Precise Mortgages – First- time Landlords: 5 top tips to help make the move into buy to let

Roger Morris, Group Distribution Director, Precise Mortgages

Imagine being an aspiring first-time landlord in January or February of 2020 and excited about making your move into the world of buy to let.

You’ve got your deposit together, identified a target property and are just about to get the ball rolling when, suddenly, COVID-19 hits. Almost overnight, your horizons, which had seemed so broad at the start of the year, dramatically narrow as lenders start pulling their product ranges, tightening lending criteria and lowering loan-to-value (LTV) limits.

It’s why the recent announcement that the number of options available to landlords are now almost back to pre-pandemic levels is such a boost for the rental market, including those looking to take their first steps in the world of buy to let.

According to the latest research from Moneyfacts1, there are now 2,709 buy to let mortgages available, the highest number of products on the market since March 2020, when there were 2,897 deals. And that’s not all. The return of more product choice has also seen the reappearance of low deposit mortgage deals as lenders reintroduce higher LTV options back into the market2.

This is great news for both customers and brokers alike. Not only are low deposit mortgages becoming more affordable to customers again, as their intermediary you also have a wider product pool from which to recommend to your clients.

But before they take the plunge, I thought it was a good time to share with you the top five things I’ve learned during my years as a landlord which I believe could help investors before they purchase their first buy to let property.

1. Aspiring landlords should always get tax advice from a suitably qualified professional before they do anything else.

Doing so will ensure they have the right ownership structure in place before they commit to an investment which they may have for the next 20 or 30 years, and could ultimately mean the difference between making a profit or a loss.

2. Customers should always research where the best areas for rental demand are. Buying a property in an area they’re not familiar with can lead to problems further down the line.

They also need to ask themselves what they hope to achieve from their investment which will help them decide the type of property which gives them the best chance of achieving their goals.

3. For peace of mind, finding a really good letting agent will ensure that prospective tenants are properly referenced and that the correct documentation is issued.

Many landlords make the mistake of using open rent arrangements, managing the property themselves or not carrying out credit checks. Buy to let can be stressful and time-consuming, and employing the service of a letting agent can take the headache out of managing a property.

4. Landlords should make sure they understand the rules and regulations associated with owning a buy to let property.

Is the house correctly insured as a buy to let? Has an annual gas test been carried out to ensure the boiler meets the legal requirements? Does the property have a five year electrical safety certificate? All of these things need to be taken into consideration to ensure a property can be legally rented out.

5. And last, but by no means least, it’s imperative that any buy to let purchase is registered and the appropriate taxes are paid to HMRC. Clients should ensure they understand the tax rules and make sure the appropriate tax is paid.

The above list is no means exhaustive and there are other things first-time landlords need to take into account before purchasing a property, but by following them they’ll be giving themselves a good chance of achieving their investment goals. And don’t forget, if ever you need any more support in placing your customers’ buy to let cases, a member of Precise Mortgages’ experienced team of business development managers is always here to help.

Sources: 

  1. https://moneyfacts.co.uk/news/mortgages/btl-mortgage-deals-at-highest-level-since-march-2020-1/
  2. https://www.which.co.uk/news/2021/07/buy-to-let-mortgage-choice-improving-for-landlords-is-now-the-time-to-invest-in-property/
  3. BVA BDRC Landlords Panel Report Q2 2021