Buy-to-Let is a joint initiative by the Association of Residential Letting Agents, ARLA, and the mortgage lenders. The scheme is designed to help private individuals to invest in property to let without being penalised by mortgage surcharges or paying commercial rates of interest. Mortgage lenders in the Buy-to-Let scheme will take account of rental income likely to be achieved from a property.
What’s so different?
Historically, borrowing on income producing property has been viewed by lenders as a commercial proposition. So, mortgages on property to let, even for private individuals, have attracted higher rates of interest than the standard mortgages offered to owner-occupiers.
In addition, until now, rental income has usually been disallowed when accessing a borrowers ability to meet mortgage payments.
Now, the view of many lenders and all other housing professionals is that growth in the private rented sector must be encouraged. Not only does it lag well behind the private rental sectors of all of the other advanced economies, the lack of choice between renting and buying is, in fact, bad for the economy and a contributory factor to the booms and busts of the housing market over the last decades.
But, the change in lending criteria and the lowering of interest rates for private investors has only been made possible by the strong presence of professional, bonded letting agents in the lettings market.
What difference does a letting agent make?
Buying a property to let is not the same as buying your own home. Mortgage lenders will want to know that an ARLA member agent has been advising on the selection of properties suitable for letting.
As an experienced agency, we know the local market, whether there is a demand for, say, two-bedroomed flats or four-bedroomed houses, or for properties close to schools or transport links or secluded properties with gardens. Also, the agent will know the standard of decoration, furnishing, fixtures and fittings required.
The Dos and Don’ts of Buying to Let
DO Think of buying to let as a medium to long-term investment
DO Seek advice from an ARLA letting agent on local market demands
DO Get your sums right. Will the rent cover borrowings and costs, after allowing for void periods?
DO Decorate, fit out and furnish to high standards, especially kitchens and bathrooms, to attract the best tenants and let quickly every time.
DO Use an ARLA member as your letting agent. They are bonded, hold Professional Indemnity Insurance to required standards, have been in the business for a minimum of two years and are kept up to date with the latest legal and regulatory requirements.
DON'T Let personal taste cloud your judgement. Be sure the property you choose meets market requirements.
DON'T Purchase anything with potential high maintenance problems. It will only effect the return on your investment.
DON'T Think that the running of an investment property to let can be left to friends or relatives in your absence. Tenants require a full management service.
DON'T Use off-the-shelf tenancy agreements from HMSO or law stationers, or forget to issue the right notices or fail to have a proper inventory and condition report made before a tenant moves in. Leave all documentation to a professional agent.
DON'T Furnish with second hand furniture or cast-off soft furnishings. This will probably contravene the Furniture and Furnishing (Fire) (Safety) Regulations.
