Top Tips: Buy to let as a first time buyer
Forth Action Invest on December 21, 2022Are you looking to purchase a buy to let as a first time buyer? You’ve come to the right place.
While the information on the web can seem few and far between, we’ve pulled together your common questions and top tips for those who buy to let as a first time buyer.
Although the world has seen some significant changes over the last couple of years, with more to come, dipping your toes into the property pool can provide a great source of regular income.
And you’re not alone, either: £8.5 billion worth of buy-to-let properties were bought by landlords in the first quarter of 2022.
The private rental sector has seen some incredible progress post-Covid, and it’s not just London who are reaping the benefits. In fact, there’s a trend of people leaving the capital and heading to towns and cities with living costs, like Manchester.
Follow along as we share some key items to remember and our top tips for buy to let as a first time buyer…
*Please note this blog does not constitute investment advice. Conducting your own due diligence and being aware of risks before making any investment is key. Seeking independent financial advice may be appropriate.
Can your first property be a buy to let?
Working with a reputable mortgage advisor is key, as being a first-time buyer could make the process a little more difficult.
Some lenders will view you as high-risk, and others will count you out altogether. But that’s not to say it isn’t possible.
There are numerous lenders who will open their books to you. You’ll just have to be prepared to provide as much documentation and proof of finances as possible.
Again, working with a trusted mortgage expert will be vital for securing the best option for you. Choose someone with extensive experience in buy-to-let rather than just residential mortgages.
Buy to let as a first time buyer: How much do I need for my first buy-to-let?
When it comes to the mortgage side, buy-to-let mortgages work slightly differently from residential mortgages and they require a larger deposit.
When buying your own home to live in, you can pay as little as a 5% deposit. With a buy-to-let mortgage, the deposit will range from 20% to 40%.
If you’re a first-time property buyer, lenders could view you as high-risk, so may require a deposit on the larger side of that scale.
Whereas those with property can already show their high-value assets (including other properties they own) to the banks.
According to a recent study, the average (for both new and existing landlords) is a 25% deposit of the purchase price.
There will also be survey fees, stamp duty, legal costs, mortgage admin fees and insurance.
Once the mortgage side is covered, you’ll have to save some money for any repairs, appliances and running costs. This will depend entirely on what property you buy, how much work is needed and where in the UK you buy.
Some landlords recommend saving 1% of a property’s value for maintenance costs, which is an average of £2,344. The costs for repair works are higher in London, with an average of £4,746.
What to do before renting out for the first time?
If you’re renting out for the first time, there are some legal responsibilities you must be aware of. You must adhere to all aspects laid out in each of these laws.
Some of the main ones include:
- Gas Safety (Installation and Use) Regulations 1998
- Furniture and Furnishings (Fire and Safety) Regulations 1993
- Electric Equipment (Safety) Regulations 1994
These are in place to keep your tenants safe and ensure your property is habitable. Within each of the regulations, there are various tasks you’ll have to carry out before a tenant can move in.
Some of these include:
- Having an Energy Performance Certificate (EPC) to show how energy efficient the property is.
- Gas and electrical safety checks – a landlord gas safety check is essential and must be carried out by a Gas Safe registered engineer.
- Smoke and carbon monoxide alarms must be supplied and installed.
- Some areas of the UK will require you to have a landlord’s license. You can check with your local council as to whether you’ll need one.
A tenant’s deposit must also be paid into a government-approved deposit scheme within 30 days of receipt. Failure to do so could result in some hefty fines.
If you’re looking to rent out your property as a HMO, you must apply for the relevant licensing with the local authority.
5 top tips for buy to let as a first time buyer
Following some simple tips can help keep you on the right track after buying your property.
Understand the legal requirements
The legal requirements can be confusing at first look. But that doesn’t mean you can bury your head in the sand and ignore it until it becomes a problem.
Understanding what is needed in your property and for tenants is vital. This includes knowing what makes the property legally safe or otherwise. And changes do occur, so keep on top of industry news.
Carry out the necessary works
Is the property you’re about to own ready to go with all the needed furnishings and amenities? Or do you need to spend some time installing a new boiler, refreshing the bathroom or painting each room?
If so, the best time to do so is before anyone moves in. This will also increase your chances of tenancy, be sure to book property photos after the works have taken place.
Establish tenancy terms
A property manager can assist with these items, which will save time, stress and resources.
If doing it yourself, a tenancy agreement must be drawn up (or can be verbal) that outlines the contract between you and your tenants.
This includes statutory rights for both the landlord and tenant and can provide more than this if desired. The agreement will be made up of express terms (what is written in the agreement) and implied terms (rights given by law).
It’s good practice to include the following details:
- Names of both parties and the address
- Date and length of the tenancy
- Details of who’s allowed use of the property and which rooms
- What the rent payment includes
- How much the rent will be and when it should be paid
- What services the landlord will take care of
- The notice period for ending the tenancy
Take inventory
Before tenants move in, you should prepare for an inventory inspection and a schedule of conditions to be drawn up for the property. This can be completed by an independent professional.
While an inventory take isn’t legally required, it’s always recommended in case damages do occur throughout the tenancy.
Manage tenants or partner with specialists
Being a landlord can be time-consuming, especially when you’re already running on a tight schedule or if you have work or family commitments.
As the tenant manager, you must stay on top of all aspects, from keeping up with laws and regulations to assisting with repairs – no matter the time.
When partnering with management and property specialists, they can take that stress off you as they manage every step of the process.
Property managers can also help with finding great tenants and attending to any issues that arise.
Work with property investors to level up
If you want to enjoy the benefits of property investment but don’t have the time to manage your own portfolio, we’ve got you covered.
Here at Forth Action Invest, we work across property sourcing and management. Our property management services are simple: we’ll take care of any maintenance associated with the property and guarantee a monthly sum of rent during the agreed period.
Unlike a local lettings agent, this all-inclusive service provides win-win rewards for landlords and investors alike.
Ready to turn your new property into a profitable real estate investment? Check out our services here.
*Please note this blog does not constitute investment advice. We recommend you conduct your own due diligence before making any investment, including seeking independent financial advice.