Becoming a landlord and renting out a property is a big decision, which can sometimes be challenging. People become landlords for many different reasons, some fall into it accidentally, while some will choose it as extra income or for a retirement fund. Here we look at the most common reasons that people let out their properties:
Renting out a property they have inherited
According to the UK Landlord Survey in 2021, 5% of landlords fall into renting because they inherited a property from a relative. With an ever-aging population, this figure looks likely to increase and by renting the property out, this can generate income to pay for repairs to a property that may be needed in order to sell at a later date when it has increased in value. Sometimes, a property has particular sentimental value, perhaps being a childhood home and some may want to keep the property in the family rather than sell it on.
Investing in a buy-to-let for additional income
In the same survey, 31% of landlords said they let their property out as a second source of income. The rent paid can cover the mortgage and any maintenance of the property and any money leftover after expenses goes straight into your pocket. This can provide some financial security by getting consistent monthly recurring revenue, as long as you have rent protection to minimise any risk.
Renting out while you wait to sell
Often, you may have made the decision to sell your house but aren’t ready for this just yet. You might not want to be in a chain if you find your dream home and need to proceed quickly on it, so renting your current property out could be an option. (However, you will need to consider there may be additional costs such as additional stamp duty.)
Renting can give you time to consider your options and make some income from it, instead of selling it for a loss, or making a rushed decision. You may have started a new relationship and decided to move in with your partner in another property, so to keep your options open, you may want to rent out your own property.
Becoming a landlord as a long-term investment
The rental sector in the UK is continually expanding with a sixth of the population now living in rented accommodation from private landlords. Landlords are seeing this as a means to fund their retirement or pension. Often investing in property allows you to invest the money without risking too much capital and the value of it will still increase based on the entire investment, which can result in a significant profit in the future.
It is worth noting that Buy-to-let mortgages work differently to residential mortgages. Typically, you’ll need a bigger deposit – of around 20-40% – because they are considered higher risk.
That’s because the mortgage payments are expected to be covered by any rent received, but there may be issues with collecting rent; or you may struggle to find a tenant. This is why the interest rates and fees tend to be higher.
It’s a good idea to talk to a mortgage broker like myself before you take out a buy-to-let mortgage, as we are well-placed to choose the deal most suited to your situation.
If you are thinking about becoming a landlord for the very first time, make sure you are prepared and read our blog post giving you advice on five main areas to help you in your property investment journey here!
At KB Mortgage Services, we can help find you the best deal and save you money over the term of your mortgage.
How KB Mortgage Services can help:
- Buy to let mortgages for investors
- Reviewing your current buy to let mortgages with remortgaging
- Mortgage protection insurance
Note: Your home may be repossessed if you do not keep up repayments on your mortgage. You may have to pay an early repayment to your existing lender if you remortgage. Second charge mortgages are arranged by introduction only.
Not all Buy to Lets are regulated by the financial conduct authority & we are unable to provide Inheritance or tax advice
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