Financing the property purchase

There are plenty of finance packages on the market designed specifically for buy to let – usually requiring at least a 15% deposit. Most lenders expect you to already own at least one property, and place as much importance on the likely rental income of the buy to let property as the income of the applicant, so make sure you've calculated the potential yield accurately (see above). An annual yield of more than 8% of the mortgage would be expected. For more advice on how to go about finding and using a professional company that provides buy to let finance, see this guide to Commercial & Buy to Let Finance.

What costs and responsibilities will I incur as a landlord?

Costs

As well as the mortgage/loan repayments, you may need to pay a letting agent to manage the property for you. Agents will charge between 5% and 15% of rental income depending on the comprehensiveness of their service – some offer income protection and specialist legal advice as well as the usual services of rent collection and client liaison. If you manage the property yourself you must factor in the cost of legal advice, for the drawing up of contracts or tenancy agreement, and maintenance and repair costs.

Minimising costs

Insurance is paramount – check that you are covered for high-risk tenants if you plan to let the property to students, multiple occupants or tenants in receipt of state benefit. These groups are often excluded by insurers. Also check that your buildings insurance covers damage due to fire, lightning, explosion, smoke, burst pipes, flooding, subsidence as well as theft and malicious damage. A particularly unlucky week could see the boiler pack up, the electrics need rewiring and the discovery of dry rot in the loft – by taking out comprehensive insurance you'll reduce those risks and enjoy more peace of mind.

Responsibilities You should also be aware of legislation relating to Health & Safety provision – check out The National Landlords' Association, a non-profit organisation with a nationwide membership of landlords which can offer advice. Membership benefits and services include a telephone advice line, information sheets on special topics, standard tenancy documentation and advantageous property insurance.