Looking to become a property investor? Look no further – in this blog, an established property investor answers the top questions we hear from first-time landlords.
Many people want to invest in property, but knowing where to start can feel overwhelming!
Buy to let Mortgage Consultant and landlord Deepinder Bhangoo answers the most frequently asked questions we hear from people taking their first steps on their landlord journey. A property investor himself, he offers top advice from his own experiences.
What is an investment property?
An investment property is purchased to earn a return on the investment either through rental income, the future resale of the property, or both. This can be a buy to let, semi-commercial or commercial property.
Which types of investment properties should I focus on?
If you are a first-time landlord looking to get started, then I would advise looking for a standard ‘vanilla’ property to let to a family. There are a number of different property types that will be considered ‘vanilla’, such as flats, terraced or semi-detached family homes, as they’re easier to mortgage and manage. Bungalows, maisonettes, and detached houses will also fall into this category.
Once you get more landlord experience, you can invest in properties that generate higher yields and returns, such as HMOs or Multi-Unit properties. Most mortgage lenders typically need you to have at least one year’s experience as a landlord before offering mortgages on these more complex property types. That being said, there are some lenders who will offer mortgages on complex properties to first-time investors. Speak to one of our experts to explore what products you could access.
Do property investors pay tax? And if so, what tax will I be liable to pay as a landlord?
Yes, property investors pay tax on their rental income. If you choose to invest via a Limited Company, then you pay corporation tax instead of income tax. For landlords in the higher tax bracket, this can mean that it’s more tax-efficient to invest via a Limited Company than in their own name.
It’s essential you speak to a professional tax advisor before making any property investment decisions.
Can I live in my investment property?
If the property is purchased with a buy to let mortgage, then you cannot live in it. If you do, you will most likely be in breach of your mortgage terms and conditions and may face heavy penalties or fines. If you want to live in your buy to let property, speak to your broker, who can review your mortgage T&Cs and explore your options with your lender.
What are your top 5 tips for new property investors?
With so much information available online, it can be hard to know what to focus on when starting out as a property investor. My top five tips to help you are:
- Shortlist buy to let hotspots and your desired location. Zoopla and Rightmove conduct quarterly reports that often highlight the areas where rental yields are increasing most.
- Do thorough research about the area (e.g. how much demand is there for rental properties and what type of tenants are interested in the properties you are considering).
- Look at the numbers carefully and calculate the net yields by considering all expenses.
- Do not put all your eggs into one basket; you should aim to grow your property portfolio into a diverse mix of property types.
- Ensure you’re making informed property investment decisions. The best way to do this is to work with an experienced mortgage broker (like us) who thoroughly understands the market.
Why work with a broker as part of your property investment journey?
Working with a broker for your property investment journey has many advantages. Some of the main benefits of working with a broker include:
- A stress-free process, as your broker can take on the hard work for you.
- Working with a whole-of-market broker like MFB means you have access to deals that you can’t get as a borrower directly.
- We have established relationships with key lenders who often offer us semi-exclusive product ranges.
- We have dedicated underwriters and BDMs at some of the key lenders, meaning we can discuss your case with a person to progress your application.
- A good broker will give you the right advice based on your individual circumstances.
How do I get started?
To see how much you can borrow, explore your mortgage rate options, and get expert advice, speak to one of our friendly mortgage brokers.
With our whole-of-market access and experience across all areas of property finance, you can be confident that you’re getting the best mortgage deal to suit your needs.
To get started, call us on 0345 345 6788 or submit an enquiry here.
