I was recently asked by a customer a series of questions regarding buying to let a UK property and, with this blog, I hope that I will be able to answer many of the questions that concern potential investors about this particular market.
A buy to let is usually an investment or second property, purchased with the sole aim of it being rented out so that the investor recovers a rent plus, in a rising market, an increase in the value of the property. In a falling market, which we are experiencing at the moment, the return on the investment is likely to be an increased rent.
The procedures are very similar to an ordinary purchase, although if a leasehold property is proposed to be purchased, then the lease will need to be checked very thoroughly, since quite often there are restrictions against letting the property or parting with occupation of it.
It is usual, when looking to enter into this market, to raise the deposit against an existing residential property, however, it is important that each transaction is looked at on its merits, as it is sometimes possible to raise all of the money against the property being purchased for letting purposes. If the investor is building a portfolio of properties, it is also possible to raise money against that portfolio, rather than on individual properties. However, expert advice must always be sought, particularly as buy-to-let mortgages are not regulated in the same way as residential mortgages and the lending criteria is different. In particular, it is likely that the mortgage rate will be higher than for a normal residential property as they are treated as commercial investments.
It is also important for the buy-to-let investor to have appointed, perhaps, their own accountants, since there are various tax implications, particularly, capital gains tax and a specialist accountant can advise on tax mitigation arrangements.
When acquiring these type of properties, it is important that a correct tenancy agreement is entered into, ensuring that you are able to comply with the tenancy deposit schemes that are available and also, if the premises are to be let furnished, that the relevant experts are appointed for the inventory check in and check out.
It is important to obtain correct advice on these types of transactions as there are many pitfalls for the unwary.
Tomorrow I am proposing to give advice to first time buyers, particularly regarding the process in how to negotiate in the UK property market.