First time BTL Landlords: It’s your first time?… don’t worry, we’ve all been there!
Beginning anything for the first time is always a slightly daunting experience. Some tasks are more difficult than others. For example, becoming a landlord for the first time comes with great responsibility. To make sure you’re clued up about what this role really entails, take a look at things you need to consider, compiled by Renee Wells from Landlord News…
Buy-to-let investments can come from two potential income streams: from rent and from capital growth of the property value increasing.
The property market is unpredictable, therefore, choosing to become a landlord is always going to have its high and low moments. It is a medium to long-term investment risk. Considering this, it is possible to lose money if property value decreases, your outgoings exceed rental yield, or if the property is vacant for a period of time.
It is important to keep on top of the fees associated with purchasing a property so that you are aware of all the expenses involved in such a project.
Stamp Duty – The 3% Stamp Duty surcharge for additional properties was introduced in April 2016.In England and Northern Ireland, you’re liable to pay Stamp Duty when you buy a residential property, or a piece of land, costing more than £125,000 (or more than £40,000 for second homes).
This tax applies to both freehold and leasehold properties – whether you’re buying outright or with a mortgage.
If you’re buying a property in Scotland, you will pay Land and Buildings Transaction Tax (LBTT) and, in Wales, Land Transaction Tax (LTT) instead of Stamp Duty.
There are several rate bands for Stamp Duty.
The tax is calculated on the part of the property purchase price falling within each band.
For example, if you buy a house for £275,000, the Stamp Duty Land Tax (SDLT) you owe is calculated as follows:
• 0% on the first £125,000 = £0
• 2% on the next £125,000 = £2,500
• 5% on the final £25,000 = £1,250
Valuation – The mortgage lender will assess the value of the property to establish how much they are prepared to lend you.
The cost can be £150-£1,500 based on the property’s value.
Some lenders might not charge you for this, depending on the type of mortgage product you select.
The lender’s valuation is not like a full structural survey, so it might not identify all the repairs or maintenance that might be needed.
Property survey – Prior to buying a property, it is important to get it checked by a surveyor.
This is integral to your understanding of any potential problems with the property before you proceed.
Surveys range from a basic home condition survey, costing around £250, to a full structural survey from £600 or more.
Paying for a good survey could save you money on repairs in the long run.
Legal costs – You’ll normally need a solicitor or licensed conveyor to carry out all the legal work when buying and selling your property.
Legal fees are typically £850-£1,500 including VAT at 20%.
They will also do local searches, which will cost you £250-£300, to check whether there are any local plans or problems.
Other things to consider…
A wise choice to make when becoming a landlord is to use a letting agent and to choose the right one for you. This requires some research and time, as you don’t want to go with a letting agent that doesn’t market your property in the way you would like. Furthermore, price range is an important part of this decision – you want to ensure that you’re getting the most for your money and that the letting agent you choose is working with you to achieve the best results.
Secondly, you need to establish a rent price. You can do this by using resources like a Rent Calculator which assists you in setting a fair rental price for potential tenants. Moreover, you could ask your letting agent for their suggestions.