Top Ten Tips for Landlords – No 6: What Should I Consider Before Investing in Buy to Let?

With interest rates remaining low, house prices continuing to rise and the recent changes to pensions, more people are looking at buy to let as an investment option. This week we look at the five main things it is well worth considering before making that commitment.

1. Target Audience

The most important decision to make is who you want your future property to be rented to and how much you are going to rent it for.

To understand this you will need to do some research on your chosen area and the types of people that are renting properties there, as well as how much they are paying to live there.

Your chosen target market will influence all your other decisions during the buying process so it is worth spending some time on this decision. Whether you decide on renting to families, students, professionals or retirees will determine what you charge and what type of property you invest in. Families will usually want more than two bedrooms, whilst a professional couple will often be looking for a one bedroom apartment.The type of property will obviously affect the amount of rent you can charge, so have a look at average rental values in the area you choose, or tap into the knowledge of a local agent. If they want your business, they should be happy to help!

2. Area

Before you set your heart on somewhere, you must consider carefully where you are going to buy the property. Ultimately this is an investment, so you need to consider the yield and rental return. How are you going to manage the property? Yourself or with an agent? If you are choosing fully managed with an agent, you could look further afield if you prefer.

Whilst you may have an area in mind, it pays to think carefully about the pros and cons of your chosen location and how well a rented property would perform in that particular area.

Do some research into the local market, speak to the specialist letting agents or any landlords that you know in your area and try to put yourself in the shoes of a tenant renting in that area. Does it have good transport links/schools/facilities? Remember it is not you living there so what you like and do not like is not necessarily what a tenant will like.

3. Affordability

Becoming a landlord is an investment, which always has its risks. It’s imperative that you prepare for every eventuality when it comes to working out what you can afford.

If you’re already a homeowner, you’re much more likely to be accepted for a buy to let mortgage, especially if you earn over £25K per year. The government has a good website which gives lots of useful advice and considerations you should take into account when taking the first steps to becoming a landlord.

You will need to potentially pay two mortgages (your own and the buy-to-let one), on your own and at the same time, without rental income to offset the costs.This is because you may well have a situation where the property is empty, for example between tenancies, although there are special insurance policies that can help protect you in situations where the property is empty for a significant amount of time.

Other costs to consider are the unexpected ones – repairs and renovations – as well as the expected ones such as letting agents fees.

4. Legal Responsibilities

Becoming a landlord means taking on certain legal responsibilities. Firstly you will need to remember that renting out a property is like having your own business – so you will need to declare it for tax purposes, via an annual Self Assessment tax return.

There are other legalities you have to comply with too, some of which require assessments or certificates, which may come at a price. Current regulations include, but are not limited to:

  • Gas Safety certificates
  • Energy performance certificates
  • Protecting the tenant’s deposits
  • Serving prescribed information
  • Landlord license (certain areas only)
  • Fire resistant furniture
  • Legionnaires disease checks
  • Right to rent checks
  • Compliant plugs and sockets
  • Safe electrical appliances

Not complying with these and other regulations is illegal and could land you a hefty fine, or imprisonment. Make sure you have the time, energy and money to ensure you are legally compliant at all times. Legislation is changing constantly and so you have to be prepared to take time to ensure you are up to date.

5. When things go wrong

Planning for every eventually when you are thinking of investing is very important. From nightmare tenants to an empty property – there is much that can go wrong and it pays to be prepared as much as possible. Consider appropriate buildings, contents and rent guarantee insurance to protect yourself as well as you can from being out of pocket.

Don’t forget tenant referencing is a vital part of finding the right person for your property. You’ll want to be sure the tenant is who they say they are and that they are in a position to be able to pay the rent every month.

Other resources for landlords:
National landlords Association:
NI Direct:
Citizens Advice Bureau:

Prior preparation will mean that when you are ready to rent your property out, you will be confident that it will be as stress free and easy as possible for you and your tenants.

NEXT WEEK: Part 7: What are the taxation rules for landlords?

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