Are you renting out your property for the first time, or wondering how you can become a landlord for the first time? Becoming a landlord is not for the faint hearted and involves ongoing oversight and knowledge to get the best out of your investment.
Choosing the Right Mortgage
The first thing you should think about when you’re buying a property is getting a Buy to Let mortgage.
A Buy to Let mortgage is not the same as an owner-occupied mortgage. You will definitely want to to understand the different types of mortgages and associated terms such as loan to value, repayment terms, costs/fees and any penalties.
Stay in Compliance
Another thing to be aware of is the recent changes that include the banning of the landlord and tenant fees that were introduced on the 1st of June. These changes also include the types of deposit you can hold and the need for them to be held in a government sponsored tenant deposit scheme.
This brings me to compliance – one of the things I think in the UK particularly, heavily restricts a landlord so, whether it’s gas safety checks or EPC’s, there are a lot of things you need to make sure you’re keeping in compliance with on an annual or regular basis. Also you will need to ensure you are maintaining your property properly for the health and safety of your tenants.
~Novel Serialisation: Heavens Fire~
Type of Property to Consider
The other thing to consider is the type of property because it might impact the mortgage that you can get. Whether it’s a single-family property, two bedroom flat, or HMO (houses of multiple occupancy), the type of property you select will make a difference to the type of mortgage you can qualify for.
Insurance
Insurance is the other thing you’re going to need to think about, not just from the view of finding the right type of insurance but also how much that insurance will cost. We manage properties for our landlords as either a corporate or short let, and there may be additional insurance to put in place to ensure you are adequately covered but also does not violate the terms of your lease.
Location of the Property
Where you look to buy your investment property will determine whether you can manage it yourself or will need a local lettings/property agent to help you find a tenant, conduct tenant referencing and ongoing property management. For example, you’re a working professional and live in northwest London but are looking to buy a property in southeast London where the rental yields might be better – logistically, that’s going to be a challenge especially when your tenants start having different maintenance issues.
Marketing to Find the Right Tenants
One of the things that I think landlords often underestimate is how important the tenant referencing process is and the restrictions in terms of what you can and cannot do. There are a whole list of “right to rent” guidelines that you have to stay in compliance with in order to avoid fines and penalties. This includes verifying the nationality of someone and that they have a right to rent in the UK. Whilst you will also want to check creditworthiness, you must be careful not be discriminatory in your rental practices.
Tax and Mortgage Interest Changes
One of the recent changes we’ve seen is the reduction in the mortgage interest you can offset against your taxes. This is having a dramatic effect on the return that many of our landlords are getting and it’s actually giving them pause to think – does owning this property still make sense? Therefore you want to factor the economics of letting out your property as well taking into account any other taxes and allowances that will impact profitability.
A property is a living, breathing asset and while it can be a great source of passive income, the best investments are those that are cared for and well maintained.
By Ugo Arinzeh, Onyx Property Consultants – www.onyxpropertyconsultants.com
Ugo Arinzeh is the founder and Managing Director of Onyx Property Consultants. She has an MBA in finance and spent over 10 years with Bank of America Merrill Lynch structuring and negotiating real estate transactions. Over the years she has personally bought, sold and managed properties both in the US and London. Ugo is passionate about property and founded Onyx to utilise all her skills from her corporate and investor background to deliver exceptional results for her clients. As part of Keller Williams, Onyx is connected to the largest network of agents globally.
