The rental market is full of opportunities, especially if you ask the right questions.
Some of these questions are for estate agents or your friendly mortgage broker, while others are for you to ask yourself. Getting an idea of the property you want to invest in and asking the right questions to the right people will help you make the best decision when buying a rental property.
It will also help you step back and see the bigger picture before making any decisions.
Keep reading as we explore what to ask when buying a buy-to-let property – and remember to bookmark this tab for later!
How to prepare yourself when buying a buy-to-let property
Whether you’re a first-time buy-to-let purchaser or a seasoned pro, investing in property is a big commitment. You should consider investment costs, how much rent you’ll make, challenging markets, and tax implications.
As well as asking the right questions, here are some other ways you can prepare before buying a buy-to-let property:
- Keep an open mind when searching for BTL properties (locations, property type, etc.)
- Get clued up on property tax (Income Tax and Capital Gains Tax)
- Work out your budget and potential costs (deposit, purchase price, mortgage payments, maintenance costs and annual costs, Stamp Duty, legal fees, and insurance)
- Check your credit score (a good credit history can get you a better mortgage deal)
- Research the local area, property market, and your legal duties as a landlord (tenancy agreements, deposit schemes, safety regulations, etc.)
- Decide whether to purchase a buy-to-let as a limited company
- Speak to an estate agent and an experienced buy-to-let mortgage broker
Questions about the buy-to-let property
Here are some questions you should ask local agents when looking at a buy-to-let investment.
Is this property currently an investment property?
It can be a good idea to play it safe and purchase a property that’s already used for investment, such as an existing rental property. You may even be able to buy it with existing tenants. This gives you immediate rental income, which helps to cover the mortgage payments.
Purchasing an existing investment property can be a faster route into the BTL property market as it cuts down on time spent researching as well as renovation costs.
You’ll ideally want to look for a property that has a high rental yield and good capital growth.
It’s important to note that taxes apply to property investments. You may have to pay tax on rental income and if you do sell the property down the line, you’ll also have to pay Capital Gains Tax.
Why are the sellers selling?
It’s always important to find out why a property is on the market in the first place. Understanding the seller’s motivation gives you an advantage when it comes to price negotiations and timescales. It can also help you avoid unwanted issues with the property, such as costly repairs or issues with neighbours.
You can ask the estate agent questions about the seller’s motivation (why they are selling the property) and how much interest the property has. It will help you understand your position and whether there are any concerns, such as previous failed sales.
What is the EPC rating?
Energy performance ratings significantly impact a property’s rental potential. A poor energy efficiency rating means higher energy bills. It’s not only less appealing to tenants, but it may also breach the rules on minimum energy efficiency standards for properties in the private rented sector.
Properties with high EPC ratings are cheaper to run, which is generally more appealing to tenants.
Is this property in a chain?
Finding out if the sellers are waiting to buy their own property will help you avoid long delays. It may also help you negotiate a better deal if you can show the sellers you are flexible and prepared to act quickly.
If you’re eager to speed things up, you may want to look for properties without a chain.
Is the property freehold or leasehold?
Freehold properties give you complete ownership of the property and the land it’s built on until you decide to sell it. You’ll have more flexibility in what you can do with the property, and you won’t have any additional fees to consider.
Leasehold properties are slightly different. You’ll occupy the property for a specific period (usually around 100 years), and you may be restricted on what you can do with the property. You’ll only own the ‘unit’ you purchase, not the surrounding land or common areas. Leaseholds also come with additional costs, such as ground rent and annual service charges to keep these areas intact.
Questions about the area
Tenants’ expectations rise year after year, and in addition to wanting a nice living space that is energy efficient and homely, a safe area with good local amenities is also appealing. Take a look at what you should research about the local area you want to invest in.
What is the rental market like in the area?
When investing in BTL property, you want to pick an area with good rental demand and low vacancy rates to ensure you make a profit. Researching the area will help you understand the market better and determine whether your property will likely benefit from increased rental income or capital growth over time.
What is the average rent in the area?
Understanding the average rental yield for similar properties in the area will help you manage your budget and set realistic expectations for potential returns. You can use sites like Zoopla or Rightmove to get a rough idea of how much rent similar properties are making.
Is the area safe?
Properties in unsafe areas are usually less desirable to tenants, which can lead to potential void periods or lower rental yields. Finding a property in a safe neighbourhood with low crime rates is important. Not only does this make your property more desirable, but it helps you find tenants who will stay for the long term.
You may even think about choosing a property close to where you live, as you’ll have a better idea of the neighbourhood and local market.
What is the demographic of renters in the area?
Understanding the demographics of tenants in the area will help you decide how much rent to charge and what type of property to invest in (e.g., HMO properties, holiday lets, family homes, and so on). You can tailor the property to your target tenants to gain interest and reduce the chance of void periods.
Questions about costs
These questions will help you work out your budget and cover costs.
How much will it cost to make the property renter-friendly?
Some properties require little to no work, while others may need a lot of renovation to make them suitable for tenants. Knowing how much money and time you’ll need to make the property renter-friendly will save you hassle in the long run.
An independent survey will tell you everything you need to know about the property and the land surrounding it. From here, you’ll be able to make an informed decision on whether the initial costs are worth it for the potential return on investment. It also helps you avoid uninhabitable properties and severe issues.
Will you be using a property management agent?
Agents can take the weight off your shoulders by handling your property investments for you. They will take care of tenant screenings, rent collection, disputes, maintenance and repairs, and they understand landlord laws and regulations.
What will the legal fees be?
When purchasing property, you’ll usually have a handful of legal fees, such as solicitor fees, Stamp Duty Land Tax, Land Registry fees, conveyancing searches, and mortgage fees.
How much will the legal fees be?
It’s important to budget for any additional costs and legal fees. Ask around and compare quotes to find the most cost-effective solution.
How can Simmonds Mortgage Services help buy-to-let investors?
Sometimes, all you need is the help of an experienced buy-to-let mortgage broker. Whatever your situation, we’ll find a tailored buy-to-let mortgage solution that works for you. Simmonds Mortgage Services has access to the whole market, including high-street lenders and private specialist lenders.
Originally I tried to sort it myself, but kept running into walls. Using a broker makes the process far simpler. (I’m self employed and wanting to remortgage to withdraw cash to purchase some buy to lets, both points which caused issues with many lenders) Using Simmonds mortgage services made it a breeze, as they have the knowledge of which lenders suit which circumstances, extremely happy with the service 👍
If you are looking to purchase a buy-to-let property, give us a call today on 01184 693 037 or book a meeting with an advisor, and we’ll get the ball rolling for you.
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