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If you’re considering becoming a landlord, there are many elements to consider and understand before you purchase a property. The process of buying a buy-to-let property differs compared to buying a residential property that you will live in yourself, so it’s good to know what exactly to expect. Of course, it’s a long-term investment that shouldn’t be made in haste, so if you’re reading this, you are probably looking for the right kind of information.
Our team at Neil Robinson Estate Agent are experts in buy-to-let advice, so here is our straight forward guide to purchasing a buy-to-let property in Skelmersdale, Orrell, Ashton-in-Makerfield or any of our local areas.
What is buy-to-let?
First things first, the basics: buy-to-let is a property that is specifically purchased with the intention to rent it out to tenants. It’s an investment property that can generate a monthly income, as long as the rent being charged is higher than the monthly buy-to-let mortgage payments.
A buy-to-let mortgage is different to a residential mortgage, and if you can’t afford to simply buy the property outright, you will need to apply for one. When applying for a standard mortgage, your income is taken into consideration, whereas with a buy-to-let loan, the lender considers the potential rental income as your primary income source, and considers your personal income as secondary. The interest rates tend to be lower, but they have larger upfront fees, so keep that in mind. Moreover, deposits on buy-to-let mortgages are also typically larger than the deposit needed for a standard mortgage, so expect to put down at least 25% more than you normally would.
What kind of buy-to-let property should you buy?
The right property is important and can include factors such as the location in proximity to amenities and transport, as well as the neighbourhood and the demand in the area. Much like when you’re searching for your own place to live, you should ensure you do adequate research into the area you want your buy-to-let property to be located in.
Consider what kind of tenant you want to target and include that in your research. If you’re trying to rent to families, your best bet is to find a property in the suburbs close to good schools. If you want to rent to students, a property near a university and good but cheap restaurants and nightlife is key. Keep in mind, the type of tenants you have renting from you can affect your mortgage, as many lenders have restrictions on student rentals, for example.
Do you need buy-to-let insurance?
The short answer is yes; you should have buy-to-let insurance (also known as landlord insurance). It gives you coverage for the building and the contents inside and any landlord liabilities.
Building insurance is often required by your mortgage lender in order to secure a loan and will compensate you if your property is destroyed or damaged. This will cover the repairs or rebuilding costs so you don’t have to pay huge expenses out of pocket.
Contents insurance will cover any furniture inside the property. It’s a smart idea to get contents insurance even if your buy-to-let property is unfurnished because you can choose what level of cover you require, and it can protect any curtains, carpets, and other furnishings that essentially come with your property between tenants. If you choose to rent your property unfurnished, your tenants will be responsible for their own contents insurance when they move in.
Landlord liability is mostly your choice, but if you’re renting to students, for example, there may be a minimum level required. This covers you for any injuries or deaths of any tenants or visitors in your property.
Do you need to use a letting agent?
If you're experienced, know the law surrounding tenancies and are happy to take on the risks if things go wrong, then you can of course manage the property yourself. A professional, experienced lettings agency, however, is able to mitigate many of the risks associated with being a landlord, and offer you a level of protection you simply won't have if you're going it alone.
Letting agents like us will help you carry out credit checks on your potential tenants, help you come up with a letting contract, chase late rental payments for you, help with any maintenance on site that needs to be done, and assist with mandatory safety and efficiency checks for gas and energy. There is even a rent guarantee option with in-built legal protection, so you don't lose out if things so go wrong.
The fees to work with a letting agent typically include paying an ongoing fee to manage the property which varies, so it’s always best to speak with your chosen letting agent to get a complete idea of costs.
Generally, utilising the services of a letting agent can take a big burden off your shoulders if you are a budding landlord, and the benefits can far outweigh the costs.
For professional advice on purchasing a buy-to-let property in Skelmersdale, contact our expert team at Neil Robinson Estate Agent on 01942 466221 / 01695 355110 or email neil@neilrobinson.co.uk.
