Buy-to-let Properties in the UK Require These Special Considerations
If you’re thinking about investing in a buy-to-let property, you are not alone. More than 1.5 million private landlords exist in the UK today, with more joining each year. The rental market throughout the country has grown steadily over the last decade, with more individuals and families opting to rent rather than purchase a home. This is due in part to the rising cost of living in several major cities which impacts housing prices across the board.
Purchasing a buy-to-let property has become a popular choice among savvy investors because of the rising number of renters, but also relates to the historically low-interest rate environment. With the ability to obtain affordable financing for a property, covering the mortgage each month with rental income is an alluring endeavor. However, prospective landlords need to take into consideration several aspects of buy-to-let investments before committing to the deal.
Requirements of Landlords
Anyone who rents out a property to a tenant is considered a landlord under UK law. With this title comes several responsibilities, including the need to complete the following tasks:
- Maintain the property as to safeguard tenants from health hazards
- Ensure gas and electrical equipment are installed and maintained properly
- Provide energy performance certificate details for the property
- Protect the deposit of a tenant in line withgovernment guidelines
Private landlords must also take timely action for any enforcement notices received by their council. These may involve fixing hazards in the home and bringing a property up to certain standards so that tenants feel safe. It is also a landlord’s responsibility to have the right insurance cover in place. A finance expert from Money Pug, a site used to find and compare cheap home insurance, states that landlords may be required to have buildings, contents, and landlord cover when renting out a property. Failing to put the right insurance in place could lead to financial turmoil, not only for the landlord but for the tenants who reside in the property.
Understanding the Costs and Benefits
Beyond landlord responsibilities, purchasing a buy-to-let property is first and foremost, an investment. Potential landlords need to recognise the financial requirements they must meet in order to make the investment worthwhile. A larger deposit is often required for property owners who plan to take out a mortgage to purchase the home, and there must be cash on hand for necessary repairs and legal fees. These are extra expenses that can add up quickly if you are not prepared.
In addition to these financial requirements, landlords also need to evaluate their ability to generate income from a property. Certain neighborhoods offer higher rents potential than others, and the same is true for larger properties. Evaluating the rent averages in certain locations for various types of properties is a sound move for potential landlords so that a true return on investment can be projected. It is also worth noting that rental income is taxable, and so landlords need to take this into account when considering a buy-to-let purchase.
Knowing Where to Get Help
There are plenty of issues that can arise with a buy-to-let property, not the least of which is an ill-fit tenant. When a renter refused to pay, does not live up to the tenancy agreement by maintaining the home, or damages the property during his or her stay, landlords may be responsible for even more costs. Repairing a property so that a new tenant can move in, or paying for legal fees to lawfully remove a tenant can add up quickly. Having the financial backing to manage these costs is necessary, as is knowing where to get help when it is needed.
Several organisations exist which offer specific guidance to private landlords in managing these types of issues. Citizens Advice, for instance, provides a bevy of information regarding private renting, from example tenancy agreements to the responsibilities both landlords and tenants have under such an agreement. The National Landlords Association(NLA) offers similar resources, as well as a plethora of forms and services to help landlords manage their responsibilities and issues with tenants as they arise.
Each of these considerations must be weighed before investing in a buy-to-let property. The private landlords who take these steps in understanding their legal and financial responsibilities, as well as determining their return on investment are positioned to have a better experience with a buy-to-let purchase for the long term.