How Does Buy To Let Work?

Purchasing buy-to-lets can be one of the best ways to accumulate wealth. If you look at the Time’s Rich list, most people either made their money in property or made their money elsewhere and then put it into property. They say success leaves clues and this guide explains the ins and outs of buy-to-let so you can successfully invest in property yourself.

What Is Buy To Let?

It’s when you purchase a property and then rent it out.

A buy-to-let mortgage is a loan that you can use to buy a property that you are going to rent out. This is great because to purchase a rental property you only have to put in 25% to 20% (market dependent) of the purchase price and the mortgage lender puts in the remaining amount.

You then find tenants and charge them rental payments, which pay the mortgage each. If you purchase high yielding properties, as we have in Liverpool, the rent will also cover all other costs and still put money in your pocket each month.

This can be an excellent way of building an additional income stream.

Do I Need A Buy-To-Let Mortgage?

Buy-to-let mortgages differ from standard residential mortgages in several ways. When you apply for a residential mortgage, the lender uses your salary to determine whether you can afford the repayments. However, with buy-to-let mortgages, the lender can look at the rental income of the property instead. This means that you don't have to have a large salary to get a buy-to-let mortgage. This is market dependent and a good mortgage broker will be able to advise you further. When you work with Pat you get access to his full power team which includes tried and tested experts in their fields including brokers, read more here: https://www.totalpropertygroup.co.uk/power-team

Can I Get a Buy-To-Let Mortgage?

The following things help you to qualify for a buy to let mortgage:

?? Good credit history - a good track record of managing credit will help you get a good buy to let mortgage.?

?? Deposit - most lenders will require a deposit of 20% to 25% (market dependent) before they'll approve you for a buy-to-let mortgage. However, some may ask for more, depending on what the property is worth and how much rent it could generate.

?? Age - mortgage lenders will consider applications from anyone over 18. Many of them may have maximum age restrictions in place too. For example, they might want to know that you can pay off your mortgage by the age of 75.

How To Make Money From Buy-To-Let

The rent you charge should cover all your costs and also leave some profit. Most landlords want to do this in one of two ways:

?? Rental income - If you purchase high yielding properties, as we have in Liverpool, the rent will cover all costs (tenant management, maintenance, insurance etc.) and still leave a tidy profit for you each month

?? Capital Growth (or capital appreciation) - this is the difference between the current value of your investment and the price you initially purchased it for.?

?? Rental growth - As with the value of the property, rent also tends to increase with time

What is an Interest-Only Buy To Let Mortgage??

An interest-only buy-to-let mortgage is a loan secured against property, where the borrower only pays off the interest on the loan each month, rather than repaying the capital borrowed. This means you have more money in your pocket each month. You could use this extra money to build up a pot to fund your next mortgage deposit.

The other benefit of not paying off your mortgage debt is that inflation slowly erodes the value of the mortgage debt over time. For example, ￡0.30 used to buy me a Mars Bar when I was a child but today, ￡0.30 would buy me less than ? a Mars Bar! The value of the ￡0.30 has been eroded by inflation and exact same thing happens with the value of mortgage debt. Magic!

What is a Repayment Buy To Let Mortgage?

A repayment mortgage means that your monthly repayments are higher because you are paying off part of the debt each month. At the end of the mortgage's life, the debt will be paid off in full and the borrower can either:?

?? Keep it and continue to rent it out; keeping all of the rental income

• if you do this then your money is not working very hard for you

?? Sell the property and you get to keep the full sale amount

• if you do this then you stop building wealth

Costs When Purchasing a Buy-To-Let

If you are new to buy-to-let then fees can be one of the greatest unknowns. It's vital to consider the costs that might be attached to it:

• The deposit is the money that you must pay towards the purchase price of the property, Lenders require 20% to 25% or possibly more.?
• Mortgages come with charges that you may want to consider. These extra fees include arrangement fees and surveys
• Stamp duty land tax will be charged if you are using this property as an investment and not part of your main residence.
• Solicitors are used to legally transfer the ownership of the property from the seller to the buyer. This is called conveyancing. A great solicitor is worth their weight in gold. When you work with Pat you get access to his full power team which includes tried and tested experts in their fields including solicitors, read more here: https://www.totalpropertygroup.co.uk/power-team

What Is The Monthly Profit From a Buy to Let?

If you purchase a high-yielding investment property then you will make a tidy profit each month, after all costs have been deducted. On a typical 2 or 3-bed terraced house, monthly profits can be between ￡250 and ￡300 per calendar month. This is after subtracting all costs including:

• Tenant management
• Maintenance
• Voids
• Landlord insurance

Buy To Let Landlord Insurance

Renting out a property can be very profitable. As a landlord, you are responsible for the safety of your tenants and any accidents or losses that might occur on your property.?

Luckily, there is insurance in place to cover all these risks so you don't have to invest your hard-earned money into something that won't give you a return on investment.?

When you work with Pat at Total Property Group you get access to his full power team which includes tried and tested insurance brokers.

About Pat from Total Property Group

Hi, it’s Pat Harper - Director of TPG. I believe that investing in property is one of the highest returning and safest ways to invest your hard-earned money. I also believe that even the busiest of people should be able to enjoy the benefits of property investing. These are the reasons my hands-free property investing service was born… and this is how it works:

I find properties that meet your criteria, I case manage the property through legal, I project manage any refurbishments and I oversee the lettings process. Everything is taken care of to ensure your investment is as passive as possible.

I have been a property investor in the Liverpool area since 2010. Over the years I have developed a wealth of knowledge and experience in the industry which ensures I deliver 1st class property investments for my clients.

Talk to Pat

If you are looking to purchase an investment property contact me now to arrange a FREE investment discovery call by messaging me here on LinkedIn or ??

To work with me: ?? [email protected]

Or check us out here: ?? www.totalpropertygroup.co.uk