Buy-to-let for beginners: our top tips

Buy-to-let property represents a solid, long term investment that can generate real income both now and long into the future. With rental properties in high demand and recent findings reporting that UK rents have risen by 11% during the past year, becoming a buy-to-let landlord can be lucrative.

Thanks to support from our mortgage advisors, making that initial investment in the buy-to-let market and growing your portfolio is simple. But, as you’ll discover when pursuing your buy-to-let ambitions, purchasing and managing buy-to-let property can be a real minefield.

Making a sound investment in the buy-to-let market and generating a reliable income is possible, however, even if you’ve never purchased a buy-to-let property before. Here we share our essential tips for first timers so you can start out on exactly the right foot.

Understand the realities of buy-to-let investment

As we mentioned briefly in the introduction, purchasing and managing a buy-to-let property isn’t all sunshine and rainbows. You’ll be taking on a challenging role as a buy-to-let landlord and that’s if you can handle the stressful, time-consuming buy-to-let purchase process to get you there.

Due to recent government changes, investing in buy-to-let property isn’t as profitable as it once was. The attractive tax reliefs that once made being a landlord extremely lucrative are no longer as Which? explains:

“Since April 2020, you’ve no longer been able to deduct any of your mortgage expenses from your rental income to reduce your tax bill. Instead, you now receive a tax-credit, based on 20% of your mortgage interest payments. This is less generous than the old system for higher-rate taxpayers, who effectively received 40% tax relief on mortgage payments.”

With major tax advantages now off the table, the reality of being a buy-to-let landlord in 2022 is very different to what it was years earlier.

Consider investing through a limited company

There are many options to explore that will help you hold on to more of your rental income, one of which is setting up a limited company to purchase your first and subsequent buy-to-let properties.

By doing just that, you could potentially claim costs, like mortgage interest payments, as business expenses. Your rental income can also be drawn as more tax efficient dividends. Investing in buy-to-let property via a limited company however isn’t for everyone, that’s why it’s important to seek professional guidance.

Get advice from our mortgage experts

Whilst, in theory, the buy-to-let market is accessible to both first-time buyers and existing homeowners, first-time buyers may find the range of buy-to-let mortgage products a little more limited.

First-time buyers are considered riskier than applicants with proven track records of purchasing property and keeping up with repayments. But don’t be deterred, every buy-to-let landlord has to start somewhere!

Our independent, knowledgeable mortgage advisors have experience assisting first-time buy-to-let property purchasers and can help you too. We’ll look carefully at your circumstances to advise you on the most suitable products as well as offer essential advice on how you can improve your chances of obtaining a great buy-to-let mortgage deal.

Save a bigger deposit to bag a better deal

It’ll come as no surprise that you have to save a hefty deposit to secure a decent mortgage deal. Similar to purchasing a residential property, the bigger your deposit, the better your mortgage options. You may be surprised to hear however that you’ll have to save a deposit of at least 25% of the property price to secure a buy-to-let mortgage.

Taking the time to save more towards your very first buy-to-let property can really pay off, especially when reducing those monthly mortgage repayments.

Ready to get started? Speak to an expert today to discuss your buy-to-let mortgage options.

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