Buy to Let

"Buy to Let" is the industry terminology for purchasing a residential property which you let to a tenant and receive rent. Until about 5 years ago, a Buy to Let mortgage was virtually unheard of, however landlords were still able to purchase properties and rent them out, but if they needed to borrow money it was typically from the a bank type institution and was treated as a commercial venture and incurred higher fees, interest rates etc.

With the advent of Buy to Let mortgages as we know them, this has completely changed and the majority of a building society type lenders consider an individual, or even a limited company, purchasing a residential property to rent out to private tenants or in some instances to tenants claiming housing benefits.

Approximately 5 years ago, changes in the mortgage market meant that lower interest rates, setting up fees and flexible lending criteria has made it an attractive proposition for private investors and if a prospective landlord purchases wisely. This does not necessarily include the escalating value of the property over the period.

Prospective landlords tend to purchase a property for one or two reasons, or often both, firstly for potential immediate monthly income / or secondly for potential growth.

Due to costs of owning a property, including ground rent, mortgage payments, insurances, general maintenance etc, it is advisable that your gross rents should be approaching 150% of your monthly mortgage repayments.

Becoming a landlord is not all plain sailing however and no matter how carefully you choose your property, the area where it is built and vet your tenants it is always possible to lose money.

Before buying a property obtain as much information about the rental market in the area, asking letting and estate agents questions such as:

Is the rental market buoyant?
How much should you receive?
Are there any significant changes likely in the area

Vetting Tenants

Always vet your prospective tenants,( you may need a Data Protection Licence to do this).

Credit check them.
Ask for references e.g.

previous landlord/lender
employer
bank

Arrange to complete paperwork at their home, this allows you to assess if they are likely to look after your property.
Insist on a property bond.

Helpful Hints

Know your rights as a landlord.
Ensure your Assured Short hold Tenancy Agreement (AST) is legally watertight and covers you for all eventualities (e.g. do you want pets in your property?).

As property is a specialist sector it can be volatile in adverse market conditions, there could be delays in realising the investment.

Property valuation is a matter of judgement by an independent valuer. Therefore it is generally a matter of opinion rather than fact.

It may be difficult to sell or realise the investment, or obtain information about its value, or the extent of the risk to which it is exposed.

The value of property investments and the income derived from them can go down as well as up. Investors may not get back the full amount originally invested and are not certain to make a profit, they may make a loss.

It is recommended by Zebra Mortgages that you seek independent legal advice before entering such a venture.

For more information on buy to let Mortgages fill out the online form or telephone the number below.

The Financial Services Authority does not regulate some aspects of Buy to
Let mortgages and commercial mortgages.

Your home may be repossessed if you do not keep up repayments on your mortgage.

The information on this website is for use of residents of the United Kingdom only.
No representations are made as to whether the information is applicable or available in any other country which may have access to it.