How to Buy to Let   by Jennifer Tweed

Find out everything you need to know about buy to let. Learn what to buy, where to buy and what not to buy. All this information about buy to let won’t cost you a penny.

buying

•If the area is full of buy to let property investors the supply of property to let might outweigh tenant demand and create pressure to reduce rents.
•Consider established areas with good communications links
•Research tenant demand as your highest priority. Find a letting agent to discuss this.
•Consider ongoing costs, e.g. maintenance, service charges etc.
•Be prepared to buy tired investment properties and refurbish them.
•Build a team of reliable tradesmen so that you can react quickly.
•Find a good buy to let mortgage provider. Finding the correct buy to let mortgage is crucial to your success when you are buying and selling investment property.

To Buy or Not to Buy an investment property for sale?

•As soon as you find a property you would like to buy, run a To Let advert in the local press. If the phone rings a lot buy it. If not walk away.
•A variation on the theme would be to run a display advert “Seeking long term tenants” I am a portfolio landlord. You find your perfect property and I will consider buying it and letting it back to you”

Demand and professional guidance

Find a letting agent and discuss the demand for properties in the areas you are interested in. They should also be able to indicate the level of rent you could expect to achieve and what type of tenancy is more suitable for the property and area.

University Lettings

Talk to Student letting officers – build rapport so they promote your property above others. They too can give you good advice on demand, i.e. where, why, how much etc.

Buying Privately

With more and more people turning to the internet to source suitable investment property for sale and for sellers looking to save on selling agent fees, more people are having the opportunity to buy and sell privately. The main difference being that you will liaise directly with the seller of the property. This may be via email or telephone. Viewings will be arranged directly between the buyer and seller and the negotiations regarding the price will be dealt with directly between the buyer and seller. However, you will still need to both appoint a solicitor to act on your behalves.

Buy to Let Mortgages

Finding the right buy to let mortgage is crucial to your success as a property investor. Unlike other forms of property investment, a lot of the capital you invest into a buy to let investment property is likely to be borrowed. Over the last few years, the buy to let mortgage market has boomed, with more and more lenders bringing out products making borrowing money to invest in this way even simpler than before. There are a number of different buy to let mortgage products available from fixed rates, discounted variable rates, base rate trackers to name a few. It is worth remembering that different products may be suitable for different investment properties.

However it is very important that you get the correct guidance with your finance. Questions that are worth considering when finding a suitable buy to let mortgage:

1. Do they have access to lots of different buy to let products in the market place?
2. Do they have the ability to create a long term investment property strategy for you?
3. Are they able to secure exclusive buy to let products?
4. Are they able to arrange buy to let mortgages within 10 working days?

Most lenders will offer a maximum loan of 85% requiring you to fund at least a 15% deposit. The buy to let mortgage industry is very competitive with new products being launched on a very regular basis.

Some brokers may charge a brokerage fee up to 2% to arrange the buy to let finance for you but don’t let this put you off because if they do have the ability to secure exclusive buy to let products for you, it could be very beneficial to your cashflow as a landlord. Plus, if they are able to reach formal mortgage offer stage in a very short space of time, this could result in you being able to secure investment property at very competitive prices if you have the ability to tell the vendor that you can have the deal completed within a matter of a few weeks. Find out more about buy to let mortgages
and see how you can start your investment property portfolio.

There are a few simple steps to remember:

•Make sure you have done your research

•Source a good buy to let mortgage provider and make sure that your own personal credit file is clean.

•If you are unsure, then you can request a copy of your personal credit file on a number of different websites which allow you to download a copy instantly.

•Once you have agreed an offer for the buy to let investment property for sale with the vendor, you will need to appoint a solicitor and exchange solicitor details with each other.

•At this point your respective solicitors will then begin the necessary legal work on your behalves to arrange the legal ownership of the investment property to transfer to the new investor.

•Contact your buy to let mortgage provider and confirm the purchase price and loan amounts required.

•A surveyor will then need to visit the investment property for sale to carry out a valuation of the property and a rental assessment. Some buy to let mortgage brokers can arrange this on your behalf. Other buy to let mortgage companies will advise you when this will take place. However, it is worth bearing in mind that if a buy to let mortgage provider is a fully packaging company then they may be able to reduce the timescales that it takes for your formal buy to let mortgage offer to be issued.

•Whilst waiting for the valuation report on the investment property for sale to be returned, use this time to complete all the legal paperwork that your solicitor will forward to you for completion and the application forms which will be forwarded to you from your buy to let mortgage provider.

•If the valuation report comes back and is satisfactory, you should then receive your buy to let mortgage offer shortly afterwards. On occasions, you may be requested to obtain specialist reports which may include a structural engineers report, damp and timber report and coal mining report.

•A copy of the buy to let mortgage offer should go directly to you and your solicitor.

•Your solicitors will then liaise with each other regarding suitable exchange and completion dates and will arrange to do the necessary completion paperwork for you on your new buy to let property.

Buy to Let Insurance

•Insuring your buy to let property is just as important as insuring your own home. As a landlord you have certain liabilities so make sure you get the necessary cover that your investment property needs. There are a number of different options available depending on the type of investment property you have for example if it is an apartment, block of flats, commercial property etc. But do shop around to make sure you secure the best buy to let insurance product.

Preparing to let the investment property yourself?

•This is an investment and cashflow is the key factor. Stick to neutral colours that will go with anything. For example, a red sofa might not match a green carpet, however, all colours look good on beige.

•Carpets - light beige looks great when clean. Light colours make room look lighter, brighter and bigger. They also encourage cleanliness and are easy to justify cleaning when a tenant vacates. Look for felt backed bleach cleanable carpets which do not require underlay. Replace carpets every 3-5 years, clean every tenant change and debit from damage deposit.

•Check with the local letting agent whether there is more demand for furnished or unfurnished property in the area.

Join your local Landlords association

•This is the easiest way to keep up with legislation and to obtain advice on getting your paperwork right.

•Other landlords in your area will be keen to share good and bad experiences. Learn from their experiences rather than making your own mistakes.

Tenant Application form

•Obtain full details including names, addresses and contact numbers of referees and emergency contacts. Also obtain previous addresses, NI numbers, employer details and proof of earnings. This makes life easier if you ever need to track down an absconding tenant.

•If possible, fill in an application form at the prospective tenants home. This will at the same time allow you to see how they look after it.

Credit Check your Tenant

•It is now possible to credit check your tenants on-line. Just because they are of smart appearance and drive a nice car doesn’t guarantee that your rent will arrive each month. We all know how easy it is to get credit these days so it is important that you have peace of mind that your tenants have the genuine ability to pay.

Fees

Charge a fee to tenants of around £100 for completion of tenancy agreements, referencing, inventory etc.

Deposit-take 5 - 7 weeks rent plus one months rent monthly in advance

Tenants often cancel standing orders on the month prior to final payment – if this happens you still have some money to cover damages

Landlord Inventory

Get prepared. As much as we all like to think we can trust everyone, it is very important that ‘buy to let’ landlords protect their investment property as thoroughly as possible. Having an inventory in place will protect you against unnecessary costs and ensure that you are maximizing your profit at all times. For example; if your teaspoons kept going missing and the curtains kept leaving the poles when the tenants vacated, this could start to add up.
Imagine if you had freshly decorated the buy to let property in a very neutral magnolia colour throughout to discover that your tenants had become creative one day and turned their hand to a bit of decorating to brighten the place up! Not only will this cost you in paint, but could potentially lose you income on rent whilst you are having to leave the investment property empty whilst it is being redecorated. And most importantly how can you prove that the property was that colour or condition in the first place. Its simple. A Comprehensive Landlord Inventory.

•Purchase a Landlord Inventory - include everything including starting colour, condition of walls, ceilings, doors, fixtures & fittings etc and get it signed so you can prove damages when the tenant vacates. The more detail the better, even include the colour of light switches and door handles and what they are made of. Comments like “carpets have just been professionally cleaned” or “walls are freshly painted” will also help to prevent disputes on checkout.

•Ensure that you arrange a check out inspection and make sure the tenant is present – get them to sign to agree to any damages and/or required repairs.

•Complete utilities meter checks and ensure the incoming/vacating tenant signs to confirm meter readings.

•Inform the utilities companies and local authorities in writing of incoming/outgoing tenants and any applicable meter readings

Tenancy Agreement

You will need to purchase a tenancy agreement. This will protect you and your tenants. There are a number of tenancy agreements that can be purchased off the shelf but it is important that you check the tenancy agreement to make sure it is suitable for the type of tenants you have. For example whether it is a family let or a property being let to sharers where they could be joint and several liability. A good solicitor would be able to draw up a suitable agreement and for your own peace of mind, this small investment could be a very worthwhile exercise.

Look after your tenants – They are a valuable asset to your investment property!!

Happy tenants will respect your property and will refer other potential tenants to you.

If the above is not cost effective or convenient for you then you should seriously consider employing the services of a property/Lettings manager.

Find out more about buy to let and how you can start.