Buying investment property – is it right for you?

September 12, 2016  |   Posted by :   |   Blog

buy to let solicitor Thames Valley

Investing in property can be an appealing alternative to stocks and shares as a tangible, secure method of building capital. A buy-to-let can provide you with a regular income, and a significant return on investment, but like any investment, it also comes with its own risks and potential pitfalls. It’s important, therefore, to ensure that a buy-to-let is right for your circumstances and financial situation. Before you make the decision to invest in property, it’s a very good idea to consult with a solicitor experienced in property law to discuss your options. Your solicitor will help you to deal with the legal aspects of the business and offer advice on managing your investment to yield the best return.

First, it’s essential to understand the commitment involved in a buy-to-let – this is a long term investment that requires thorough planning and ongoing management. Property prices fluctuate, the rental market can be slow and fickle, and you may end up selling for less than you paid. But by making a savvy purchase and managing your investment rental well, you could create a worthwhile source of capital with a regular monthly income.

Here are some of the considerations to take into account when investing in a buy-to-let:

Property purchase:

If you’re able to buy a property outright or put down a large deposit, you’ll be in a strong position to reap the benefits of an investment property. The smaller your mortgage, the larger portion of rental yield you will receive each month.

Remember to include the legal costs of buying a property into your considerations, including solicitors’ fees, land tax, survey costs, stamp duty, and capital gains tax on any profits you make from your rental.

In April 2016 a new stamp duty rule came into affect which requires investment property buyers to pay an additional 3% over each stamp duty band. However, buy-to-let landlords can also offset mortgage interest payments and certain business costs against their income.

Investment protection:

The best way to protect an investment property is through landlord building insurance. This is often a requirement for a buy-to-let mortgage, and covers your property for loss, damage and emergencies.

It’s also sensible to set up mortgage protection, such as a critical illness cover insurance policy, and update your will to include your new investment.

Management and maintenance:

Most landlords rent property through an agent, so it’s important to take these additional fees into account when budgeting the costs of your buy-to-let. For larger properties, or multiple rentals, you may also wish to arrange maintenance, cleaning, or a business manager to handle the everyday requirements of your investment. These too will need to be added to your outgoing costs.

Return on investment:

By making clever choices when in comes to purchasing a buy-to-let, you could find yourself with a great investment. Look for properties in areas that have a regular stream of potential tenants, for example: suburbs popular with young families and first time buyers; a popular commuter bases; or areas surrounding universities that will draw in student rentals.

If you have the time and funds to do up a run-down property, you may find a bargain with a small mortgage that will provide a much higher return once it’s modernised and rented out. Plus, making cost-efficient improvements to a property will raise its value when you come to sell. Be aware, however, that all the time your property is off the market for renovations, you are losing out on potential rental income – so if you plan on making improvements, choose options that can be completed quickly and cost-efficiently.

Buy-to-let risks:

There are, of course, significant risks that come with any property purchase or mortgage. But extra care must be taken when it comes to a property you intent to use as a source of income, since you will need to rely on the rental yield to ensure your investment brings in money instead of costing you more! The main concern here is ensuring that you have reliable tenants, and that your rental income not only cover your costs (mortgage payments, insurance, marketing, agents’ fees, tax) but also provides you with a profit.

Other issues buy-to-let landlords are faced with include difficult tenants, costly repairs, an unpredictable property market and the sheer time and effort it takes to manage your business. A buy-to-let should not be taken on lightly, and requires thorough planning and organisation.

A buy-to-let can be a great way to invest, providing you with a regular income and a reliable business model. But before you embark on property investment, make sure you have all your ducks in a row: budget carefully, incorporate a sensible contingency plan, and seek as much advice as you can to ensure your plan is as sound as possible.

To speak to an experienced property solicitor at Frances Lindsay & Co in the Thames Valley visit or call us on 01628 634677. For a free online conveyancing quote, click here. We can help you with all the legal aspects of buying and selling residential, commercial and investment property – let us take the weight off your shoulders and make the best investment for your situation.

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