Eager to invest your hard-earned money in profitable property? Why not consider the lucrative avenue of becoming a landlord with buy-to-let properties? To help you weigh the pros and cons of this venture, the property experts at Mistoria Estate Agents explain how you can buy a house to rent out.
How does a buy-to-let work?
As the name suggests, a buy-to-let property is purchased with the intention of letting the property to a tenant. The buyer becomes the landlord and sets the monthly rental amount they expect to receive. This amount will need to be more than enough to cover the monthly mortgage payments, bills (if included in the rental price), maintenance costs, property management fees, and any other associated costs to make a profit.
Obtaining a buy-to-let mortgage
Unlike standard residential mortgages, buy-to-let mortgages have more rules and are specifically designed for landlords. Considered by lenders to be higher risk than regular mortgages, buy-to-let mortgages are typically only offered to applicants that already own their own home, have a strong income (abide by the strict affordability criteria), are under the maximum age limit, and have a potential rental income that is likely to cover more than 125 per cent of the mortgage repayments.
As a result, obtaining a buy-to-let mortgage is often a more complicated process than you’ll have gone through to purchase a residential property. Not to mention, there are plenty of associated costs that you should also take into consideration before committing to becoming a landlord. We explore these buy-to-let mortgage costs in more detail below.
Buy-to-let mortgage costs
First and foremost, the interest rates and fees associated with obtaining a buy-to-let mortgage are typically much higher than standard mortgages. Plus, the minimum deposit for this type of property is a more substantial 20-40 per cent of the property’s value – a much more significant deposit than the 10 per cent that’s generally accepted for residential properties.
It’s also important to bear in mind that while some buy-to-let mortgages are offered on a repayment basis, the majority of buy-to-let mortgages are interest-only, meaning only the interest of the loan is paid each month. At the end of the mortgage period, the original loan is paid in full. While the costs of a buy-to-let mortgage will naturally vary, the main takeaway is that these mortgages are more expensive than regular, residential mortgages.
Things to consider before renting out a house
Do your research
When choosing a buy-to-let property, you should carry out detailed research to help determine your target market and the best location to purchase a rental property for that market. This research will be vital in helping you obtain the best rental returns, ensuring you purchase a suitable property in the most sought-after location with strong demand from your target tenant.
As a landlord, you’ll have many more responsibilities and obligations to your tenants that you’ll need to be aware of. From ensuring the property is free from health and safety hazards to making sure your tenant has the right to rent your property, there are plenty of landlord responsibilities that you must be willing to take on.
Do you have the time to properly manage your rental properties and their tenants? If not, you should consider enlisting expert help from a property management company or estate agents. For a small fee, the hassle of chasing payments and conducting inspections can be taken care of for you.
Discover buy-to-let properties in the North West
Now you have a clear understanding of how to purchase a buy-to-let property, why not explore all your property investment options? Here at Mistoria Estate Agents, we have offices located across the North West of England (including branches in Liverpool, Bolton, Cheadle, Salford, and Worsley) that allow us to source fantastic buy-to-let opportunities for a wide range of landlords.
Specialising in buying and selling property, we’ve become one of the leading estate agencies in the region. Helping us to succeed in these areas, we’ve enlisted a team of experienced property professionals including chartered accountants, property managers, and even commercial real estate agents.
To find out more about our expert team, our extensive selection of buy-to-let properties in the Manchester area, or our property services, don’t hesitate to get in touch.
Alternatively, why not pop in and speak to one of our knowledgeable and approachable Mistoria property professionals in the flesh?
Simply take a look at our contact page to discover your closest Mistoria Estate Agents branch.
No matter which Mistoria Estate Agents office turns out to be nearest, you can rest assured that you’ll receive a friendly welcome and unmatched customer service!