You may think that once you’ve found a property, been offered a mortgage and found some tenants, being a buy-to-let landlord is relatively straightforward way to make money.
But buy-to-let is a big commitment and should be viewed as a long-term prospect If you change your mind you may not be able to get your money back in a hurry, or get back everything you have spent.
Owning an investment property is not like owning your own home - you are running a small business and will have various responsibilities to your tenants, your mortgage lender, your accountant, your local council and the taxman.
So before you get carried away with the idea, think about the hard work involved in buy-to-let.
Before you commit to the mortgage, review your current and longer-term position and ask yourself:
- Will I be able to cover my mortgage repayments and insure the property if I have no money coming in from rent, perhaps for several months?
- Can I afford to take a loss if the housing market slumps?
- Will taking out a mortgage on this property affect my chances of getting a mortgage if I decide to move house at a later date?
Additional costs
Making a fast buck is not an option, given fluctuation in the property and rental markets and the relatively large amount of time, effort and expense involved in buying and letting property.
In addition to your mortgage, there will be other costs you must cover. These may include insurance, ground rent, service charges and letting management fees.
You will also need to make sure the property is in a good state of repair and well-decorated so that you can attract and keep tenants.
Ongoing maintenance could involve anything from a lick of paint to replacing the central heating system.
Expensive responsibilities
If you intend to rent the property furnished then make sure your budget can stand it. Ensuring the safety of gas and electrical appliance and that all furniture and furnishings meet fire safety codes is also down to you.
Legal costs must also be considered. It is good practice to have an Assured Shorthold Tenancy agreement with your tenants and you may want the help of a solicitor to draw this up.
Legal bills may also be an issue if you have to pursue tenants for rent or get them evicted.
If you are not sure, you may benefit from professional help from an independent financial adviser.
Next article in this section: The pros and cons of buy-to-let
Previous article in this section: What is buy-to-let?
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