Buy to let

Townhouses With To Let Sign In KensingtonBuy to let means to buy a property in order to let or rent it out so that other people can live in it as your tenants. As the landlord, you will have legal responsibility for maintaining the property.

Before you commit to a buy to let investment, you should:

  • work out what you can afford and how much you will be prepared to pay for a property
  • compare buy to let mortgage rates available with different lenders if you require a mortgage
  • work out how much rent will be reasonable to charge and take into account periods where there might be no tenants
  • consider who your target tenants will be
  • decide on the location, for example, a student town
  • decide whether you will employ a managing agent especially if you are not living close to the property

Costs

As well as the cost of repaying a buy to let mortgage, you will need to think about:

  • legal fees
  • Stamp Duty Land Tax
  • survey fees
  • buildings insurance
  • running and maintaining a rental home such as a letting agent, cost of repairs, legal and marketing fees if you choose to sell the property and landlord insurance.

Is there any tax payable on buy to let properties?

You can potentially earn profit, on which you pay tax, through:

  • the rent you receive, less any maintenance and running costs such as repairs and agents fees (rental yield)
  • The increase in the value of your property when you decide to sell it (capital growth).

If you sell your property and the capital growth is more than the annual capital gains tax threshold, you will need to pay capital gains tax.

If your rental income is more than your mortgage interest payments and certain other expenses, you will have to pay income tax.

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