Buy-to-Let Investor Guide

Buy-to-let is a British phrase referring to the purchase of

a property specifically to let out. A Buy-to-Let mortgage
is a mortgage specifically designed for this purpose.

For many years landlords have invested in residential Seek professional financial advice
property to be let for profit, but due to the rent controls
Linley and Simpson can provide tax and mortgage
imposed during the First World War, arranging a
advice through independent finance sector specialists
mortgage to fund such a purchase was difficult. Since the
who - without obligation - will discuss with you ways
Housing Act 1988 introduced assured shorthold
of achieving your desired mix of rental income and
tenancies, mortgage lenders have been more willing to
capital growth.
provide finance. You can now apply for special buy-to-let
mortgages which allow you to include anticipated rental Decide what type of property and where to buy
income when calculating your ability to make repayments.
Some landlords feel reassured by only buying in areas
Rates for these are often lower than for commercial
that they know well whilst others are simply not
mortgages. Buying property to let as a long-term
interested in the geography, only in the financial return.
investment or to generate a regular income has become
Both approaches can work out well if youre open to
an increasingly popular option over recent years, and the
our advice. We wont claim to be able to predict every
demand from would-be tenants for quality rental property
new hotspot but we can certainly tell you where
continues to grow. The Council of Mortgage Lenders
major developers are active, where other investors
reported that as of Q3 2014 the Buy-to-Let market
are buying and where major new transport links or
accounted for 14.4% of all mortgage lending.
facilities are planned.
The key to success with Buy-to-Let is also choosing the
Linley and Simpson right property. If you are buying a property to let, choose
one that will appeal to the type of people who live in
Buy-to-Let service that area.

Helping you get it right For example, the main tenant market could be made up
Linley & Simpson have specialised in lettings for over two of busy professionals, single people or couples who may
decades and we have dedicated teams to manage all be looking for:
aspects of the property once you are ready to let, but a two or three-bedroom flat or house
where you can really take advantage of our expertise is in good transport links
the buying process. We can give you insights into the small or no garden
market and provide you with all the information you need
when making an investment. We can identify properties The Buy-to-Let section of Linley and Simpsons website
that would represent good Buy-to-Let opportunities, enables investors to search for properties that Linley and
provide potential rental values and give advice on Simpson experts have already vetted to be potential
demand and tenant profiles for properties. investment opportunities and offer a wide range of
properties and areas to consider. Potential rents are
This guide is intended to explain the process of buying- identified alongside each property for ease. Take a look
to-let, and the steps you can take to make it work for you. at some of the stock we currently offer - your ideal
It has been prepared to answer many of the most property could be sat there waiting, maybe even with a
common questions that arise when would-be landlords tenant already in place!
first consider investing.
Our Buy-to-Let advisors are available to offer more
specific advice and tailor property searches
1. Where do I start? to match your search criteria.
Decide your investment objectives
Be clear about what you can afford, and what you want to
achieve. If youre investing for retirement, your main
objective may be capital growth. If youre investing to
boost your income, the rent you earn may be more
important.
2. What are the risks in buying to let?
As with all investments, buying-to-let entails risks which
must be weighed against the potential gains. Rentals
and house prices may fall, while mortgage rates may rise.
Investors can minimise their exposure to some of
these risks by choosing property - and their Letting
Agent - wisely.
Although our strict referencing methods minimise the
likelihood of you experiencing problems with your
tenants such as non-payment of rent or refusing to vacate
the property, there is always a possibility that things could
go wrong. Unforeseen circumstances such as losing a job,
illness or relationship breakdown could mean that the
tenant is unable to pay the rent.
If you wish to protect yourself against this, Linley and
Simpson can offer our managed clients a warranty for just
3% of the monthly rent.

The cover includes:

Reimbursing unpaid rent for up to 12 months (first
month excess applies).
Paying your legal costs up to 50,000.
Free legal advice during the Tenancy
up to 50% of the rent paid for 3 months after vacant
possession is obtained
4. What types of Buy-to-Let mortgages are available?
What deposit will I need?
3. What does the percentage yield of a
When the Buy-to-Let scheme was first started by ARLA in
property mean?
1996, the choice of finance was quite limited. It is now
The yield of a property tells you how much of an annual possible to find capped and fixed-rate mortgages at
return you are likely to get on your investment. It is rates comparable with owner occupier mortgages.
calculated by expressing a years rental income as a The maximum loan you are likely to be able to raise is
percentage of how much the property cost. In other currently 80%- 85% of the value of the property. More
words, if the estimated monthly rental on a flat is 500, typically Buy-to-Let mortgages are available at 75%
the annual rental would be 12 times that, or 6,000. And if loan-to-value, so it is likely you will need to fund a quarter
the flat cost 100,000 to buy, then the yield would be of the property value. Most lenders will insist that the
described as 6%. Remember that this is the gross yield. property is let and managed by an ARLA Letting Agent
on an Assured Shorthold Tenancy agreement. Letting
The link below can help you make this calculation:
Agents who are members of ARLA (Association of
[Link] Residential Lettings Agents) adhere to professional
The net yield is after fees, repairs and running costs have standards that give lenders assurance that the investor
been taken into account. (Fees are likely to include Stamp will receive good advice and service.
Duty, solicitors and surveyors fees, and letting and The following link may be useful to give you an idea of
management fees). Running costs include such things as the maximum amount you can borrow with a Buy-to-Let
service charges, ground rents, and buildings and contents mortgage, but be sure to verify this information by way
insurances. Thats the bad news. The good news is that of independent financial advice.
rental income is taxed after expenses such as fees and
[Link]
property maintenance have been deducted.
The average annual gross yield on a buy-to-let property is
4.1% nationally, with Linley & Simpson averaging a rate of
6%; an average taken from our currently available Buy-to-
Let properties (April 2016).
How 1,000 put into buy-to-let 6. Property Appraisal

outperformed other investments At the earliest stage of your Buy-to-Let investment make
sure you contact your local Linley and Simpson branch to
Based on performance of 1,000 invested carry out an appraisal on the property you are looking to
between 1996 and 2014 buy. It is always best to get an independent appraisal on
the property and not just advice from the agent that is
selling the property. There are several reasons for this:
Buy-to-let with a 25% deposit mortgage
a. Over Valuation - the agent selling the property may just
14,897 tell you what you want to hear to agree the sale - dont
Buy-to-let cash buyers forget that the agent only gets a commission when a sale
is completed.
5,071
UK Commercial property 16.2%
Annual return on
As a dedicated Letting Agent who has moved into sales
our specialist lettings experience means we know what a
4,494 buy-to-let property realistic rental price will be, we wont just quote you
UK Government bonds bought with 25% happy to get the business - A property wont let if it is
deposit mortgage overpriced, costing you money in void periods.
3,329
b. Demand in the area - again we will be able to advise
Equities (FTSE All-Share index) on whether there is demand for the type of property in
3,119 question. As the largest independent Letting Agent in
Yorkshire our database of active applicants is always
Cash growing, resulting in us being able to give you a realistic
Source: Rob Thomas,
1,959 Wriglesworth Consultancy indication into the demand for your property.
c. Work to be carried out - we will be able to advise on
any work that will be needed to adhere
to legal requirements and also any work that will be
5. Why mortgage if I have enough cash? needed to achieve the best possible rent.
It could make sense to borrow most of the purchase price You may not need to carry out as much work as you think.
since all the interest you pay on your mortgage can be
deducted from your rental income, before you pay tax on 7. Preparing the property to let
it. By borrowing, you can increase your opportunities, Once you have purchased your investment property you
perhaps using the remaining cash to fund additional will need to prepare it to let. When people view your
property investments. Discuss this with your financial property, they will compare it to others available, so its
advisor or tax specialist. condition and appearance will affect both the rental value
The diagram below not only shows how Buy-to-Let and the speed at which it is let. In most cases, we have
exceeds other investments, but also how taking a found that there is very little difference in rental values
mortgage can be beneficial in increasing your returns. between furnished and unfurnished lettings. Our staff will
Every 1,000 invested in an average Buy-to-Let property advise you on the most appropriate option for your
purchased with a 75pc loan-tovalue (LTV) mortgage in the property. An unfurnished property would require carpets,
final quarter of 1996 would have been worth 14,897 by curtains and usually white goods
the final quarter of 2014, according to research by
Remember that first impressions count:
specialist lender Paragon. By comparison, someone
buying a Buy-to-Let property with cash would have seen wherever possible decorations should be light modern
and neutral - be prepared to re-decorate as necessary
each 1,000 invested grow to 5,071 by the end of 2014.
carpets need to be clean and neutral
The report also predicted Buy-to-Let returns would kitchens and bathrooms should be modern and well
presented with white bathroom suites ideally
continue to outperform other investments over the next
in general the property should be thoroughly cleaned
10 years.
and the rooms left neat and uncluttered
any gardens should be tidy and easily maintained
ensure that any obvious day to day maintenance is
dealt with prior to letting
8. Do I need a Letting Agent to let the
property I purchase?
There is nothing to stop a landlord acting without an
agent. However, there are many legal requirements that a
landlord has to fulfil and over 100 pieces of legislation
relating to tenanted properties; failure to comply with
these may result in criminal prosecution. Our staff are
trained to understand these requirements and advise you
of your obligations under safety regulations and we have
systems in place to ensure they are complied with. Linley
and Simpson also have facilities to properly vet a
potential tenant, allowing you to make the right choice.
Time will also be of the essence once you have
completed your property purchase and you will want
rental income to commence as soon as possible. Linley
and Simpson have a database of active applicants
currently in excess of 10,000 applicants across our 11
Yorkshire based branches. Your property will be
immediately matched and sent out to any suitable
applicants for consideration.
Not only do we have a constant supply of tenants actively
seeking a property but we have established contacts with
major local companies and relocation agencies, who have
a regular requirement for good quality accommodation.
We also operate the latest in computer software which - Preparing and arranging the completion of the Assured
automatically matches potential tenants to your property Shorthold Tenancy (AST) agreement and signing the
and emails the particulars to them immediately. document on your behalf. Renewing the agreement
where requested.
We take great pride in finding good quality tenants
quickly and will always look to match the tenants not only - Arranging for the drawing up of the inventory and/ or
with the property but with the landlord as well, so that all schedule of condition (excluding lofts and other
parties are comfortable with the tenancy moving forward. inaccessible areas). The inventory allows us to monitor
whether a tenant is looking after your property and to
9. What letting services do Linley and Simpson offer? assess whether any of the security deposit should be
retained for repairs or dilapidations.
The majority of our clients choose the Letting and
Management option, as this provides a complete service - Collecting a deposit from your tenants, which will be
from start to finish, offering you peace of mind and the held in accordance with tenancy deposit regulations.
satisfaction that your property is in capable hands. Our The deposit is usually equivalent to 1.25 x the
comprehensive tenancy agreement will make sure that monthly rent.
your interests are protected in line with current
- Notifying the Council Tax and Water Authorities of the
legislation.
change of occupier and reading gas and electric
Our Letting and Management service will include: readings at the commencement of a tenancy

- Advice on your responsibilities as a landlord including - Collection of monthly rents with payment to you within
repair and maintenance obligations, gas and electrical 9 working days less any fees or expenses due or incurred
safety and fire safety of furnishings. for the period. Payments made by direct bank transfer.

- Accompanied viewings with prospective tenants - Preparing and sending rent statements outlining income
and expenditure
- Dealing with applications and taking up references for
prospective tenants including employers, current - Issuing rent demands for late payments and notifying
landlords and a credit reference agency search where you as appropriate of rent arrears
appropriate. (Please note that although we endeavour
to ensure that the tenant is suitable and an acceptable
risk, we cannot guarantee this).
- Visiting the property at regular intervals to ensure
tenants are fulfilling their obligations under the terms of
the tenancy and providing you with a written report. The
checks also help us highlight whether any maintenance
work is required to keep your property in good order.
- Responsibility for the day to day management of your
property which may involve arranging for general repairs
or maintenance to be carried out.
- Working to reduce void periods. Most agents will ask for
tenants to give 1 months notice when they are looking to
end the tenancy, as a company we ask for 2 months
notice. This allows us to market your property for an extra
month, reducing the risk of your property standing empty.
- We have a dedicated renewals department who actively
work towards renewing tenancies, again reducing the
risk of void periods.
- At the end of a tenancy, The full inventory and schedule
of condition are checked to assess whether the tenant
has maintained your property in a satisfactory condition.
If it is found that there are items that are not up to
standard then these areas will be costed and deducted
from the tenants security deposit - subject to statutory
deposit regulations
Other services are available on request. Please also
remember to ask about our rental protection if this
would be of interest.
Stamp Duty- this is a tax you will have to pay when you
10. Costs summary purchase the property.

- Deposit if youre funding your purchase with a Income Tax- Tax is payable on the profits you make from
mortgage you will still need to find a deposit from letting your Buy-to-Let property. Its normally calculated
elsewhere. Typically you will need to fund a quarter of on the gross annual rental income, less any allowable
the property value. expenses incurred as a result of renting out the property,
- Arrangement Fee this could be up to 3.5% of the as well any other allowances that youre entitled to. If you
amount borrowed. It can usually be added to your lose money in any one year, you should be able to carry
mortgage, which means you will pay interest on it, but the loss forward and set it against profit you make in
can normally be offset against your tax liability. subsequent years. As a landlord, youll have to submit
- Mortgage costs. Mortgage interest payments are likely your rental income on your tax return, so its vital you
to be your largest ongoing costs. keep detailed records of the rental payments you receive
as well as all the expenses you incur. Its standard practice
- Insurance (Buildings and Contents) as a minimum.
for a landlord to employ an accountant to ensure HM
Specialist buildings and contents insurance
for landlords is essential. Revenue & Customs are properly advised and to make
sure that all allowable expenses are identified so you can
- Repairs to the property and contents unless it is
offset them against your profit. Although using an
caused by the tenants
accountant will cost money, the fees you pay for the
- If leasehold ground rent and service charges service will be tax deductible, and the help youll receive
- Managing agents fees could easily save you money in the long run.
- When the property is empty utilities and services. Expenses which can normally be deducted from your
- Other costs will include legal fees, stamp duty land income to calculate your profit include: utility bills,
tax and a survey fee. insurance, maintenance and repair (but not
improvements), professional fees, cost of services like
cleaners and tradesmen and other expenses such as
11. What about tax? advertising for tenants.
There are several taxes you may need to take into
consideration:
 Capital gains tax - you may have to pay this when you
sell the property if the value has increased significantly
over the period of ownership. If you sell it for less than
there is no capital gain and so no tax due. There is an
annual tax-free capital gains allowance of 11,100 for tax
year 2015/[Link] are a number of expenses you can
deduct to reduce the overall capital gain. Namely
Solicitors fees, Stamp duty, Estate Agents fees and any
loss made on the sale of another Buy-to-Let property the
previous tax year.
Inheritance Tax - property assets will form part of your
estate so you should talk to your adviser about tax
planning.

Maximise your investment

with Linley and Simpson
Why choose us?
Specialised Buy-to-Let Advisors
Coverage of all core potential investment areas
Expertise of staff across 11 branches offering unrivalled Linley and Simpson are proud to be members of the
knowledge of the private rented sector in Yorkshire National Approved Lettings Scheme (NALS), the Property
Largest portfolio of managed properties in Yorkshire Ombudsman Scheme for Residential Lettings and ARLA.
allowing us up to date, inside knowledge of market We are also registered as a SAFE agent. This means that
trends our practices and client accounting systems are fully
regulated which in turn means that we are accountable
Access to Buy-to-Let properties offered for sale by and your money is protected and insured. This all offers
current landlords. you complete peace of mind that your interests are
Specialising in professional letting means we attract protected and your property and tenants are being
good calibre, low risk tenants. handled professionally.

Letting is easy with Linley & Simpson

[Link]

Branches across North & West Yorkshire

This Guide is written by the estate agent Linley and Simpson. All advice contained herein is offered in good faith, and readers
who choose to act upon it do so at their own risk. Linley and Simpson accepts no responsibility for any action taken, or loss
occurring, as a result of any advice/information in their Guides.

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