The property will be purchased using a mortgage from a specialised lender who offers what is called a Buy to Let Mortgage. This will usually be an ‘interest only’ mortgage, which means the loan is not repaid, but purely serviced by monthly payments of the interest.

The mortgage provider will consider the rental income of the property as a major factor when making a decision for the borrower, as the property must be seen to be able to pay for itself, what we refer to as positive cashflow.

This means that the rent from the property must be more than the interest payment on the mortgage and a lender will insist upon this by placing a ‘rental uplift’ figure on the application criteria which is typically 125%. This means that the rent must exceed the mortgage interest payment by 25%.

The owner of the property as a Landlord is responsible for the safety of his tenants and various legislation exists to ensure this takes place, the most important of which are the Gas and Electricity certificates. Legislation is also now in place to include the fitting of permanent or ‘hard wired’ smoke alarms and a minimum level of energy performance is also under serious review. Specialised insurance is also needed for this type of venture.

As an investment, Buy to Let property offers two types of return. Taken as a long term venture, typically ten years, the property will show growth in value and while you get there, the rental income shows you a monthly profit. Refinancing along the way can also provide a useful source of tax free income, as long as rental levels support the extra borrowing, as rent rises tend to follow property value increases.

We are always happy to advise you on how best to start investing in property and how to put together a stable and balanced portfolio. We don’t charge for advice or education and always welcome visitors to our offices, where a few hours with us will answer all the questions you may have before getting started. Please call us if you would like to arrange a visit and we will book you in.