Written by
Ben Wilkie, editor of the Mortgage Magazine
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SOUND INVESTMENT
An increasing number of people are viewing buy-to-let as
a
profitable long term investment, especially as interest rates
are so low, it is a good source of income and there is also
the long term gain on the value of the property.Students have
and always will need rental property whilst the whole of the
market is seeing an increase in rented property.The biggest
reason behind the demand in rental property is due to the end
of the 'job for life' scenario. People need to be free to move
on to find work and do not want the
responsibility of buying a property. Many mortgage lenders now
see the potential in this market, so competition among lenders
is also keener. COVERING ALL ANGLES
Becoming a landlord will change the way you look at buying
a property, and you will need to run it as a business. You
will need to consider the overall profitability of the venture.
Also you will need to work out the profit you are likely to
make. There are a number of cost factors involved when entering
the buy-to-let market, such as the survey and conveyancing
fees, as well as landlord costs, such
as letting agent fees, buildings insurance and ground rent.
There will be legal obligations to consider, such as having
the gas checked at
least once a year and smoke alarms installed.
FINANCING THE DEAL
Competition is increasing the range, flexibility and affordability
of
buy-to-let mortgages. The interest rates on buy-to-let mortgages
have been brought into line with the rates for owner occupier
properties and most lenders will now take the rental income
into consideration in repaying the loan. However you will
need to
produce a deposit of around 20 per cent, also which deal do
you consider, such as fixed or capped deals, or flexible loans.
Borrowers may go on to acquiring further properties, although
lenders tend to limit the number of properties in a portfolio.
SOLID FOUNDATIONS
Getting the style, type and most importantly location,
of your property right is essential for a successful buy-to-let
investment. Make sure the property is in an area where there
are plenty of students looking to rent. Perhaps buy within
the area where you
live, as you know the area. Wherever you choose, fully research
the area. Also, use an experienced and local letting agent
to help source the right property. When buying, look at the
long term as you will eventually want to sell the property
for a good price in years to come.
FIRST IMPRESSIONS
In an attempt to find the right tenants for your property
entrust
the task to an experienced letting agent - preferably a member
of the  Association
of Residential Lettings Agents (ARLA) or the NALS scheme.(Universities
often have their own leasing schemes where they will manage
your property on your behalf should you not to wish to manage
the property your self-ed)The advantage of an agent is
their knowledge of the market. They can also promote the property;
vet prospective tenants; and take out references. Most lets
these days are arranged as an assured shorthold tenancy
(AST), usually set for a minimum period of six months. Check
local papers
(or studentpad.co.uk) for an idea as to the amount of rent
you should be charging.
(www.studentpad.co.uk
can also help let your property as the official student accommodation
web site for a number of
Universities across the UK-ed)
BUSINESS SENSE
Although you can let and manage your property yourself,
employing an agent can make the whole process much smoother.
A letting agent plays a similar role to an estate agent but
their remit is far wider. They can find you a tenant, deal
with the day to day aspects of letting your property, and
produce an inventory and condition report. During the terms
of the tenancy, the agent will collect the rent and pass it
on to you. Choosing the right agent is vital, ie. pick a company
that will go the extra mile.
TAXING QUESTIONS
Knowing the rules will help you avoid paying too much
tax. The profit from letting property located in the UK is
subject to income tax. The profit itself is calculated as
the total rents receivable less the costs payable, where they
are incurred 'wholly and exclusively' for the rental trade.
When you sell your investment property, any rise in its value
is liable to capital gains tax.
INDUSTRY STANDARDS
As a landlord, you want to know that the lettings agent
you are using is professional and trustworthy. ARLA is a professioal
body for letting agents in the UK. The organisation's 1,200
plus members are governed by a code of conduct which provides
an ethical framework within which all professionals must operate.
In the event of a
dispute between landlord and tenant, an ARLA member will be
able to provide an arbitration service, as well as draw up
an appropriate tenancy agreement.
Please note that Universities themselves
are increasingly operating accreditation schemes. Landlords
must fulfil certain criteria (e.g. a current corgi / NICEIC
certificate) dependent upon the University,
to achieve accreditation status. The students will recognise
your property as achieving the standard and the University
will act as an arbiter if disputes occur.
LET AND PROTECT
Insuring your buy-to-let property is essential, but how
much cover do you require? Mortgage lenders will insist that
you take out buildings insurance and you will need to calculate
what the
rebuilding costs will be in order to ensure you have sufficient
cover. The choice of insurers may be limited, but approach
your household insurer first. Types of cover you require will
include contents insurance and rental income. As with any
insurance policy, it pays
to shop around, and always read the small print.
Written by: Ben Wilkie
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