Buying a property to let can be an excellent idea for increasing your investments when interest rates are low, and there’s uncertainty in the stock markets. As local property experts, we know the sale and rental values of London property inside out. As a trusted letting agent, we also have access to thousands of potential tenants.
We have put together answers to several frequently asked questions to help you, the Buy-to-Let Landlord, make informed and practical decisions.
Buy-to-Let is a type of mortgage that enables you to invest in let property without being penalised by mortgage surcharges or commercial rates of interest.
The average rental return in Britain is around 3%-6% before taking into account any of the variable running costs or capital appreciation of property. In the current market, we feel you should take a long-term view to benefit from capital appreciation, probably 7-10 years.
Start by talking to an ARLA Propertymark registered letting agent. We can help you find appropriate properties, advise on your property’s letting potential, the sort of rental income you could expect and what you might need to do to attract good tenants. At Samuel Estates, we also offer a tailored ‘Landlord Acquisition Service’ where, for a modest fee, we can assist in finding you the ideal investment property.
The process is very similar to buying your own home. Buy-to-Let mortgages are subject to the usual status checks and can be arranged for terms of between 5 and 45 years; and for up to 80% of the value of the property. We have several Independent Financial advisors (IFA’s). They will be able to advise and assist you in finding the most suitable mortgage for you and they all offer a fee-free service.
As experienced agents, we know the local market, what type of property there is a demand for and the standard of decoration, furnishing, fixtures and fittings required.
Furthermore, if you trust a professional agent to manage your property, your status will be enhanced with mortgage lenders. We will:
Generally, lenders will expect you to use an ARLA Propertymark member to let and manage the property. Your rental agreement should also be drawn up as an Assured Shorthold Tenancy or another clearly defined contract.
Insurance cover is now available to protect your rental and provide for legal expenses. Please ask one of our friendly lettings team for more details.
As a general guide, the total monthly rent you receive should be between 110% and 130% of your monthly mortgage payment.
There will almost certainly be ‘voids’ when the property is unoccupied, or rent goes unpaid. In these situations, you’ll need to have a financial ‘cushion’ to meet your mortgage payments.
You might also need savings for significant repair bills. For example, the boiler might break down, or there might be a blocked drain.
If you’re a basic rate taxpayer, Capital Gains Tax (CGT) on buy to let second property is charged at 18%. If you’re a higher or additional rate taxpayer, it’s charged at 28%. With other assets, the basic-rate of CGT is 10%, and the higher-rate is 20%.
Information correct as of 04/20.
If you sell your buy-to-let property for profit, you will usually pay CGT if your gain is higher than the annual threshold of £12,000 (for the 2019/20 tax year). Couples who jointly own assets can combine this allowance.
Any profit from the sale of your property should be declared on your Self Assessment tax return for that tax year and will be included when working out your tax status for the year which push you into a higher bracket.
For more help and advice on managing your Buy-to-Let property, get in touch with our local expert team.
