Do’s and Don’ts of Buying to Let!
By James Duggan, Director and Mortgage Advisor for James Duggan Estates
I have been a mortgage advisor for over 20 years, and all too often have seen buyers get carried away with the belief that buying a rental property is a quick and easy way to make money – Here are my top tips on getting it right…
1 Do avoid Interest-only Mortgages –they can seem like a quick easy solution at the time but the long term implications can have a massive impact on your cash flow, remember that even a small increase in interest rates can increase your monthly payments ten-fold. For this to be a real benefit in the long run you want to actually end up owning the property.
2 Don’t rush into anything – keep an eye out for the right property and spend time with your local estate agent asking them to keep you in the loop for any property that might fit your set of requirements.
3 Do take into consideration the rental return of any potential investment, look for a minimum of a 10% yield – it needs to exceed your mortgage payments.
4 Don’t forget to account for any maintenance that might be needed between tenants –account for about 20% of your overall yield to cover this.
5 Do take a deposit, we recommend 1 month’s rent, upfront and assuming there is no real damage, the tenant can get this back once the lease agreement ends.
6 Do take into account times when the property may not be rented and you have to cover the payments yourself – can you and your family afford to do this? How long for? Is it worth the risk to your financial stability?
7 Don’t think it will always be clear sailing…Being a Landlord can have its up and downs and it’s worth remembering, especially if you have more than one property, that you will need to invest a lot of time to ensure it runs effectively for you.
8 Do take out Landlords insurance and insist that tenants take out contents insurance – better safe than sorry!
9 Do remember you must declare and pay tax on your profits to HMRC – If you don’t you will get charged a penalty and have to pay any back dated taxes owed since the date you purchased the property.
10 Don’t forget at James Duggan Estates we offer a Lettings service which can ease some of the day to day stresses.
At James Duggan Estates we have a wide variety of properties suitable for investment – come in and see us – perhaps we can help you invest in your future…