Buy to Let Properties
What is a Buy to Let property?
A ‘Buy to Let’ property is a property that is purchased specifically for the intention of renting it out to tenants. It is an increasingly popular and attractive option for those looking for a long-term investment. However, there are practical factors you should be aware of if you are considering buying a second property.
Freehold vs Leasehold
The low prices of leasehold flats are an attraction to potential buyers, but your solicitor’s perusal of the lease might find some restrictions. For example, not all leases allow the flat to be rented out. Some will only allow the flat to be let out if the consent of the freeholder is obtained first, often for a fee. Some leases might require a fee to be paid each time a new tenant is found. This is something worth finding out from the start before you make your offer.
There are also additional costs of owning a leasehold property, such as ground rent and service charges. These long-term costs of ownership should be factored in when calculating your expected income.
Stamp Duty Land Tax
Stamp Duty Land Tax is a tax you pay to the government when you buy a property above a certain value. If you are buying an additional property, then the higher rates of stamp duty apply, with a surcharge of 3% on top of the standard rates. To see how much stamp duty you will need to pay, click here.
It is highly advised that you should consider financial advice because you may be required to pay capital gains tax and/or income tax.
Energy Considerations
One crucial factor to consider is the Energy Performance Certificate (EPC) rating for the property. It is no longer permissible to grant a tenancy, or to continue letting a property to an existing tenant, with an EPC rating of F or G.
There are upcoming changes in 2025 and the government are imposing stricter regulations. It has been proposed that by 2025, it will no longer be permissible to grant a new tenancy with an EPC rating lower than C, and by 2028, existing tenancies will also be affected.
Before purchasing a buy-to-let property, you should have the EPC assessed and firstly ensure that the EPC rating is E or above. To meet the new 2025 requirements, you should consider the work necessary to upgrade the EPC rating to C or above.
Mortgage
If you require a mortgage to fund your purchase, you will need a buy to let mortgage rather than a residential mortgage.
Buy to let mortgages often have specific conditions, such as requirements in relation to the types of tenancies and the types of tenants that are acceptable to them. There are formal notices which need to be served to protect the mortgage company in the event of repossession.
Potential Multiple Occupation Licences
There may be a requirement that the property can only be occupied as a single dwelling (for example, as a family unit). If you wish to rent a property with rooms occupied by unrelated people, such as young professionals or students, you will need a special house in multiple occupation (HMO) licence. If you wish to convert a single dwelling house to an HMO, you may need planning permission.
If this is something you are considering, you should speak to the local authority HMO officer immediately. Even if the property currently has an HMO licence, it cannot be transferred to you as a buyer, so you should make initial enquiries of the HMO officer.
Legal Obligations
As a landlord, you will have legal responsibilities and obligations to the tenant, including gas and electrical safety, fire safety, maintenance, repairs and more. These responsibilities do not end when the tenant moves in and continue throughout the tenancy.
It might be useful for you to use a specialist letting agent, who can manage the property and your responsibilities on your behalf. As, there are many pitfalls in landlord and tenant law, a letting agent would ensure that all bases are covered. However, remember that letting agents come at a price and typically take a percentage of the rental income.
If you would like further information or advice about buying a property to let, please contact Anthony, Karen, Michelle, Jodie or Sandeep on 01752 668246 or send an email by clicking here. Alternatively you can obtain an online conveyancing quote by clicking ‘online quote’ in the menu.
