Mortgage expert Andrew Milnes on all you need to know when purchasing a buy to let property

The buy-to-let market has seen its share of changes in recent years. While some headlines might paint a picture of a struggling sector given the current economic climate and rising rental costs, there are still strong arguments to be made for its potential as a longer term investment strategy, as opposed to short-term.

Ideally, a well chosen buy-to-let property will see its value appreciate over time, while also generating rental income that covers mortgage payments and potentially provides additional profit.

Where the tenant pays down the mortgage through rental payments, you as the landlord would benefit not only from your debt being reduced but also hopefully from the value of your buy-to-let property increasing.

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Nevertheless, the buy-to-let mortgage market hasn’t been without its hurdles. Additional Stamp Duty on non-primary residences, the removal of tax relief on mortgage interest payments, and despite the new Energy Performance Certificate guidelines being kicked down the road by the current government, these things have all presented challenges for landlords.

Andrew MilnesAndrew Milnes
Andrew Milnes

In more positive news, some of the properties in Yorkshire with issues that we’ve previously encountered when arranging buy-to-let mortgages are starting to be resolved.

For example, fire safety remedial works are now being completed on certain apartment blocks, making them mortgageable again. However, rising service charges remain a concern for many, highlighting the need to be fully aware of any potential drawbacks before diving in.

These factors highlight the importance of undertaking thorough research, not just on your mortgage options, but also on the property you wish to buy and its location.

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Consulting with a mortgage broker who is experienced in buy- to-let and a letting agent who understands how the local market operates is crucial for making informed decisions .

When purchasing a buy-to-let property, there are several routes. One is to consider is purchasing a property to rent out as a House of Multiple Occupation. This could be especially lucrative in popular student areas, with who have recently graduated and want to stay in their university city.

This could generate a higher rental income compared to a single-occupancy model. Or look for three to four bedroom properties for those who need a family size home.

Understanding your exit strategy is crucial. Are you aiming for a return on investment post-sale of the property or a steady stream of income?

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Knowing your goals will guide your investment choices and financing options. For long-term growth, a repayment mortgage could be an option. Alternatively, an interest-only mortgage can offer higher cash flow but you have to pay for the full loan amount at the end of the term.

You could form a limited company to manage your buy-to-let or involving children in the ownership structure can be a strategy to mitigate inheritance tax.

Talk to a mortgage broker who specialises in buy-to-let to help you with the intricacies and finding the right mortgage.

Andrew Milnes is business principle at the Mortgage Advice Bureau, Bingley.

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