the long-term, property value increases. Historic house price performance cannot a guarantee the future performance, although many landlords perceive property risk to be relatively low.

Rental Demand & Yields

The value of rents achieved may vary as tenant demand changes along with the volume of supply available. When there is an over-supply of property, this can limit the achievable rent of a property. There is also a potential risk of void periods between tenancies, where the property lies empty and generates no income at all. A landlord may then have to pay utilities on the property such as council tax, prior to a new tenancy starting.

Buy To Let Costs

When investing in property it is important that you consider the following taxation that landlords have to adhere to including:

• Stamp duty tax on a purchase price
• Income tax on rental profits
• Capital gains tax when selling a property
• Inheritance tax on a property

Insurance

Insurance costs can also be significant but are a necessity. A landlord insurance policy will cover the building and its contents. It is important to have a good policy in place and is a requirement for mortgage lenders.

Mortgage

Many landlords seek advice from an independent mortgage advisor before choosing a mortgage for their purchase. You can choose between repayment mortgages, where you pay back capital on the mortgage, and interest only mortgages, where you only pay interest on the mortgage loan. With interest only mortgages, your monthly payment will be less than that of a repayment mortgage, but you have to remember you will need to re-pay the lump sum at the expiry of the mortgage unless you extend its term. Your property is at risk of being repossessed if you do not meet mortgage payments.

To speak with an experienced mortgage advisor affiliated with Roebucks, book an appointment with our office on 01226 447277.

Other Costs

Other costs to considerations include the upkeep of the property and any future renovation costs. Many landlords purchase properties which have been modernised to 'futureproof' these potential costs. Other costs include:

• Gas Safety Certificates
• Electrical Installation Condition Reports
• Energy Performance Certificates
• Licensing Fee (If applicable)
• Marketing Costs 
• Inventory Costs
• Deposit Registration Fee