Step 4 - Finding the ideal rental property and buy-to-let mortgage
As a landlord, you can use Rightmove in two ways…
- To find a property to buy with the express intention of renting it out
- To find a tenant to rent the property.
This section covers how to find a property to buy that can be rented out.
Rightmove is the best place to start your search, because 90% of property for sale in the UK is advertised on the website.
This gives buyers a huge choice of property for sale. Most listings on Rightmove have additional information such as extra photographs, virtual tours, floorplans and brochures so you can really get a good idea of what the property is like before you go on viewings.
To make your search easier, you can create an account to register for property alerts so you can receive automatic notification in your inbox of new listings that match your search criteria. Once you have found a property that interests you, contact the Rightmove member agent who is marketing the property to arrange a viewing.
Other ways to use Rightmove
The latest Rightmove House Price Index may be useful to get a general idea of what the asking prices in England & Wales are at the moment.
Finding the ideal buy-to-let property
To get a property that will give you a good level of rental income and capital growth, you'll need to understand what will appeal to tenants - which may be very different from what appeals to you.
For example, while you might love houses that are a stone's throw from nowhere, there will be limited demand from tenants for properties like this, no matter how pretty and idyllic it looks. Start by looking for areas and types of property that are in demand now and will become increasingly in demand in the future.
Things to look for are...
- Improvements driven by companies moving in, new transport links or government regeneration money
- An area getting 'discovered' - this may be because it is close to another attractive area. An up-market shop opening is often a good sign.
Your local Rightmove member letting agent will be able to advise:
- What type of properties in their area have the strongest (and fastest growing) level of tenant demand relative to the supply of properties of that type
- What type of tenant will be looking for your chosen property type - singletons, couples, families, students, private tenants or those on local housing allowance
- What level of furnishings (if any) the tenant will expect a landlord to provide
- What approximate level of rent you could expect to achieve - and how quickly you can expect to receive it
- What changes are happening locally that will affect future tenant demand and property prices
- Whether an oversupply of a certain type or size of property is likely to develop a few years down the line.
Properties that let quickly tend to have the following features:
- Proximity to transport links, shops and parks. For the student market being close to the university is a big plus
- Kitchens and bathrooms in a good state of repair and décor
- Ample storage
- Good natural light
- Parking
- Garden (important for tenants with children)
- Good security
If you have a type of buy-to-let property in mind, discuss this with your lettings agent.
Mortgages
Buy-to-let mortgages are similar to an ordinary residential mortgage and these days the interest rates and arrangement fees on buy-to-let mortgages are only slightly higher than on ordinary residential mortgages.
The two main differences are...
1. When considering whether to give you a buy-to-let mortgage, as well as looking at your own credit history and the property's value, the lender will also do an assessment of the likely rental income from the property. The lender's valuation report will give them this information and they will usually expect the rent to be at least 20% more than the interest payable on the mortgage (this is called 'the rent to interest ratio').
2. Most buy-to-let lenders will only lend up to 80% of the property's value as a mortgage (this is called the "loan to value" ratio) - it means you will have to put in the other 20%. These percentages do vary greatly between lenders - as do the types of property they will lend against - so it pays to shop around a bit for the best deal.
The key thing is to be comfortable with what you have borrowed and to be happy that if the property was empty for a month or two with no rent coming in or if interest rates went up, that you would still have enough money to pay the mortgage and other expenses.
And remember - if you are thinking of letting out your former home you must contact your mortgage company as you'll need to convert your residential mortgage to a buy-to-let one.
If you haven't arranged your mortgage yet, your local Rightmove member agent should be able to help or point you to a broker who can.
Builders and developers often have attractive mortgage deals too, so if you are buying a new build home, ask what's on offer.