FISCUS MORTGAGES - INFORMATION AND ADVICE

The Costs Associated With Buying-To-Let

VALUATION FEES

The following application fee scale has been adopted by the majority of lenders we deal with. The application fee is inclusive of the cost of valuations, rental assessments and booking fees for exclusive products.

Thereafter, (for guidance only) £1.00 per £1,000 plus VAT

STAMP DUTY

Stamp duty is paid on purchases in accordance with the following scale:

REDECORATION

Unless you are purchasing a brand new property, you should budget for re-decoration. No matter how tidy a property looks on first inspection, or when it was last decorated, once furnishings have been removed it will look untidy. Ignore your personal preferences in respect of colour and stick to magnolia or white. White is particularly useful in dark rooms.

If you are looking for somebody to do the work for you, your local landlords’ association will usually be able to refer you to a reputable and reasonably priced contractor.

Carpets and curtains need to be smart, hard wearing and neutral coloured. If they are not, change them! Beige is the best colour as it goes with anything. Go for a carpet with a fleck as it will not show dirt and marks as much.

INITIAL VOID PERIOD

It is reasonable to assume that you will not be able to let the property for up to a month. You will need at least a week to redecorate etc. The best way to reduce the void period is to seek permission of the vendor to show prospective tenants around in between exchange of contracts and completion. If the vendor has already moved out of the property you may even be able to negotiate access for re-decoration.

ONGOING VOIDS

On the basis that you have purchased the right property, in the right area, and it is in good decorative order, you should have very few problems attracting good tenants at market rent.

Be sure to budget for re-decoration every five years and an associated void period of perhaps two weeks.

Make it a condition of your letting that outgoing tenants allow you to show prospective tenants around the property.

Fortunately, the letting market and property booms are counter-cyclical. At times when properties are slow to sell, more people will want to rent. In boom times, many small landlords will sell up for a quick profit. This often results in high tenant demand. In the event of tenant demand falling too low, due to the bulk of the market deciding to purchase for example, you should be in a position to sell for a handsome profit.

LETTINGS AND MANAGEMENT

Other than finding the right tenant, the key to successful letting is getting the paperwork right. If you choose to self manage, join a landlords association. Your nearest association will be able to keep you abreast of the law and provide you with all the paperwork you will need. They are a useful source of information and with membership costing less than £100 per year, they provide superb value for money.

If you don’t have the time to self-manage, you may wish to appoint a property manager. It is hard to know which one to choose, so a good way to make a decision is to go to at least one of your local landlords association meetings and ask other landlords. They will be quick to tell you who is best and to warn you of any cowboys in your area. It might cost you a few G&Ts, but could save you a fortune in the long run.

FURNISHED OR UNFURNISHED?

If you are going to furnish, then you must get it right. All furniture must be new and meet the latest fire and safety regulations. DO NOT, under any circumstances, furnish a property with second hand furniture. You could reduce rather than increase the rental value by putting in poor quality furniture.

If you are going to furnish, budget for about a £3,000 capital cost, based on a two bed flat, and bear in mind that you need to do this every five years.

As a general rule of thumb, we suggest that unless you can increase your rent by at least £60 per month, you should lease your property on an unfurnished basis. Whether you furnish or not, you will be expected to provide ‘white goods’ such as a cooker, fridge/freezer, washer/dryer etc. Again, it is best to talk to your local landlords association about suppliers that members have successfully negotiated discounts with.

PROPERTY & LANDLORDS INSURANCE

Beware: many insurance policies exclude risks on let properties. Additionally, a landlords’ insurance policy will need to cover additional risks, for example, payment of rent in the event of the property being uninhabitable due to fire, flooding, structural defect etc.

If you would like further help with a buy-to-let mortgage or any other financial product related to property letting, please complete our quick buy-to-let enquiry form and an IFA will contact you with the best deals on all aspects of any prospective or current buy-to-let property.