If your goal is to have future security that allows you to retire comfortably, buy-to-let can provide a solution. Of course, like any property investment, all of this market’s aspects must be considered.
Unlike owning a personal home, owning a buy-to-let property means that you are a business owner; a landlord who provides housing to tenants. This type of property ownership comes with its own set of legalities.
HMO stands for ‘house in multiple occupation’. This type of arrangement is one of the most popular forms of buy-to-let property investment. The HMO property is one where three or more people live in one home and share amenities such as the home’s kitchen and bathroom. These properties exist in both small and large sizes. A large HMO is one where five or more tenants share the amenities in a building that’s at least three stories in height. Although this type of tenancy is most commonly associated with students, it is also becoming increasingly popular among the young professionals market in London, Nottingham and other British cities.
This option demands that particular legalities are adhered to. For example, as a landlord, you will be expected to regularly check certain vital aspects of the building, such as electricity, fire and gas safety. You will also need to ensure that the property’s number of tenants remains at a reasonable level. In addition, you will need to ensure that all facilities, whether for washing or cooking, as well as any communal areas are always clean and in sound working order.
Usually, an HMO does not require planning permission if you wish to convert it to a personal dwelling in future unless it has been classified as a large HMO.
How to Invest in Buy-to-Let
Once you’ve reviewed the list of buy-to-let property for sale near you, you can make your investment with personal cash or opt for a buy-to-let mortgage with a deposit of cash. Any investment into a buy-to-let property also means carrying a mortgage. However, it’s important to note that mortgage payments remain due whether or not there are tenants occupying your building.
Earning a Profit
Investing in buy-to-let property can earn you a profit in more than one way. You can earn money through capital growth as well as through rental yield.
Capital growth refers to the profit earned when a rental property is sold for more than an investor paid for it. Most commonly, it is rental yield which offers the most lucrative way to earn profit. This is the rental payments received from tenants, minus the cost for repairs and running the building.
In addition to the cost of purchase and maintenance, buy-to-let properties also incur stamp duty, land tax and survey and solicitor’s fees. Fees will also be incurred by letting or sales agents. Marketing fees may also apply should you choose to sell your property.
In order to secure your investment, you may decide that taking out a landlord’s insurance policy as well as buildings insurance are both good ideas. Both offer protection for you and your investment.
Before you commit to purchasing a buy-to-let property, it’s crucial to ensure that you’ve thoroughly researched things like consumer protection so that you know what is and what isn’t available to you as a landlord.