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Buy to let affordability

If this is your first foray into the world of buy-to-let property, then you’ll need to do your research around how much it’s going to cost you.

It’s all well and good finding a property with a cut-price purchase cost, but of course that is just the beginning of the full costs involved with becoming a landlord.

As well as the mortgage and all the associated fees, you’ll need to factor a number of other items into the equation. Below is a list of other costs you’ll need to consider:

  • Solicitors fees and legal costs
  • Valuation & survey fees
  • Buildings insurance
  • Landlords insurance
  • Letting agents fees if applicable
  • Maintenance costs
  • Annual safety checks
  • Rental insurance (to protect yourself against periods of un-occupancy or rent arrears)

If you don’t have rental insurance it’s wise to have an accessible savings pot, with at least three months' worth of rent in case you experience any shortfalls.

Calculating your Return on Investment

In order to work out if a buy-to-let property is worth getting into, you’ll need to calculate how much money – if any – your investment is going to make.

Most lenders will expect you to have a rental yield of at least 125% of your monthly mortgage payments – so if your mortgage payments are £350 per month you should aim to be getting in at least £440 per month from your tenants.

You’ll need to deduct all the relevant costs from your rental yield though, not just your mortgage – so if you are coming up with a shortfall then it may not be the right investment to make.

However don’t forget that if you have bought well, the rental income and potentially the property value should increase over time, meaning your return on investment could be significant. This is why buy-to-let properties should be seen as a long-term investment rather than a short-term gain.

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