Buy To Let

The UK's Number 1 Property Investment Guide

Investing in buy to let property became popular in the 1990’s due to the introduction of Buy to Let mortgages.

In the current climate it has become difficult for a first time buyer to get a mortgage to get on the first rung of the property ladder. Therefore renting has become increasingly popular. Needless to say this is very good news for the property investor. You can create a great monthly cash flow if you do your sums correctly at the beginning.

So what does Buy to Let investing mean?

The basic idea is that you buy a property, using some capital of your own and some borrowed money (the mortgage). You then find some tenants to rent the property to. They pay you rent to live in the property. Hopefully the tenants cover all of your costs of owning the property and give you some positive cash flow. In addition to this cash flow, you get the benefit of significant capital growth as the property increases in value overtime.

The key to successful buy to let investing is to purchase a property in a location where there is strong rental demand and the rent “Stacks up”. This means that the rent is enough to cover all of the costs and still leave a profit for you at the end of each month. Each year you will have to pay income tax on your rental profit.

The main costs you have to cover will include:

  • Interest on your mortgage (always get an interest only mortgage)
  • Landlord insurance (make sure you get Landlords Insurance and not just a household policy)
  • Management fees (if you use a letting agent to look after your property for you)
  • Service charges (if you have a leasehold property)

Yields

Make sure you know how to work out the rental yield on a property. The calculations are shown below:

Gross Yield = annual rent/purchase price

Net Yield = annual rent less running costs/purchase price

We find it much safer to work with the net yield, as this gives you a truer picture as to what will end up in your pocket at the end of the month.You should also build in some contingency to your figures in case of a worst case scenario happening.

 

Subcategories from this category:

Finding a Tenant/Property Management , Find a Tenant Online

Landlord has the last laugh

We regularly come across cases where tenants have fallen on hard times and rather than communicate with their landlord for fear of losing their home, they instead choose to avoid paying the rent until the landlord reaches breaking point and the end result is eviction. This is why we always try to encourage landlords that come to us asking for help with problem tenants, particularly cases with rental arrears, to try and engage in dialogue with their tenants and understand the reasons behind the lack of payment.  Sometimes this can be enough to save the professional relationship and work out a payment plan that suits everyone. After all, if a landlord has a tenant who has been in their property for some time and has taken good care of it, it can be more beneficial to be understanding and support the tenant to get back on course than to get...
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Know Your Market: What Tenants Say About Their Landlords

Have you ever wondered what tenants say about landlords? CIA Insurance have put together this infographic based on a study they conducted in order to find out how tenants feel about rental properties and the risks that they face. Take some tips from the results of the survey to ensure that you are targeting the right market and making sure that your tenants are happy.
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Evictions- Its a messy business

Last week I attended an eviction in East London with the Channel 5 film crew in tow.  This was not an ordinary case; the arrears were in excess of £20k as a result of rent not being paid for over 2 ½ years. The landlord was based overseas and had passed his portfolio of properties to be looked after by a property manager, who was clearly not up to the task.  They had allowed rent arrears to build up on several of his properties.  As a further blow to this landlord, he unfortunately instructed a fraudulent legal representative to carry out the evictions.  They did nothing for months and then absconded with the legal fees, leaving the landlord losing thousands of pounds worth of rent on his portfolio. One of the tenants in question tried to defend the case at the hearing on grounds of disrepair, but had not paid a...
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Landlord Action against MORE court fee rises

The Ministry of Justice has proposed to charge 5% of the value of the claim to all court cases worth more than £10,000, which it estimates will bring in an extra £120m a year. A further consultation has also opened on extra charges for possession claims and general applications in civil proceedings. Possession claim fees will rise by £75, which the fee for general applications will go up from £50 to £100 for applications made by consent and from £155 to £255 for contested claims. These increases will apply equally to all applicants. We at Landlord Action are absolutely opposed to each and every one of the justifications given by the Ministry of Justice for enhanced court fees. Our responses to each of these are details as follows:- Consultation justification: -          The fee remains low, compared to the overall costs of litigation; Landlord Action response: The market place for practitioners...
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How much would you pay to live above Londons luxury retail?

Mayfair’s Sloane Street has always been a sought-after place to live, but the rise in designer retail outlets is drawing even more buyers to the area.

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