Buy to lets and being a landlord
Stafford Financial Services is your trusted broker in building and managing a successful buy-to-let property portfolio. Whether you're a seasoned landlord or looking to venture into the world of property investment, we're here to provide expert guidance every step of the way.
What is a buy to let?
A buy to let (BTL) is a type of property investment where the buyer purchases a property with the sole purpose of renting it out to tenants. This investment strategy can provide a steady stream of rental income and the potential for long-term capital growth.
Navigating the complex landscape of buy to let mortgages requires expert knowledge and industry insight. A mortgage broker acts as your advocate, scouring the market to find the best mortgage deals tailored to your specific needs and financial goals. From securing competitive interest rates to ensuring compliance with lending criteria, our expert brokers will help you maximize the potential of your property portfolio.
The Financial Conduct Authority does not regulate most Buy to Let Mortgages.
Managing and expanding your property portfolio
For landlords looking to manage and expand their property portfolio, strategic planning is essential. This includes conducting thorough market research, identifying high-demand rental areas, and maintaining strong relationships with tenants. Additionally, landlords should regularly review their portfolio's performance, consider property refurbishments or renovations to increase rental yield, and explore opportunities for portfolio diversification.
Landlords must carefully consider various factors when renting properties, including tax implications, ownership structure (personal name vs. limited company), and affordability assessments by lenders. We always recommend landlords seek tax advice as how you own and manage your property portfolio can make a real difference between making and losing money in property.
Looking to become a landlord?
For those looking to enter the world of property investment, we offer a step-by-step guide to obtaining a buy to let mortgage. This includes assessing your financial situation, understanding mortgage criteria, and gathering necessary documentation. Our experienced brokers will walk you through the process, ensuring a smooth and seamless experience from application to approval.
MOST BUY-TO-LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY
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What to consider as a landlord
Tax advice
We recommend all landlords should seek tax advice. Ensuring you get the most from the rental income and utilising the tax structures available is essential for a profitable portfolio. Cautious planning in the short term leads to long term financial success. Stafford Financial Services can put you in touch with a specialist tax adviser who can discuss your circumstances in detail, and create a tax efficient plan to become a successful landlord.
Personal or Ltd company ownership?
How HMRC assesses rental income changed from 2017-2020 meaning rental income forms part of your personal income, which could put you to a higher rate of tax, resulting in a bigger tax bill. This can have a detrimental effect on profits for your portfolio.
A professional landlord should consider owning your properties through a limited company. This can future-proof your portfolio and provide potential tax benefits, of course tax advice is strongly recommended to ensure this is the right solution for you.
Mortgage lenders commonly want the ltd companies to be set up for the sole purpose of buying and managing rental properties. This is called a Special Purpose Vehicle (SPV). Our mortgage brokers are very knowledgeable in these types of mortgages and can guide you through whether this is the right solution for you.
Lenders assessing BTL affordability
Instead of lenders assessing your income and outgoings to understand how much you can borrow on a property, for buy to let mortgages, they base affordability on the rental income the property will achieve. This is stress-tested to ensure the rental covers the monthly mortgage payments at a certain interest rate, usually much higher than the rate you apply for, to prove it's sustainable should rates increase.
Lenders will still assess you as a individual as part of the mortgage application process, and some can look to use personal income to support higher borrowing should their calculations fall short of the borrowing required. However, the rental income should be able to cover the cost to you as a landlord, and that is what lenders want to see.
Your tax status will also affect the lender's affordability assessment on borrowing as the higher tax band you are, the tighter the affordability assessment.
Are you considered a portfolio landlord?
Do you have multiple rental properties? Lenders typically define you as a portfolio landlord if you have 3 or more mortgaged buy to lets.
When you fall into this definition, mortgage lenders may assess your application in a different way and can have specific mortgage products. Not only will they assess the property to be mortgaged on the application, but they'll assess the profitability and sustainability of your whole portfolio. Lenders need to be responsible and ensure you're not in danger of losing money with how your property portfolio is set up and currently running.
It's essential you regularly review your portfolio, understanding any changes which may affect you and your properties, and have professionals on-hand to provide the right advice and guidance. Our expert mortgage brokers deal with many portfolio landlords and will help provide the best solutions tailored to your circumstances.
Specialist buy to lets
When it comes to buy to lets, you may think about a standard house or flat being let on one tenancy agreement to one household. However, there are alternative solutions within the property world which can offer opportunities to you as a landlord.
House of multiple occupants (HMOs)
A HMO is generally defined as a house share or flat share which is let out to three or more tenants who come from separate households, and share amenities such as the kitchen & bathroom. These types of lettings may require certain licences and have additional legal requirements, and a lot of lenders would want you to be an experienced landlord before applying for this type of mortgage.
You're less likely to have rental voids on a HMO property because you let out each room individually on separate tenancy agreements, so it's less likely all rooms will be vacant at once. There is also potential for a greater return on investment than letting the whole property to one household.
However there is also the risk that you could have high turnover in tenants, and there are costs for specialist insurance, fees & specific mortgage products. It's important to factor in all these considerations and obtain the right advice before becoming a HMO landlord.
Holiday lets
Holiday and short term let properties are designed usually for rentals in tourist & holiday hot-spot locations where tenants would be living there for a short period of time.
The benefit of these is during peak season, much more income can be generated than a long-term standard buy to let. Some lenders can also allow you to use the holiday let for personal use a few times a year.
Of course, you need to be mindful that there can be periods of rental voids, or less rent being charged during off-season, so careful planning is required to maintain a steady profit throughout the year. Lenders manage affordability by looking at the projected average rental, including peak and off-peak season, and may require you to have a minimum income to support running costs.
Let to buy
Thinking of moving but want to keep your current home? Why not consider letting it out!
A let to buy mortgage is designed for this exact solution. Depending on the equity and rental affordability on your property, you can also raise mortgage borrowing to support your new home purchase. There are great benefits by doing this, including generating a passive rental income stream, and future benefit from long-term property price increase.
Having an additional property does come with stamp duty and tax implications, so please consider these and obtain financial advice to fully understand the costs involved.
As the transactions of buying your new home and letting out your existing property are simultaneous, getting the right advice for the right mortgage is essential. It can be stressful trying to juggle all the different parts of the transaction, so our comprehensive and managed service is designed to ensure the process runs as smoothly as possible to support and help you.
Refurbishment buy to lets
Before letting the property out, there may be incentives to renovate and refurbish the buy to let as this could improve the amount of rent charged and value of the property.
Whether it's purchasing a property at auction that needs some tender, love and care before it's ready for the market, or adding extensions and features to attract higher profits, there are mortgage solutions available to cater for these requirements.
Standard buy to let lenders will assess the property in it's current state, which can cause problems lending should you want to base borrowing off the projected improvements. Specialist lending look at the project plan and the desired outcome. From light refurbishment to bridging finance, specialist lending options could give landlords the opportunities to generate wealth on properties with great potential.
