How Much Money Do You Need to Buy a Buy to Let?

Written By PropertyLoop
February 16, 2021
Buying an investment property to rent: PropertyLoop

Do You Need a Bigger Deposit for a Buy to Let Mortgage? 

Perhaps one of the most significant obstacles for a landlord to overcome is the deposit for their buy to let mortgage. Banks will view a buy to let product as a far greater risk than a standard residential mortgage, something that is reflected in the amount an aspiring landlord will have to provide for the deposit. Whilst an owner may only be expected to put down a deposit of around 5% for a residential mortgage when it comes to a buy to let providers will often demand deposits as high as 30% of the property’s value.  

How Much Is an Arrangement Free on a Buy to Let?

Typically, when shopping around for the best buy to let mortgages the providers that will offer the most attractive interest rates may serve the heaviest arrangement fees. This fee will only be around 5% of the loan’s value and will not be treated a separate payment, instead be charged within the loan and charged upon completion.

Can I Buy to Let as a First-Time Buyer? 

Whilst it is far less commonly seen, it is possible for a first time buyer to obtain a buy to let mortgage and have their first steps onto the property ladder be taken as a landlord. This is not to say that the process will be easy, as mentioned owners that wish to take out a buy to let mortgage will typically be able to offset this upfront cost through the equity in their home, something unavailable to first time buyers. Not only that but with a mere fifth of providers offering buy to let loans to first time buyers, options may be slim at best. 

Buy to Let mortgage tax relief 

Rental property owners are no longer able to enjoy the same generous tax relief on their buy to let interest payments as in previous years. Moving forward landlords will only be able to offset 20% of their annual buy to let interest payments, leaving many paying more tax as we move into a new financial year.

Buy to Let Stamp Duty   

When a rental property is purchased the owner must pay stamp duty. The amount of stamp duty that must be paid will be dictated by the market value of the property, with higher values demanding an increased rate of stamp duty. Similarly to Council Tax, there are different bands of stamp duty that must be paid, providing that value of the property is above £40,000. Properties that have been purchased to rent will be required to pay an additional 3% in stamp duty. 

Do I Have to Pay Letting Agent Fees?   

Traditionally when starting the search for tenants owners have turned to high street letting agents and their online counterparts, seeing landlords pay fees for marketing, administration, referencing and more. Not only does this turn finding an occupant into a race against mounting fees, but sees agents take a slice of your rental income each month, or place a premium on their service.  

With PropertyLoop landlords are given everything they need to find a tenant, establish and maintain their tenancies all without paying any commission. Properties are listed across all major online letting sites, presenting your unique rental opportunity to a pool of verified renters. Owners can also enjoy tenant referencing, deposit registration, tenancy agreements and rent collection all for free; saving landlords thousands in fees each year! 

How Much Does Landlord Insurance Cost?   

The amount a rental property owner can spend on insurance will not only vary between providers, but on the amount of cover the landlord wishes to take out. Typically speaking landlords will choose to not only have buildings insurance, as this is commonly made a condition of their buy to let mortgage, contents insurance and liability cover.  

What Is the Average Profit on Rental Property? 

It is generally accepted that if landlords are able to gain a rental yield of around 7% then they will receive a good return on their investment. Having said that there are a number of factors that can influence the amount of profit a landlord can make on their rental property. Whilst all owners will understand the importance of location when demanding a premium for your rental property, demand for rental opportunities is also key. How long are properties being advertised by competing landlords in your area? This will be the simplest indication of current demand in your area.  

It is also essential for landlords to understand that their rental income will not only need to prove them with a good return, but cover the costs of mortgage payments, management fees, advertising costs and repairs! 

Why continue paying thousands each year in commission to let your property? With 97% of landlords recommending our services, and with over 50,000 tenants joining our rental community in the last year alone PropertyLoop is welcoming a new era of renting.

The PropertyLoop platform establishes the trust, transparency and personal service that has been lost from the renting sector. We are anything but another faceless corporation looking to profit from your investment, but a community founded on expertise and ambition.

We offer landlords complete clarity on available specialists through a landlord controlled rating and review system, giving users complete confidence of your PropertyPro’s proven results in finding owner’s ideal tenants faster.

With PropertyLoop landlords will have everything they need to let out their rental from start to finish, with no hidden fees, financial barriers or catches; only a revolutionary new way to let.

Buy-to-letLetting AgentsMortgage

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