What is Buy-to-Let
A Buy-to-Let investment entails buying a property to let out to a tenant, producing a passive income on rental returns and potential for capital growth.
How Do I Choose A Buy-to-Let Property?
There’s no hard and fast rules for what will succeed. However, there are some important considerations that should go into your decision including the tenant demographic you’re looking to target and location you’ve identified as a key driver of property success. Look at transport links and amenities in and near your development. Are there schools and universities in the area? How is the entertainment, leisure, retail and jobs offering nearby? Finally, look at tenant demand and whether your investment provides anything that tenants would want.
How Do I Calculate Rental Yields?
Rental yields are a great indicator of whether your buy-to-let property is financially viable. The yield is essentially the rental return you can expect your property to generate. You can calculate this by dividing the annual rental income by the purchase price and multiplying by 100. This will show you your gross rental yield as a percentage. A typical gross rental yield in the UK sits around 4 – 5%.
What are my Responsibilities as a Landlord?
As a landlord, your main responsibilities are legal-focused. You need to provide your tenant with a contract, verify they can legally rent in the UK, protect your tenant’s deposit in a government-backed scheme and ensure all fittings meet fire safety regulations and have up to date energy-performance certificates. If you’re self-managing, you’ll also need to keep up with your financial due diligence alongside maintenance of the property and finding tenants.
Should I be Worried About Brexit?
With such an unprecedented event, there’s every chance that an unfavourable Brexit deal could result in a stall for the UK property sector. What we have seen is that the UK market has remained fairly resilient in times of relative uncertainty – Brexit has had little effect on the overall direction of the market and although the sector has its own positive and negative trends, regional cores are continuing to grow and Sterling has risen in value. The wider problem the UK is facing is a chronic undersupply of property. There is a shortage of residential property to meet the young, growing demand, a problem if you’re looking to buy a home but favourable if you own or you’re looking to own an investment property. If you own property in an established area experiencing regeneration or an emerging market, you’re going to be seeing rising demand – mitigating void periods and increasing the potential returns.
What is Stamp Duty Land Tax?
Stamp Duty Land Tax (SDLT) is a tax on properties bought in England and Northern Ireland. SDLT is applied on any residential property purchase over £125,000 and is a legal requirement. When the SDLT changed in April 2016, many thought the 3% levy on all second homes or Buy-to-Let properties would change the market. Fortunately, the sector is still attractive, with high-yields and the potential for heavy capital growth offsetting challenges from the government.