Becoming a First Time Buy-to-Let Buyer

With buy-to-let investment continuing to boom, the demand and availability of buy-to-let mortgage options has followed suit. Buy-to-let investment is currently at its highest rate since before the recession.

First time buy-to-let investors

As a result, a number of first time buy-to-let investors are opting to join the market. Understandably, there are many dangerous attributed to this, therefore it is important to consider the following guidelines: 

• Make sure the risks are fully understood

First time buy-to-let landlords must make sure that they are aware of the risks as well as the benefits. Deposit money could well be tied up for a considerable amount of time and for many, investing could use up all of their savings. With most lenders offering a maximum 75-80% of the price of the property by way of loan, investors will have to ensure they can afford the rest of the deposit.

• Check that a mortgage can be obtained

Becoming a First Time Buy-to-Let Buyer

Due to changes in the market, very few lenders are prepared to have first time buyers as landlords. This is due to the fact that many people have tried to gain this type of mortgage after failing standard affordability tests. It is advisable that first time buy-to-let buyers contact a mortgage broker to discuss and learn from their knowledge of the market.

• Research the area

When selecting the area in which they wish to rent, first time buyers should always research the demand in close proximity. They should ask themselves questions, such as: Are there already a number of unoccupied rental properties in the area? Are there sufficient transport links? Is the area well populated with schools, shops, etc?

• Work out the set-up costs

There are a number of costs that potential owners of a property must consider. Legal fees, mortgage application fees, and survey costs are just some of the expenses that will have to be budgeted for. In addition, gas and safety checks, repairs and redecoration will also have to be factored in. 

• Type of tenant

Landlords should be clear what type of tenant they want to live in their property. They should think about whether they want to rent to families, or if they would be comfortable renting to people such as students. Groups such as students notoriously bring extra problems, so the investors should think very carefully.

• Managing the property

When investing in a property, first time buyers should make sure that they are fully comfortable on how the property will be managed. Self-managing buyers will need to perform duties such as finding tenants, checking their backgrounds, and drawing up contracts.

Letting agents will be able to perform these duties on behalf of the buyers, but for a fee of around 8-15% of the total rent. First time buy-to-let investors should research their agents thoroughly and should only use agents fully accredited with organisations such as the National Landlords Association (NLA) or Association of Residential Letting Agents (ARLA).

• Seek advice

Most importantly, buy-to-let first time buyers must seek professional mortgage and letting advice before they contemplate signing up for a property.