23^rd February 2018

What is buy-to-let, who is for and how does it work?

As the leading independent estate agent in the area we have significant experience in buy to let in Chester and the surrounding area. In this article we discuss what it is, who is it for, how it works and how we can help.

What is buy-to-let?

If you’re considering property investment in Chester, buy-to-let is a tangible investment offering you the opportunity to purchase a residential property with the intention to let it out, rather than living in it yourself.

Buying a property to let is effectively like running a business. You need to work out all the purchasing expenses, the cost of ensuring all the health and safety requirements have been met and balance that against the rent you are likely to achieve.

Don’t forget there is profit to be made from growth in the capital value of the property as well as from the rental income. You can earn an income from the net yield – so any money you have left over, once you have paid for any expenses held responsible by you as the legal landlord. When it comes to selling the property, if the value has gone up, you could earn a good return compared to the price you bought it for. 

Who is it for?

Getting the best deal on your buy-to-let mortgage is crucial to making sure you get the best return on your property investment. It’s worth working this out as soon as possible, as this really comes down to the mortgage rate you’re offered and the costs involved to rent a property. We can put you in touch with a mortgage adviser who has access to the whole of the market to get you the best rate.

Lenders require a higher deposit for buy-to-let mortgages and will ask for at least 25% of the purchase price. Generally, the higher the deposit you put down the better the mortgage interest rate will be. How much rent you’ll be able to charge is also important, since a lender will look for a monthly rental income of at least 125% of your monthly mortgage interest payments.

On top of this, landlords should consider:

• How much you have to pay for stamp duty
• You’ll need to pay income tax on any profit you receive from renting your property
• If you sell your buy-to-let property, you have to pay capital gains tax on any profits made by this transaction
• It’s worth noting any buy-to-let property you own contributes to the value of your estate for inheritance tax purposes

How does buy-to-let work?

Once you own a property and have qualified for your buy-to-let mortgage, as the legal landlord there are quite a few factors to consider including:

• Tenancy agreements – Setting out the legal terms of the tenancy.
• Tenancy Deposit Protection – The Housing Act 2004 legally requires you as the landlord to protect deposits on assured shorthold tenancies in a Government approved scheme
• Finding the right tenants – all landlords must check their tenants have the right to rent in the UK
• Property maintenance – you are responsible for tending to any maintenance requests made by your tenants
• Health and Safety -there are various obligations on the Landlord to ensure the safety of the tenant, for example an annual Landlord’s Gas Safety check.
• Adequate energy saving facilities – you must have a valid energy performance certificate, and provide a copy for your tenant. The minimum legal requirement is an E rating.

Do I need a managing agent?

With so many legal obligations and requirements as a landlord, it’s is well worth employing a letting agent to manage your property for you. Our highly experienced team will be happy to advise you on the purchase, letting and management of your property from start to finish, so you can rest assured we’ve got everything covered, leaving you to focus on your investment and other responsibilities.

We are licensed by ARLA Propertymark so have to comply with rigorous membership criteria:

• We are members of a Client Money Protection (CMP) scheme
• Our staff are experienced and trained professionals who are required to undertake regular training
• We are members of a Government approved independent redress scheme
• We are kept up to date with complex legislative changes and best practice
• We submit independently audited financial accounts to Propertymark
• We adhere to a nationally recognised Code of Practice
• We hold professional indemnity insurance

If you are interested in speaking to a member of our lettings team, please contact us on lettings@matthewsofchester.com  or give us a call on 01244 346226 and our team will be pleased to help.