Landlords get moving after government old age alert
Recent figures from the Council of Mortgage Lenders reveal a buy-to-let profit increase of five per cent in the second quarter of 2012 which is good news for current property investors.
Experts predict that this will prompt a surge of new landlords to the market helped by the government urging everyone to provide a pension for our old age and people weighing up ways of investing their money.
Kate Faulkner, spokesperson for The Property Investor Show, who has written six books on property, gives her top tips for first time landlords.
1) Plan your property investment
Before purchasing a property, be sure about why you are investing. Make a serious decision over how you plan to make your money and whether you want the income every month, capital growth or if you want to invest your savings and put them into a pension fund.
2) Pick your property type
Research what type of property you are going to buy and in which area. Be aware that flats are typically leasehold and under this agreement you may not have permission to rent them out.
If a property’s value appears too good to be true it usually is, so when considering the price, watch out for the drawbacks.
Leases with 80 years left or less are difficult to get a mortgage for and often require the buyer to pay cash. Renewing a lease can also prove costly so know this from the outset.
Many flats often have service charges and ground rent and the landlord is frequently liable, along with the freeholder, for keeping the flat in good order. When possible opt for freehold and, if you have enough money, choose a house over a flat – it will give you more flexibility.
3) Property rules and regulations
Find out the regulations stated by your local council. Never buy anything without a gas safety certificate, an energy performance certificate and always make sure you protect a tenant’s deposit. Also understand the Housing Health and Safety Rating System (HHSRS) outlined by your local authority.
4) Property costs
When buying a property it isn’t enough just to consider the initial price. Know what maintenance work will be required throughout the lifetime of your ownership and calculate this within your budget.
Make sure your property will continue to deliver. If you expect it to deliver capital growth above inflation of say, three per cent each year, that’s the average overtime. If not, you might be better putting your money elsewhere.
Once you have found a property, know how and when you can get out of this investment and what will trigger this.
If your aim was to put down a deposit of £30,000 and then sell it at a profit of £30,000 within ten years, and it meets this in five years, then it may be worth selling up. If your property doesn’t meet your expectations, look at what rental options you have, for example is renting rooms more profitable than renting the whole property?
Have a plan for your buy to let investment to survive for 15 to 20 years and track your properties return to make sure they deliver against your objectives. Have contingency plans, for example, do you know what to do if mortgage rates hit 7 per cent?
5) Legal and tax implications
It is important to take specialist legal and tax buy-to-let advice when purchasing your property. Typically, if you are husband and wife you buy under ‘joint tenancy’ but if you invest with a business partner or friend, it is better to buy under ‘tenants in common’.
It’s essential not to just buy a property and rent it out as there are continually changing legal letting rules and every authority interprets these differently. Make sure your letting agent is ARLA or NALS Registered so if they run off with your money their insurance should protect you from any losses.
If you don’t go through an agent, become a member of a residential landlord association to protect yourself and to keep up to date with the ever changing laws.