2016 was certainly a bumpy year for buy-to-let investment but I reckon, with the current economic uncertainties, we’re getting quite used to a bit of a rollercoaster ride in various areas of the financial market. The good news is that, in 2018, buy-to-let is now officially booming, especially in seaside towns such as Southend. You heard it here first.
Here at Zing, a leading buy-to-let mortgage broker (as well as every other kind of mortgage under the sun), we’re pleased to pass on our Top Ten Tips for Buy-to-Let. This means that if you decide to launch into the rental market, at least you’ll do it with your eyes open. There are upsides and possible downsides, needless to say.
First, let’s explore what happened to make buy-to-let less favorable. The esteemed governor of the Bank of England, Mark Carney, was concerned that buy-to-let investment was a serious threat to the UK housing market. He issued tougher rules for mortgage companies and other lenders. There was a 3% surcharge on stamp duty for buy-to-let properties as well as second homes. Then lenders tightened their belts ahead of a reduction of tax relief on mortgage interest. Landlords’ ‘wear and tear’ allowance, which enabled them to claim expenses for upgrading their properties, was removed. Last but not least, there was the referendum and all the economic wobbles that caused, either in reality or in public perception.
Buy-to-let is tougher than it once was, for sure. However, with low-interest rates and good mortgage deals to be had these days, it could be an effective way to bring in a regular income for you. Investing in bricks and mortar certainly feels somehow solid and trustworthy against other more airy-fairy deals like stocks and shares. Rents are rising and will continue to so with inflation on the horizon. Despite this, there’s still a huge demand for properties to let.
So here goes with the Top Ten Tips:
1. Research, research, research
Not just the area, but the financial implications. In your circumstances, other investments might be better for you – like a high-rate savings account. Think about the risks as well as the expected gains. If you have to take out a mortgage and pay a hefty deposit in order to purchase a property and then house prices fall, can you cope with the hit? Ask advice from people with experience—and you could start with us!
2.Do your sums
Get yourself a notebook and pen, then list ALL the outgoings against the rent you’re likely to achieve in the area you’re considering—including maintenance costs. And what if your property is empty for a few weeks? A rule of thumb is to have rent that covers 125-150% of your mortgage repayments
3.Choose a good area
Good areas, in this context, are simply those where people want to live, for whatever reason. Good infrastructure for commuters, highly-rated schools, a university, a holiday destination… Speaking as a Southend-based company, seaside towns are very popular with property investors, with holiday rentals and accommodation for seasonal workers in demand. Remember overall rental yields might be compromised if the property can’t be let throughout the year. A couple of years ago, Southend was Number One in the country for return on investment outside London, with a whopping 14.7%. Hoorah for Southend!
4. Look out of your area
While it’s convenient to have your buy-to-let property close to hand, your town may not be the best place to invest. Think about casting your net wider to a university town, for example, or an up and coming area of a city. Here, there are usually lots of run-down properties that you could buy to renovate. Remember to factor in the cost of refurbishment, though.
5.Get the best mortgage on offer
Perhaps we should have put this top of the list? We can talk you through every available deal. Once we know your circumstances, we can help you to make an informed decision about the best buy-to-let mortgage for you.
6. Don’t be afraid to negotiate
You’re in a good position to buy because you’re not relying on selling one property to buy another. You won’t be desperate to find somewhere to live for yourself, either, so there’s less risk of the deal falling through.
7. Think about your prospective tenant
It’s not a property for YOU—it might be for students, or young professionals, or families, so decorate accordingly, even if it’s not to your personal taste. Don’t spend too much. Practical, durable and neutral is best because your tenants will want to add their own touches to make it feel like home—and then they’ll stay longer too!
8. Consider limited company buy-to-let
Could this be the solution to stop you, as a landlord, from losing tax relief? Probably not, unless you’re buying four properties or more—but we can advise.
9. Think about buy-to-let remortgage
There are lots of reasons why you might want to remortgage your buy-to-let property, from raising capital, to changing terms, to swapping mortgages to gain the best rates. Again, we know all the wrinkles…
It’s all a bit mind-boggling, this stuff about buy-to-let, isn’t it? But we understand all the ins and outs and will be able to help you to decide if it’s for you, and if it is, find the best way to go about it.
Zing Mortgages advice equals happy buy-to-let landlords, with eyes wide open!