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Original poster

Buying to let for the first time - what do I need to know?

66 replies

33goingon64 · 26/01/2023 15:12

Both parents died, about to get a cheque for just shy of £400k. I'm aware it's a lot of money and I want to invest wisely. The most obvious option seems to be buying a property to let. The steps I can image I need to take are:

Research what I can get for my money - and whether it will appeal to renters
Research areas that are 'up and coming'
Decide how much work I'm willing to do and how hands on I want to be
How far away it needs to be from where I live (linked to above)
What rent I could charge
What are agency fees and what should I look out for when choosing an agent?
Are there rules about buying to let if I don't need a mortgage?
What kind of level of tax do I pay on rental income?

Anything else?

If anyone is a seasoned property investor and has tips to share I'd be very grateful!

OP posts:
ladymacbeth · 26/01/2023 18:55

OP, what does IFA stand for...?

Greenfairydust · 26/01/2023 19:18

If you really are set on becoming a landlord don't put all your money in a property. Instead try to keep a large chunk of money in savings account. Being a landlord sounds like a lot of hassle to me and has the potential to go wrong.

''@caringcarer · Today 15:51
I'm a buy to let LL. I have 8 btl and in process of buying ninth.''

Sigh. And this is why so many people with regular jobs can't afford to buy a home...

pilates · 26/01/2023 19:25

Sorry if I missed, but do you own a property? If not, I would buy to live in. Just so you aware you will pay higher rate stamp duty too.

caringcarer · 26/01/2023 19:35

@Greenfairydust, wrong, there are so many properties for sale. Me buying another is not stopping anyone else buy one. Look on Rightmove see how many properties for sale. What is most likely stopping some people from buying a house is lack of deposit and lack of income multipliers plus may struggle to pass the stress test.

caringcarer · 26/01/2023 19:36

@ladymacbeth, independent financial advisor.

caringcarer · 26/01/2023 19:37

Also OP is correct in that pensions have not been doing well recently.

freez · 26/01/2023 19:38

What do you need to know? Well you need to know you might be taking a property away from a family who are priced out of the market. You might be taking a property from locals who can't afford to live where they grew up.

Use your money elsewhere.

Mildura · 26/01/2023 19:39

caringcarer · 26/01/2023 19:36

@ladymacbeth, independent financial advisor.

i think the point was that the clue is in the name

overthink4r · 26/01/2023 19:40

I'm a landlord, would I do it again....nope

Hoppinggreen · 26/01/2023 19:46

I don’t hate Landlords, I have been one BUT I would not do it now.
Lots of red tape and getting bad tenants to leave is difficult and expensive

BlisterWives · 26/01/2023 19:52

A pension would be my priority, then a BTL, you could get an investment interest mortgage. I put down a 40% deposit and got a mortgage on the rest. My mortgage costs £146 per month and my rent is £950. Obviously that isn’t all profit.

CurlyhairedAssassin · 26/01/2023 20:01

OP, we considered this when I inherited a similar sum. Then we sat down and realised how much time just maintaining our own house takes and the fact that getting tradesmen to even come to quote is just so damned difficult round here (we have needed a roofer for nearly 2 years, had about 4 round, loads more didn't even bother to come, one only fixed one of the issues and probably ripped us off doing so, and STILL we have not fixed the main problem).

We are in an area where the housing stock are all the same age and so are all having similar repair work needing doing. Victorian terraces and pre-war semi-detached. Lots of probate properties which need completely gutting. We just don't have the trades available around here for me to just phone up someone to come and fix something in a house I was renting out.

I work FT, term time only, and couldn't give that job up yet and I just don't have the time to be making multiple phone calls during business hours to administer a rental property.

Maybe consider the day to day issues like that too. My friend gave her rental flat up it became a burden for her to manage.

ladymacbeth · 26/01/2023 20:04

caringcarer · 26/01/2023 19:36

@ladymacbeth, independent financial advisor.

I know. My point was for the OP to spell it out to themselves

aramox1 · 26/01/2023 20:09

How are pensions doing badly? They're just wrappers for funds, like isas, no? Sure the market is doing badly but that's hitting all investments.

Alexalee · 26/01/2023 21:38

One thing btl has over a pension/annuity is when you die the annuity dies with you and doesn't go to your children. A btl would

LookingOldTheseDays · 26/01/2023 21:43

Alexalee · 26/01/2023 21:38

One thing btl has over a pension/annuity is when you die the annuity dies with you and doesn't go to your children. A btl would

You don't have to buy an annuity with a pension though.

theholidaymum · 26/01/2023 21:51

we let out our house while moving away for work. Never I will do it again. Would rather sell it next time.
Due to Covid, the tenant decided they wont pay us, and not moving out either. Took 6 months to get rid of them (the EA in no contact as they refuse to do anything, couldn't get the eviction notice because of backlog), plus no rent received for almost a year! And it's our faults apparently, we should be feeling sorry for them while they took a piss on us!

GougeAwayIfYouWantTo · 26/01/2023 21:53

If you decide to go down the BTL route, I would advise being present when prospective tenants come to view the property.

I have an excellent relationship with both sets of tenants and we’ve never had any issues.

theholidaymum · 26/01/2023 21:54

In the end. the tenant decided to just left before the final notice received. That's how we got the house back!
Apparently they can refuse the notice without giving any proper grounds for it for maybe 3-4 times ? And each time it's another waiting period - of 6 weeks!
They obviously know the rules more than us - the actual landlord obviously lol.

CuriousSIL · 26/01/2023 21:57

Property Girl website has a downloadable information booklet which would help give you pointers.

Figgygal · 26/01/2023 21:59

BTL is probably the least obvious option
You'll pay a fortune in stamp duty as its a second home
We rented out a property for a while when couldn't sell it and it was a right pain in the arse. You've got risk and overheads.
Pensions are not "dodgy" you get instant 20% tax relief
Husband works for an IFA he says look at unbiased.com and look for an advisor in your area you don't pay anything until you buy anything. Ifa's are highly regulated.

TeenagersAngst · 26/01/2023 22:08

caringcarer · 26/01/2023 15:51

I'm a buy to let LL. I have 8 btl and in process of buying ninth.

You don't have to buy house outright. You could pay half as deposit and then do a 50 percent interest only. If you buy it outright you won't pay interest then can't claim tax credit of 20 percent against interest for self assessment tax bill. Buy a house that needs no work at all just ready to rent out. Make sure it has EPC of C. A city btl will always rent well. Buy a house not a flat. Flats are leasehold and have maintenance fees. 3 bedroom or 2 bedroom with garden rent best for families. Best to rent with either high single income tenant or better still 2 tenants who work as if 1 looses job they still have income to pay rent. You might be able to buy a house that is already tenanted. If you do this ask to see proof of tenants paying for last 3 months. To begin with probably best to go through an agent who will charge you up to 20 percent of profit. After first year once you get to know tenant you might want to run it yourself. You need to print off How to Rent from government website and give tenants a copy, print out EPC for them, get gas certificate, renewable every year, and electricity certificates, renewable every 5 years and lease. Take photos of house on day they move in, print and get them to sign condition of house on moving in day. Get them to sign document agreeing they have received above documents and fire blanket, first aid box, carbon dioxide alarm and house has a smoke alarm on each floor. Get insurance against tenants not paying rent. You can claim this and has/electricity certificates back against tax, plus any accountancy fees for completing self assessment if you can't do it yourself. You can buy a reasonable btl for £200k or far less if you pick the right area.

The tax credit of 20% just offsets the 20% you've already paid on the mortgage interest which is no longer a deductible expense. So it's not really a bonus. If you're a higher rate taxpayer, then you're out of pocket. Mortgaged BTLs can be very expensive now with interest rates rising.

TizerorFizz · 26/01/2023 22:31

What mortgages people have now and what a new purchaser gets are two different things. The op isn’t, I assume, looking for an empire of 9 with mountains of debt.

Rents will go up if small private landlords pull out. With the ending of no fault eviction, they will. Especially those of us without an empire of property that’s our job. It’s laughable to think the government, or any government, will fill the gap. Housing targets are more of less abandoned.

Savings accounts are not returning too badly at the moment. Shares, overall, in ISAs, do better. A spread of investments is always best and a home and pension should come first if you don’t have them.

thaisweetchill · 26/01/2023 22:45

Buy a house that doesn't need work,preferably new, old houses have things break all the time.

Shop around a few letting ages for their fees. I pay 8%+VAT a month and paid a £200 finders fee (Shropshire).

DO NOT manage it yourself, I did this with my last tenant and it ended badly.

Do not furnish the property - more items to damage/replace and most tenants have their own items anyway.

canfor · 26/01/2023 22:48

I am a landlord, had to move away for work and intend at some point to move back, but it's been a good few years now.

There is quite a lot of regulation now so prepare to keep up with EPCs, Annual Gas Certs, requirements for carbon monoxide and smoke alarms, EICRs, council licensing, Deposit Schemes and other stuff.

Landlords always get a bashing, sod it, I don't care! My conscience is crystal clear as I try to be the best landlord I can be.

My top tips...
Join a property forum or two and trawl the boards for wisdom
Always meet the tenants yourself and play an active part in who you choose to let to - even if you use an agent, get references and a full credit check
I have used agents - and it's a really good idea if all of this is new to you as they will keep you right - but you will pay a premium for that
Keep on top of maintenance- gutter cleaning, boiler services, minor repairs etc.
Personally inspect at least once a year
Keep up good communication with your tenant
Take out legal expenses cover as part of your landlord insurance
I let below the market rate, I'm happy to have great tenants and I want them to stay.

The tax on BTL is rough, look into this before you jump in, consider whether to buy via a company, consider whether a holiday let is a better idea for you.

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