Whether you are already a landlord or considering buying a property for future investment for the first time, Bennett Oakley Solicitors can assist you. Our lawyers have extensive experience in the buy to let market, ranging from a single house or flat purchase to managing a portfolio of properties.
We can offer friendly, helpful advice on:
- Selecting the right property.
- Buy to let mortgages.
- Your responsibilities as a landlord.
- Selling your investment property.
- Disputes resolutions.
Considerations When Buying or Selling A Buy To Let Property - Selecting the right property
When purchasing a buy to let property you need to take into account different factors than if you were buying a family home. Remember, you will not be living in this house so it does not matter whether or not you like the style of the kitchen. As an investor you need to be thinking about what type of tenant you wish to have, the return you need on your investment, and the future resale value of the property.
Location is extremely important. If you want long-term families as tenants, your buy to let property search needs to take into account the proximity and desirability of the schools, shops and other facilities such as parks and pools in the area. Young professionals are often more interested in inner-city living that offers plenty of markets, cafes and nightlife on their doorstep. Make sure you decide who your tenant will be before you begin your property search.
Buy to let mortgages
House prices are on the rise again and interest rates are low, making property an attractive investment. However, it is vital that you work out your costs and allow plenty of financial wiggle room within your budget so you can cover the mortgage payments if your buy to let is without a tenant for a period of time. Draw up your budget on the assumption that your property will only be let for ten months of the year. This will give you plenty of buffer to cover you if the property is empty for a period, interest rates rise, or you are hit with unexpected repairs.
Typically, lenders will ask for a 25% deposit (often more) and an assurance that the rent will cover 125% of the monthly mortgage payments. You may also be required to pay an arrangement fee. Make sure you shop around for the best rates.
Your responsibilities as a landlord
As a landlord you will have certain legal responsibilities to ensure your buy to let property meets certain health and safety standards. For example, you need to ensure all gas and electrical equipment supplied with the house is properly installed and maintained and fire regulations are met. The tenants deposit must also be lodged in a government approved scheme. You will also need to ensure all repairs are done to keep the property in a reasonable condition. Finally, remember the income you receive from your buy to let as rent is taxable so ensure you have tax planning in place to manage this efficiently.
Selling your investment property
You will be liable for Capital Gains Tax if you sell your buy to let for a profit. An annual, tax-free allowance of capital gains is provided for each tax year and you can deduct some of the expenses incurred from buying, improving or selling the property. Capital gains tax is currently charged at 18% or 28% of the profit made on the property.
Unfortunately not all landlord-tenant relationships run smoothly. Sometimes disputes happen. Prevention is better than the cure; make sure you vet your prospective tenants thoroughly by obtaining a credit check, references and employment details. Having a detailed tenancy agreement which has been overseen by a lawyer can also protect you from future problems.
If you are thinking of purchasing or selling a buy to let property, or want legal advice on your existing property portfolio, please contact us by filling out our contact form or emailing us. If you prefer to talk please phone 01444 235 232.