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Becoming a landlord

What you need to know

Buy-to-let mortgages offer home owners the opportunity to purchase additional property that they can use to rent out to tenants. Many people use this additional investment as an extra income or as an asset for the future.

Why buy to let?

Over time, property can offer a great return on investment. The home you purchased ten years ago is likely to have risen in value.

Owning more than one home, therefore, may be a worthwhile investment, and renting the property in the meantime helps to fund the repayments on your additional mortgage.

You should check beforehand though, that you're not purchasing a property in an area that already has more places to let than people looking to rent.

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What you want out of it

Essentially, purchasing an additional property is an investment, which means you must decide whether you want to help that investment to grow or use it as an income.

The majority of rental property is often concentrated in city centre areas which may mean higher property prices and more competition for tenants.

Properties in suburban areas can be cheaper but the rent can also be lower than in more popular areas.

You need to decide which option will provide the right return for you.

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Working with an agent

Once you have decided on a property, the next step is to find a letting agent to help you consider promising tenants and draw up the relevant documentation.

Unless you intend to become a landlord on a full-time basis, developing a portfolio of properties and using them as your main income, it is likely that you'll also use the letting agent to find suitable tenants and collect rent.

Agents normally charge around 10%-15% of the agreed rent, depending on the level of responsibility they take. It is advisable to budget for this when you make your initial purchase and consider rent amounts.

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Your responsibilities

Your daily responsibilities as a landlord will largely depend on the level of responsibility you agree with the letting agents. However, you still own the house, and you'll be responsible for its upkeep, as well as insurance on the building and any contents that you own. You must also make sure that any gas or electrical equipment passes safety checks and complies with relevant regulations.

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Preparing for the risks

There is no doubt that buying a property to let can be a worthwhile investment option. However, it is important to remember that buy-to-let also comes with risks attached.

You need to make sure that you can fund the mortgage that the property demands. Even when the rentals market is strong, you must still consider the possibility of having no tenants for any period of time, with mortgage payments still being required.

The state of your property is also worth careful consideration. Places that need renovation, or those in run-down areas, may be cheap to buy but they could be expensive to refurbish. In addition, when you look to sell the property in the future, you may not get the return on investment you expected.

The key to getting the most out of a buy-to-let property, as with most investments, is in long-term plans. Housing markets constantly fluctuate as the economy changes, but the trend has often been growth. By taking the right advice and making the right choices, the property you buy-to-let now may provide you with returns in the future.

Remember, it is your responsibility to declare any income from property to the relevant tax authorities.

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