Becoming a landlord comes with big financial gain promises. Especially in today’s market and with the current housing shortage, there is a lot of money to be made when buying and renting out a property.
However, being a landlord also comes with a lot of responsibilities. If not handled well, some if not all of these responsibilities may end up costing you as a landlord in the long term.
Our estate agents in Newham have extensive experience in letting and managing properties for landlords and know all there is to know about the responsibilities, risks, and gains associated with this endeavour. Keep reading to see what tips our estate agents in Newham have for existing or soon-to-be landlords.
If you are or are planning to become a landlord and want a professional and dedicated team by your side to handle all the ins and outs of this venture on your behalf, be sure to contact our estate agents in Newham at 0207 055 0441. They will provide the highest quality service and professional advice that will increase your chances for success and profit.
What you can find in this article:
- Financing Your Rental Property
- How to Choose a Property With High Potential
- How to Calculate Rental Yields
- Landlord Costs
- Landlord Responsibilities
Financing Your Rental Property
One option is that you already have the funds available to buy the property you are planning to let. However, that is not the case for many landlords either because they do not have the available funds, or they do not want to use their own money to finance the property purchase.
If you need a mortgage for your rental property, you must look into buy-to-let mortgages. They are specially designed for buyers purchasing a property as an investment, not as a home.
Buy-to-Let Mortgages
Nowadays, lenders offer a wide range of buy-to-let mortgages. With a bit of research, our estate agents in Newham say you can find good rates no matter if you are an experienced investor or a first-time landlord.
Buy-to-let mortgages are interest-only. This means that, for the duration of your mortgage contract, you will only be paying interest on the loan, not the capital as well.
The deposit you will need for this type of mortgage varies from 20 to 25% of the property’s value. The higher your deposit is, the better the rates lenders will offer you.
How to Choose a Property With High Potential
Our estate agents in Newham recommend you take your time choosing the right property to invest in.
Your first step should be to research the local markets. You can either do this on your own, using portals like Zoopla, or enlist the help of experienced local estate agents.
What this research should help you determine is which areas have the highest potential and which types of rental properties are in demand. Different categories of renters want different things. On top of this, renters may change their preferences regularly and one type of property that looks good like it has potential now may not have so much potential in the next 10 years.
This is why it is crucial to research the local property markets well and have an experienced professional giving you insight and advice into what type of property to choose.
Once you are finished with your local market research, decide who your ideal tenant is.
According to our estate agents in Newham, the type of tenant you want is a big factor to consider before purchasing your investment property because you need it to have the features that particular type of renter is looking for. A modern flat in a good location will appeal more to young professionals, while a larger home in a good school district with plenty of storage and outdoor spaces will appeal more to families with children.
The next step our estate agents in Newham recommend you take is to make a list of pros and cons between new-build properties and older homes. New builds tend to be pricier but come with lower utility costs and also have more potential for growth. Older builds may require refurbishment works but you can typically find them at a lower price.
How to Calculate Rental Yields
Your rental yield will depend on:
- The type of property you are renting
- The property’s location
- Changes in the property market
To calculate your rental yield, you must consider the home’s value and how much you stand to make in rent each month. If your property is worth £400,000 and the average rent you can charge each month is £2,000, first multiply the monthly rent with 12. That will give you the amount you stand to gain each year. Now, divide the estimated yearly rent to the home’s value, and you will have your rental yield. In our case, it is 6%.
According to our estate agents in Newham, your rental yield should be at least 5% for the property to be considered profitable.
Landlord Costs
On top of mortgage costs, as a landlord, you will also be responsible for other monthly or one-time payments.
To be able to make a real profit and avoid unpleasant surprises, our estate agents in Newham recommend you take all of these costs into account from the very beginning.
Here are the costs associated with buying and owning a rental property every landlord should consider and budget for:
- Buy-to-let mortgage deposit
- Monthly payment for buy-to-let mortgage
- Letting agent fees
- Legal fees
- Buy-to-let stamp duty
- Tax on buy-to-let properties
- Initial refurbishment costs
- Regular repair and maintenance costs
- Regular refurbishment costs (every few years)
- Landlord insurance
Our estate agents in Newham also advise you consider void periods for the property and set up a contingency fund.
Landlord Responsibilities
Landlords are responsible for making and keeping the home safe for tenants, as well as for paying certain taxes or fees to local councils.
The most important responsibilities a landlord should take into account are:
- Gas safety – Any gas equipment must be installed, annually checked, and maintained by a registered engineer
- Electrical safety – The property’s electric system and appliances must be safe
- Fire safety – The property must be fitted with smoke alarms on each storey and a carbon monoxide alarm in any room with a ‘solid fuel burning appliance’
- Energy efficiency – The property must have a valid energy performance certificate (EPC) with a minimum rating of E
- Right to Rent checks – Landlords are required to check that their tenants have a legal right to live in the UK
- Licensing – Landlords need to get a license before renting out a property for Houses in Multiple Occupation (HMO) and certain local councils also require selective or compulsory landlord licensing
Our estate agents in Newham are experienced in letting and managing a wide range of properties. They provide landlords with professional advice based on clear market data and support investors in making the most profitable decision. To learn more about or letting and property management services, contact our experienced estate agents in Newham today at 0207 055 0441.
