FAQ’s for Buy-To-Let Investors

With our Sales and Lettings businesses under one roof, we regularly hear from investors looking to invest in properties that they will later rent out using our property management service. That coupled with the abundance of apartments in Swindon, which in our opinion are ideal buy-to-let investments, means we often get asked the same questions regarding the local area, the current market and other specifics such as leasehold and new builds. 
 
With that in mind, we have spoken to our in-house Investment Specialist, Hugo, who has answered the most frequently asked questions below…

FAQ’s

How many buy-to-lets can I have?

There is no maximum or minimum number of buy-to-lets that you can own. However, you should bear in mind the additional stamp duty which will be payable each time a property is purchased. Please note, this is in addition to your main residence or any other properties that you own, whether they are in the UK or anywhere else in the World. Find out more here

Is it a good time to invest in the property market?

The market will fluctuate over the coming years, making it hard to predict. However, Swindon is consistently ranked in the top 10 places to live and work in the UK, so the town offers an attractive proposition for those seeking to invest or expand an existing property portfolio. 
 
The trend at the moment (September 2021) appears to be that the market will continue to grow or certainly remain stable. An apartment would make a great long term investment (10 years plus) as there is always good demand from tenants for apartments, though the rate of capital growth would be slower compared to a house. Freehold houses make good shorter-term investments as capital growth tends to be better. There is of course the possibility of adding more value to a house, for example, if the property could be extended or refurbished.

Do I require a larger deposit in comparison to buying my own home?

In most cases, mortgage lenders will require a 25% deposit. However, it would be worth speaking with our recommended mortgage broker to check what options/products are available. We would recommend speaking to our friends at South West Mortgages

How much tax do I have to account for?

Currently (September 2021), there is a 3% surcharge for stamp duty payable for investment properties or 2nd homes. We would recommend speaking to our recommended mortgage broker who will be able to confirm the amount of Stamp Duty Land Tax due on legal completion. Calculate Stamp Duty Land Tax here.

Should I buy freehold or leasehold?

Many purpose-built apartments and conversion type apartments tend to be leasehold, meaning most mortgage lenders will be happy to lend, as long as the lease is of a healthy length (Most mortgage lenders won’t lend unless there are at least 70+ years left on a lease). A property with a lower lease could also prove to be a good investment if it can be purchased at a price point to reflect the cost of a lease extension, either as part of the purchase or in the future during ownership. The main benefit with leasehold properties is that more often than not, residents will pay a service charge meaning that most repairs to a building are covered.

With Freehold or Share of Freehold, there is often no service charge or management company, residents would be asked to contribute on an ad-hoc basis if repairs to the building were needed. For a freehold house, it would be entirely the responsibility of the sole owner to maintain the property.

Should I buy a new build or an older property?

Modernised homes typically rent out quicker than older ones. All new builds in the UK are covered by a 10-year home warranty and most developers will offer some sort of customer service warranty covering snagging defects for the first 6 months to 2 years. In the first two years, any faults that don’t meet the warranty provider’s technical requirements have to be corrected by the builder. After that, the 10-year warranty covers you against certain structural defects and smaller issues, such as the foundations, the roof & the double glazed windows. If you’re interested in buying a new build home, we have an experienced new homes team who can help you. 
 
While older properties are likely to be cheaper, they may need money spent on them to get them into a rentable state. On the plus side, places that need improvement present you with an opportunity to renovate them cheaply and quickly to boost the value of your investment. Take a look at our properties for sale here.

I have seen a property that does not have parking, should I invest?

We are finding that it has become more and more common that tenants do not have a car, therefore demand for properties even without parking is high. Swindon’s transport network is excellent and very well run with many different connections all over the town and beyond. Swindon is located in close proximity to major cities such as London, Bath, Bristol, Oxford and Reading and has prime train links, achieving a journey to London in as little as just 50 mins!

I have not had a mortgage or owned another property before, can I invest in property?

Most mortgage lenders advise that they will only consider applications from buyers, who have previously owned another property. However, we would recommend having a conversation with our recommended mortgage broker who would confirm your options – South West Mortgages.

What is the rental yield & affordability?

Do the maths thoroughly before you start your search and work out what your monthly rental yield will be – that’s the income you’d make on a property expressed as a percentage of the building’s value. As a benchmark, 5% a year is considered a good rental yield. Your mortgage application will also consider affordability and whether you can keep up with mortgage payments while the property is empty. As a rule of thumb, it’s smart to budget for a buy-to-let property being empty for at least two months in any 12. Consider all costs, such as agent fees, stamp duty, repairs, etc., when working out the affordability.

Top Tips:

1. Finances – speak with a mortgage broker or the bank first just to get an understanding of how much you can borrow because calculations on Buy-to-Let products are different from residential mortgages. Therefore, it is worthwhile having these conversations before you start viewing properties – most estate agents will want to see an agreement in principle before confirming any viewings.
 
2. Get educated – before investing your savings into property, you should take the time to educate yourself first, particularly if you are investing for the first time. Investing is exciting and it feels really good when you get it right. However, it can be a costly mistake if you do not learn the basics. Consult our investment specialist, Hugo Chapman, if you have any questions about your next move. 
 
3. Set some goals – if you are investing in a buy-to-let property, you’ll want to set yourself some return on investment goals. Don’t forget to factor in solicitor fees, stamp duty, lettings management fees and any property repair costs. Your goals can also shift based on many factors, so remember it’s fine to re-evaluate these. 
 
4. Use a letting agent – Using a letting agent takes out a lot of the admin and stress of managing buy to let property for many landlords. They’re familiar with the processes involved in sourcing and vetting tenants and can help manage any maintenance issues and ensure gas and electrical safety inspections and certificates are up to date. We have a team of dedicated property managers who can help you with this, please enquire here.
That’s all for now, but if you do have any other questions do not hesitate to contact us. We are always happy to help! Please call – Apartments & Investments on 01793 688 708, New Homes on 01793 688 705 or Lettings on 01793 520 721
 
Please note: Your home may be repossessed if you do not keep up repayments on your mortgage.
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