PREPARING FOR YOUR
BUY TO LET MORTGAGE

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Buying a property to rent out can be a lucrative prospect, but it is not a decision to be made lightly, because it is a big financial responsibility. Not only that, but it also comes with the added costs of repair, maintenance and insurance, not to mention the financial burden of vacant periods when you don’t have a tenant.

Once you have thought these things through and have firmly decided on becoming a landlord, it is time to decide on a location for your new investment property. You will need to select a location where the rental market is good and you can depend on not having to suffer through any vacant periods. You will also need to decide the type of property you want to buy, ie. flat or house.

Fix Your Budget

After you have chosen a suitable location, it is time to decide on a budget. You will to make sure that you have saved up a deposit that is around 25% of the price of the property you have chosen. You will also have to make provisions for costs of your mortgage, ie. booking and arrangement fees, legal fees, valuation fees and estate agent fees.

You will also need to make sure that you cover the mortgage payments from the rent you will potentially earn.

It would also be wise to set aside some money to cover for any potential vacant periods or large unexpected repairs.

Decide How You Will Manage Your Buy to Let Property

You can manage your property in 2 ways: by yourself or through the services of a letting agent.

If you decide to manage the property by yourself, please keep in mind that it can be quite a responsibility, because you will be undertaking the arrangement of all advertising, repairs, maintenance, safety checks, tenant viewings, setting up contracts and deposit protection schemes. The upside is that you will not have to pay anyone else to do the job and save that much money.

On the other hand, hiring letting agents is not without its perks. They can take the hassle of all the jobs mentioned above off your hands for a fee.

Calculate Your Tax

Since the rent you receive is your income, it is liable to tax. You can reduce the amount of tax you pay by deducting the expenses from your income. These expenses can be as follows:

  • Your monthly mortgage payments for your Buy to Let mortgage
  • Letting agent fees
  • Accountancy fees
  • Ground rent where applicable
  • Money that you spend for repair and maintenance
  • Costs of safety checks like gas safety, emergency light checks, electrical installation checks, PAT testing
  • The 'wear and tear' allowance for furnished properties.
  • Landlord insurance

Tenancy deposit

When you let out your Buy to Let property to a tenant in England and Wales, you will need to place your tenant’s deposit in a government deposit protection scheme. There are 2 deposit protection schemes: My Deposits, Deposit Protection Service and Tenancy Deposit Scheme.

These schemes will hold your tenant’s deposit on your behalf to protect it in the event of a dispute with your tenant until such time that the dispute is settled.

is settled.

You can learn more information on these schemes on the government’s website – www.gov.uk/deposit-protection-schemes-and-landlords