investing in buy-to-let mortgages as first-time btl buyers with already a mortgage

Buy-to-let mortgage for first time buyers

Are you thinking about stepping into the world of property investment? Buy-to-let mortgage for first-time buyers help you get on the investment ladder with a rental property, but before you dive in, there are a few basics to cover. That’s the purpose of this guide, which has what you need to know about investing in buy-to-let for the first time. 

Understanding the dynamics of buy-to-let

Buy-to-let investment is a popular strategy among investors in the UK. It sees you purchase a property with the intention of renting it out to tenants, an approach that’s often considered appealing due to its potential for dual income streams. 

It can generate a steady flow of income through regular rental payments, which provide a consistent return on your investment. Plus, there’s the potential for capital growth over time as property values increase. This can significantly boost your return when deciding to sell.

The UK’s robust housing market and strong demand for rental properties also make buy-to-let a potentially lucrative investment avenue. Additionally, being a landlord can feel like a rewarding experience, as you’re a provider of quality housing for tenants.

Buy-to-let investment also lets you diversify your investment portfolio if you have other investments, giving you a potentially effective way to spread risk. With careful planning and management, buy-to-let can be profitable, whether you end up buying one property or several. 

Conduct market research

It’s unlikely that you’ll make a successful venture into buy-to-let if you don’t do the research first. So start by analysing which factors can influence the profitability of your investment.

The first step is identifying areas with strong rental demand. Factors driving this could be proximity to universities in the case of student tenants, or access to employment hubs for young professionals. Families, on the other hand, will look at the availability of schools and family-friendly amenities.

Also think about the type of tenants you want to attract. Different tenant groups have different needs and preferences. Students often look for affordable, shared housing close to their university. Young professionals desire modern, well-connected properties with easy access to work and amenities like the latest restaurants and bars. Families are more likely to prioritise space, safety and a sense of community. 

Approaching lenders directly allows you to ask specific questions about the remortgage products they offer. But with fully digital lenders like Molo, you can enjoy a personalised experience tailored to your remortgaging needs. 

75 LTV mortgages

  • Borrow up to 75% of the property’s value
  • Get a mortgage as an individual or limited company
  • An online mortgage application that takes place entirely online.

Financial considerations

Affordability is a key factor in any buy-to-let investment. The average UK property price is £286,000, while London averages are even higher at more than £530,000. Therefore, you’ll likely need a substantial deposit if you’re getting a buy-to-let mortgage. 

The amount required can vary, but it’s typically larger than for a residential mortgage, often around 25% of the property’s value. Although, here at Molo, we offer buy-to-let mortgages starting from 85% loan-to-value (LTV), meaning you need a 15% deposit. 

Ideally, you should work out the rental yield. Investing in buy-to-let property is typically a long-term strategy, and like any investment, it should generate a profit or “yield”. For instance, if you purchase a property for £150,000 and it brings in an annual rental income of £7,500, your yield is 5%.

However, there are other costs to consider, including stamp duty, which is a tax on property purchases, and solicitor’s fees for handling the legal aspects of the transaction. You may also incur agency fees if you use a letting agent to find tenants or manage the property.

You’ll also need to budget for maintenance costs to keep the property in good condition, as well as building insurance to protect your investment. If the property is a flat in a larger building, you may also have to pay service charges and ground rent.

Property prices and rental incomes can also fluctuate. Providing excellent service to your tenants can encourage them to stay longer, leading to a more consistent rental income as you won’t need to continually find new tenants.

Choosing a buy-to-let mortgage

Even if you are already a homeowner with a residential mortgage, getting a buy-to-let mortgage is a different experience. Selecting the right buy-to-let mortgage will be central to your plans if you’re not buying outright. 

Consider aspects like the mortgage’s interest rates, associated fees, and specific terms and conditions of the loan. You’ll also want to make sure that you meet the lender’s eligibility requirements. Getting a buy-to-let mortgage is one of the most common ways to fund a buy-to-let purchase, so it’s important to have everything organised before getting started. 

Keep on top of legislation and legal obligations

As a landlord, you’re bound by certain legal obligations and regulations. One of your primary responsibilities is to ensure the property you’re renting out is safe and fit for habitation. As a general rule of thumb, you’ll need to adhere to the following rules and regulations:

  • Maintain the property in a good, liveable condition.
  • Conduct safety checks on an annual basis.
  • Properly handle any deposits paid by your tenants.
  • Have procedures in place for rent recovery or tenant eviction in case of issues.

It’s also important to keep on top of new changes to regulations. One prime example is energy performance certificates (EPCs). Previously, landlords didn’t need to concern themselves with the EPC rating. Under new rules, however, landlords must ensure their properties have a minimum Energy Performance Certificate (EPC) rating of E. 

Future plans are also in place to raise the minimum EPC rating to C for all tenancies by 2028. An increasing number of landlords are opting for green initiatives in their buy-to-let properties to safeguard against future legislation and also appeal to a growing tenant demand that wants to live in more energy-efficient homes.

In addition to this, you should familiarise yourself with specific laws such as the Tenant Fees Act. It places a cap on the fees you can charge tenants for various services, with the aim of making renting fairer. Understanding and adhering to these regulations is a legal requirement and acts as a way to build trust with your tenants while maintaining a positive landlord-tenant relationship.

What are the risks involved with buy-to-let?

Like any investment, investing in buy-to-let property comes with its share of risks. Market conditions are subject to change that can impact property values and the demand for rental properties. Economic downturns, changes in local infrastructure, or shifts in population can all affect the profitability of your investment.

Tenant-related risks are another factor. As a landlord, you should expect some void periods that can disrupt your rental income. Many landlords save at least a month’s worth of rent to safeguard themselves against a temporary empty property. 

You should also consider maintenance issues. Properties require ongoing upkeep, and unexpected repair costs can arise, be it a broken boiler or a leaky roof. These can significantly impact your return on investment if not budgeted for.

Final thoughts: covering all bases

Investing in buy-to-let can be a profitable venture, but it’s important to do your research and understand what you’re getting into. Considering your financial situation, the market conditions and legal obligations is a good place to start as you begin your buy-to-let journey. 

Ready to explore your buy-to-let mortgage options? Check out what Molo has to offer with a range of mortgages for first-time landlords looking to get on the buy-to-let ladder. 

75 LTV mortgages

  • Borrow up to 75% of the property’s value
  • Get a mortgage as an individual or limited company
  • An online mortgage application that takes place entirely online.

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