Buying a second property can be fantastic investment during tough economic times. Maximising this investment is essential to safeguarding your money. Many people choose to make their second property a buy-to-let.
As one of the most popular options for mortgages in the UK, buy-to-let allows people to purchase second properties to rent out to tenants and make an income from the rent. The rental income can prove significant, especially if your buy-to-let mortgage is small.
However, owning a buy-to-let property is not as simple as buying a property and renting it out. There are many legal considerations to think about when you become a landlord. You are essentially running a small business and you should treat it as such.
Additionally, difficult tenants can make owning a buy-to-let property more hassle than it is worth. From damaging the property, not reporting faults that need fixing and not keeping your property clean, tenants can ultimately devalue your property, leaving you out of pocket on your investment.
Some landlords employ letting agents to help run the day-to-day management of their properties. This takes the stress out of buy-to-let for many landlords. Letting’s agents will take a small fee from the rent to cover their costs of running your property but will save you so much hassle in the long run.
Landlords also need to insure their properties in case of accidental or intentional damage by tenants. Buy-to-let insurance can be expensive, especially if you buy an older, period property as they might need repairs more often. You might be able to find deals with reputable brokers though.
UK regulations around renting property have become more stringent in recent years too. These regulations lean heavily towards protecting tenants, their deposits and their data from landlords who look to abuse the system.
You will need to put any deposit in the Deposit Protection Scheme (DPS) and you can only take funds from a deposit if a tenant or ombudsman approves you to. This might only happen after a lengthy consultation period if your tenant is not happy with the deductions you want to make.
Nevertheless, buying a buy-to-let property is more often than not very financially rewarding. Most rental tenants take care of their homes just as much as they would if they owned the property. Plus, if you build a relationship based on mutual trust, support and dialogue with your tenants, you could find it to be a very pleasant experience.
With the Stamp Duty Holiday continuing on until the end of June this year, it could also be a very good time to buy a buy-to-let property. As the discount could help you save money towards a better investment property.