A guide to buying your first investment property

A guide to buying your first investment property
9th May 2022

Are you thinking about buying your first investment property? This guide will provide you with everything you need to know about the processes involved when becoming a landlord.


Buy to let mortgages explained

If you are planning to invest in a property to rent out or let your existing home, you will need to apply for a buy-to-let mortgage. Exclusively designed for landlords, BTL mortgages usually require a higher deposit (between 20-40% of the purchase price) which can be interest only or repayment. Due to the higher initial deposit, a lower more manageable monthly repayment will be made to your lender that will be covered (and more so!) within your monthly income. Lenders tend to consider the expected rental income when calculating the amount available to borrow through a BTL mortgage, although other considerations may be considered. You need to be comfortable in being able to keep up with the mortgage repayments in unforeseen circumstances such as lengthy void periods or tenants defaulting on payments. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.


Choosing the right tenant for you

Deciding the market you wish to target can help determine the type of property you look to invest in. If, for instance, you are looking to invest in student properties, concentrate on sourcing apartments near the university or larger houses with multiple rooms that could be permitted to be a HMO with a good public transportation links. Alternatively, if you want to appeal to a family, consider local schools and amenities - choosing the wrong location or type of property may result in your struggling to rent it out to your target market.


Rental fees and other costs

Mortgage fees aren’t the only thing to consider when deciding whether property investment is for you - house insurance, general house repairs, and agent fees should all be taken into account. Using a local and reputable property management agency means they can advise on the average costs for similar property types in that area to ensure you get the best return on your investment.


Stamp duty and income tax costs

You will need to factor in a higher level of Stamp Duty Land Tax if your rental property would be a second home (in England or Northern Ireland) - to help you consider how much money you should set aside to cover these costs, use our stamp duty calculator. Once you have a paying tenant in place, you will need to let HMRC know and report your rental income to them each year, as tax will be paid on the profits generated.


Whether professional landlord or private speculator, property management is key to ensuring you get the best possible return from your investment. Find out more about our range of services offered here.

For more tips and tricks when renting out your home, you can browse our blog for further insight or follow us on Twitter, Facebook or Instagram for updates.

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