Buy to Let

JonSimon Estate and Letting Agent

You might have heard that ‘there’s always money in bricks’ – and this could seem especially true after the onset of the COVID-19 pandemic, which has led many people to become more reliant on their homes than possibly ever before.

It has also led many people to reassess their life priorities and how their homes could be readjusted to accommodate these. For example, with more and more people having started working from home, many of them could well have recognised how they could benefit from moving into a larger home that would give them the space they need for a well-equipped home office.

Furthermore, while many residents are enjoying bracing the outside world again in a way they couldn’t in lockdown conditions, they probably still aren’t too keen on doing so in overly busy public settings like town centres and parks. Hence, it shouldn’t be overly surprising that many residents have been seeking spacious homes complete with gardens where they could enjoy both fresh air and privacy in abundance.

To this backdrop, you could be enticed by the prospect of moving into buy-to-let investment by acquiring appealing homes in similarly appealing locations and renting out these properties to people who can’t quite afford to buy a home outright or simply want more flexibility in how they live.

Still, you should be aware that buy-to-let investment is not necessarily as straightforward as numerous platitudes about the sector could have led you to believe. There’s obviously no shortage of TV programmes and online articles on subjects like property ‘flipping’ and renovating homes, but consuming content like this won’t necessarily make you an expert on property investment – or at least not in the near future.

If you already have various other investments or have started mulling over a move into buy-to-let investment because you are nearing retirement or your kids have flown the nest, you should stop to think about whether you would have the time or energy to fully manage properties yourself.

The possibility that you wouldn’t is one reason why our lettings agents here at JonSimon are dedicated to helping landlords with managing rental homes in Lancashire and North Manchester. We already manage more than 400 properties across our geographic coverage area on behalf of buy-to-let landlords.

If you are drawn to the idea of investing in a buy-to-let property, we can help ease you in gently. This includes sourcing the right tenants for your property and offering seminars that you can participate in to help keep yourself updated on legislation and best practice.

However, you shouldn’t simply dive straight into the buy-to-let pool, so to say – as it remains crucial that you first carefully judge whether becoming a buy-to-let landlord would be right for you personally. In this detailed guide, you can learn more about the implications of life as a landlord before you decide whether to get in touch with our team.

How to buy to let

If you are looking to take your first step into the buy-to-let waters, you should first make sure you thoroughly understand what being a landlord would involve. For people interested in becoming landlords in England and Wales, we have listed various legal responsibilities the role would entail.

These include protecting the property against health hazard risks, such as by making sure a carbon monoxide alarm has been installed in the building and that all gas and electrical equipment it needs, including the smoke alarm, has been installed safely and is regularly maintained.

In England, you would also need to check that tenants would legally be able to rent this residential property. The UK Government website explains the whole process of making this check.

In either England or Wales, you would have to do other legwork before advertising your buy-to-let property to potential tenants – such as ordering an Energy Performance Certificate. The EPC, as it is otherwise known, basically provides an overview of the property’s energy efficiency.

This includes details of the property’s typical energy costs and advice on how its energy usage could be reduced in order to save money. The EPC will specify an energy efficiency rating from A to G – from most to least efficient – and be valid for ten years from the date it was issued.

You could be fined if you fail to obtain an EPC before putting the property on the buy-to-let market – especially as you would need to show a tenant the EPC when they agree to rent the home.

In advance, you should also educate yourself on how to place the tenant’s security deposit in a tenancy deposit protection (TDP) scheme, as you will need to do this within 30 days of receiving the deposit. As this is a government-backed scheme, it can reassure the tenant that their deposit will eventually be returned as long as they meet the terms of their tenancy agreement.

When a tenant signs this agreement for a buy-to-let property you have in England, you should also provide them with this ‘How to rent’ checklist. This is intended to inform tenants about their rights and responsibilities, and an ‘easy read’ version is available for tenants with learning disabilities.

It is worth emphasising that the various rules detailed above specifically cover England and Wales; different rules apply for landlords in Scotland and Northern Ireland.

Naturally, the success of any business venture would require you to make more money than you spend – and there are quite a few ongoing costs you would need to heed as a buy-to-let landlord. Perhaps the largest of these costs would be those you incur from holding a buy-to-let mortgage, though you can land a better mortgage deal if you opt for a larger deposit.

You should also set aside money for repair, maintenance and refurbishment costs. Though it’s difficult to judge how heavy these necessary costs could be in practice, you should err on the side of caution if the property is particularly large or complex and so could more easily throw up unexpected challenges.

How do buy-to-let mortgages work?

Buy-to-let mortgages were first launched in September 1996, when the private rented sector was responsible for a mere 9% of the UK’s housing stock. These mortgages were specially designed to help landlords with obtaining properties and converting them into rental homes.

Robert Jordan, a former president of the Association of Residential Lettings Agents (ARLA), has recalled: “We couldn’t see where we would find more homes to let, so ARLA designed a buy-to-let product that would enable more investors to purchase an investment property and let it under the new Housing Act 1988 regulations.”

Twenty-five years later, the financial comparison website Moneyfacts was listing nearly 3,000 different buy-to-let mortgage deals. That’s no small benefit, either – as, if you are an aspiring landlord, you won’t be able to use a normal residential mortgage to fund the purchase of a property for buy-to-let purposes. For this purchase, you will need a specialist buy-to-let mortgage.

So, how do buy-to-let mortgages actually work? Most of them are provided on an interest-only basis – meaning that, for each month of the mortgage period, you will pay only the loan’s interest rather than any of its capital as well.

This would bode well for you as a beginner landlord, as it could help you to minimise your monthly outgoings. However, you must plan ahead to make sure you will be able to fully pay off the loan or, come the end of the mortgage term, refinance.

Usually, to secure a buy-to-let mortgage, you will need a deposit worth at least 20-25% of the home’s value. However, you can put down a larger deposit if you wish – and generally improve the quality of the mortgage rate you are offered as a result.

The Bank of England has recently started tightening restrictions on buy-to-let mortgage lending. However, much of the resulting burden falls more on experienced than prospective landlords. Professional landlords with at least four properties, for example, are often classed as ‘portfolio landlords’ and, since October 2017, have faced greater hurdles in accessing additional finance.

Is buy-to-let still a worthwhile investment?

The buy-to-let market’s death knell has regularly been sounded for a while now – largely as a result of wider economic turbulence as well as a raft of tax and regulatory changes. However, in a recent survey by Nottinghamshire Building Society, 80% of buy-to-let landlords were found to remain keen on keeping all, or at least part, of their existing property portfolios.

Admittedly, some landlords have recently thought twice about continuing with buy-to-lets and decided to sell up while house prices are increasing. However, there is good reason to believe that these prices could continue increasing for a while yet.

In summer 2021, after the buy-to-let market was temporarily shaken by the COVID-19 pandemic, many lenders started offering more attractive buy-to-let mortgage terms – including by increasing maximum loan-to-value (LTV) amounts from 75% to 80%.

Consequently, securing a buy-to-let mortgage does not necessitate quite as hefty a deposit as it once did. Whereas a buyer would have previously needed to put down a deposit of £75,000 for a house commanding a £300,000 purchase price, the required deposit would have more recently dropped to a more manageable £60,000 as a result of the LTV change.

Interest rates on buy-to-let mortgages have also remained historically low, with lenders increasingly introducing fee-free deals. Therefore, now could be the best time in a while to become a buy-to-let landlord – especially as the demand for rental properties looks on course to keep rising.

As figures from Statista reveal, while two million UK households lived in private rented accommodation at the turn of the millennium, the number in 2021 was 4.43 million. Furthermore, some experts believe that, by 2045, 55% of the UK population will live in the rental sector.

It is true that a number of tax changes in recent years could have given many buy-to-let investors food for thought. A 3% higher rate of stamp duty now applies when landlords acquire a new property, while landlords must also shell out an extra 8% in capital gains tax when selling a property.

A number of other changes have eaten into landlords’ rental income. For example, ‘wear and tear allowance’ – a 10% income tax relief for helping to cover maintenance costs – has been axed, while landlords can no longer write off mortgage interest against their profits before paying tax.

Now, buy-to-let landlords are simply handed a flat-rate tax credit based on 20% of their mortgage interest. So, whatever income these landlords have used to pay the mortgage, they must declare this on their tax returns – rather than, as previously, declare it after deducting mortgage payments. In essence, many landlords may have been nudged into higher tax brackets than before.

Nonetheless, if house prices continue to rise as they have largely done over the last two decades, you could find that these additional costs are more than offset by your growing rental income. In short, despite its challenges, buy-to-let remains a promising investment opportunity – whether or not you intend to rent out properties for the foreseeable future or sell up at some point down the line.

All the same, where exactly you snaffle rental properties can undoubtedly prove a major factor in how much revenue you make from them. This is why you should be careful to research different geographic areas of the UK’s buy-to-let market before you pour money into them.

Why choose JonSimon?

Wherever in the UK you opt to rent out homes, there remains the question of whether you should directly take on all of the required responsibilities yourself or instead ask a lettings or property management agency to handle the day-to-day running of these properties.

The latter route would, at least initially, add to the cost of serving as a buy-to-let landlord. In the longer term, though, it could actually save you a significant amount of money – especially if you are inexperienced with buy-to-lets or, at the other end of the scale, have a large portfolio of buy-to-lets.

Whether you are a novice or experienced with buy-to-lets, we would definitely urge you to peruse properties in the Lancaster and North Manchester areas. We are admittedly biassed, as these are the areas we cover ourselves as a locally based letting agency. However, it’s certainly a part of the country we can help you to make the most of – especially given its strong record in rental yields.

Here at JonSimon, we can do many things on behalf of landlords – including advertising any buy-to-lets they own in Burnley, Bury, Ramsbottom and Radcliffe, finding and vetting tenants for these homes and arranging for maintenance and repair work to be undertaken on the properties as and when necessary.

You could find it prohibitively time-draining to attempt to fulfil all of these responsibilities yourself – especially if you have always envisioned using buy-to-lets as a source of supplementary income rather than as your main revenue stream.

If you are entirely new to buy-to-lets, you could feel particularly daunted by several of the more administrative aspects of looking after rental properties, like undertaking regular inspections of them and making sure all of the documentation you use for these homes is legally compliant.

It could therefore be a huge relief to you that the JonSimon team would be able to conduct all of these property management tasks and others in your absence. In freeing up time for you in this way, we can take much stress out of your journey as a first-time landlord – and, if you wish, leave you to spend more of your time on other projects outside of buy-to-let investment.

As we are highly experienced with managing buy-to-lets on behalf of landlords, you can trust us to manage yours without making rookie mistakes. For a novice landlord, successfully navigating the world of buy-to-let can require a lot of trial and error and thus run up many inadvertent costs that could otherwise have been avoided had the work been left to a property management firm instead.

Our experience with vetting prospective tenants means that we know many of the warning signs to watch out for in dubious would-be tenants. Hence, we can help you to find responsible and respectful tenants who are likely to be particularly diligent in looking after the property. This, in turn, can help to minimise repair and maintenance costs you could otherwise have had to pay.

If you have recently snapped up residential property in Burnley, Bury, Ramsbottom or Radcliffe, we invite you to contact our letting agency at an early stage so that we can assist you with every stage of running buy-to-lets – such as setting simultaneously feasible and profitable rental prices.

Our buy-to-let specialists are ready to help

Naturally, if you are about to take your first steps into buy-to-let, you want to make things as easy for yourself as possible. There are various ways you can do this – including, as far as we are concerned, snaffling your first buy-to-let in Lancaster or North Manchester.

Yes, we are bound to think highly of these areas – but that’s one big reason why we decided to establish the lettings side of our business here in the first place. With our vast experience of managing buy-to-lets in this part of the UK, we can also help you quickly get up to speed with the local market so that you can avoid stumbles potentially damaging to your properties’ appeal.

Our team is spread across our separate RadcliffeBurnley and Ramsbottom offices. You can contact any of these three offices to get in touch with a lettings agent who would be able to advise you on the local buy-to-let opportunities available.

With JonSimon by your side during your buy-to-let adventure, we can make sure any issues with properties we manage for you will be resolved smoothly. We have a large network of local contractors who would be able to swiftly rectify the likes of roofing, plumbing and heating issues.

Meanwhile, our own team can complete accurate valuations of your buy-to-lets, organise tenancy agreements and, ultimately, handle every single aspect of managing the properties, along the way dipping into our extensive body of expert knowledge about local lettings. Whatever questions you may still have about buy-to-lets, please don’t be afraid to ask our dedicated team.

Meet The Team

Dramatically reinvent market-driven relationships vis-a-vis customer directed e-business. Monotonectally incentivize distributed e-markets through high standards in.

Simon Morris

BA (hons) PGCE, MARLA, MNAEA

Company Director

Jonathan Morris

MNAEA

Company Director

Ryan Dillon

Lettings

Michael Greenhalgh

Company Director

Andrew Collins

Sales

Gareth Dooley

MNAEA, MARLA

Director

John W Dinsdale

Sadly John passed away in the Spring of 2021, his influence on Gareth, Laura and the business will be an ever present one.

Consultant/Charted Surveyor

Laura Stockdale

MARLA

Lettings Manager

Leanne Gill

Sales/lettings

Joanne Scott

Property Manager

Carmine Sodano

Sales

Frankie Garvey

Sales

Aaron Pilling

Lettings Co-Ordinator

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