What is a Buy to Let Mortgage?

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Buy to Let mortgages have been very popular since they were released in the late 1990’s, this is simply because the property market is very lucrative, if done correctly.  A Buy to Let mortgage is when you take out a mortgage to buy a house or flat with the sole intention of renting it out.  If you have the money to get into this industry then you can make a full time living out of it, but beware that the housing market has taken a harsh impact with the recent credit crunch.

The amount that a potential landlord can borrow for a Buy to Let mortgage depends on the value of the property and the estimated amount of rent that a tenant will pay.  The rent should comfortably cover a percentage of the monthly instalments as well as covering any other costs such as maintenance.

Prior to the recession, a bank would expect a 10 – 15% deposit be paid, however currently this figure has shot up to 20 – 25% but this is dependant upon the person’s credit status among other factors.  The best advice would be to speak to the bank or building society as they may be able to do something based on other incomes.

The interest rate that is paid back is slightly higher than that of a tradition mortgage, and this is solely down to the fact there is greater risk involved.   For example, when renting out a property, there is a chance that there could be a period of the time when it is inhabited during the change over of housemates but the mortgage on it will still have to be paid.

Being a landlord and having several Buy to Let properties out there can be very lucrative, as mentioned earlier, but you have to be prepared to put the work, effort and money into it or you could lose everything.

What to Know About Landlord Insurance

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Being a landlord entails a lot of responsibilities and risks.  Therefore it is advised that landlords insurance is taken out in the event that problems arise.  There are various insurances on the market which ranging in what is covered from loss of rent to damage to contents or the building itself, which are the most common claims by landlords.

Building & Contents Insurance

The most common types of insurance that is taken out by landlords.  It covers both the property and content in the event of any damages such as fire and smoke damage, water damage and vandalism, just to name a few.

Contents Only

Similar to Building and Contents Insurance, but only covers the contents of the property.  A landlord can opt to be protected against accidental damage too for an additional cost, depending on how confident they are on the tenants.

Items which are covered by contents insurance include any furniture, appliances and property which is included in the property when a tenant moves in, but check with the insurer of what is covered and what isn’t when taking out the policy.

Rent Guarantee

One of the most important factors that landlords worry about is any late or missed payments.  If a landlord relies upon the income from the tenant, then they have to be confident that they will receive their payment every and each month on time, which is why insurers offer insurance cover in case a tenant refuses to pay their rent.  Generally, an insurer will offer 50% of rent for up to three months whilst the tenant is being evicted.

Prior to choosing the best cover, it is advised to contact different insurers to see what they will cover and for how much, it may also be an idea to contact the National Landlord Association to offer advice on the matter.

Landlords with Rooms for Rent

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If you are a landlord starting a house or flat share, you may be wondering what you have to do make sure that your property is ready for renting out.  Remember that letting out a house or flat is an investment, and like other investments, it shouldn’t be rushed and you should take the time to make sure that the property is up to scratch and well presented, which will reflect on the amount of money which you can ask for rent.

The first thing to think about, prior to decorating the property is to decide on what type of people you want to rent it out to.  If it is close to universities or colleges then you may be better targeting students or if it is near a busy commuter train station you may be better off targeting young professionals.  The implication which this has is that you will decorate and let out your property in different ways, depending on who is going to be moving in.

Appliances Included?

If you are including any appliances such as a fridge, freezer, washing machine etc. you have to ensure that they’re in good working order and more importantly safe. If possible it would be best to photocopy the manuals in case the tenant doesn’t know how to use them correctly, never leave the originals as they may get lost.

Health & Safety

It is imperative that landlords take health and safety into consideration prior and during renting out a property, failure to do so could results in imprisonment or hefty fines should a judge find you guilty of neglect should accidents happen.  Ensure that all appliances are checked and certified as safe by registered engineers.

Don’t Forget the Exterior

One thing which some landlords over look is the exterior of the property, whether that be from the front or the back.  Make sure that the gardens are tidy and are a fair representation of the interior of the property as it may deter prospective tenants.

What Exactly are Flat and House Shares?

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For those those are still unaware of what Flatshares and Houseshares entail, to put it simply, it is when you share accommodation with another person – this could be someone such as a family member or friend or even a complete stranger, which isn’t too uncommon, some even “Buddy Up” which is where people find others looking to share somewhere to live and together search for available properties to rent.

The benefits of sharing accommodation are primarily the financial savings that are made.  Renting or buying a house or flat means that one person has to bare the brunt of all costs, however sharing with other people means that any incurred costs is split, generally equally, amongst all the tenants.

Typically there are two types of landlords with house and flat shares,

  • Those that have rooms to rent in their homes living with a lodger, and these are live in landlords
  • Those that let or rent a room in properties that they own, but do not live in and these are live out landlords

The second of the two is more common within the UK.

Finding flat shares in London, Manchester and the larger cities in the UK are traditionally more common as there is a greater density of people searching for accommodation but with higher costs of living, the most cost effective manner to rent is through sharing accommodation.

If you were to share a flat with one other tenant it would halve your expenses each month and having up to six would mean that you only pay one sixth of the bills.  This is why many students share a house when at university, as it drives down costs and is a cheaper accommodation.

Other benefits of renting a room in a house or flat include, the opportunity to live in a nicer property or location as costs are lower, or some people want to live in shared accommodation as they are more sociable and it is a great way to meet new people and make friends.

Responsibilities as Tenants

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If you are new to Flatshares and Houseshares, you may not be aware of the responsibilities you have to comply to in order to ensure the best results and a solid relationship with your landlord.  These will always vary between properties but most of them revolve around the same basic points which are explained below.

Paying Rent

The most obvious task you have to do is pay your rent, this should be in full and on time – your landlord will have set up a contract with yourself so you should be fully aware of how much it is and when you have to pay it (i.e. weekly, monthly etc)

House Maintenance / Repairing Damage

If you or another house or flat mate was to damage anything whilst you are living there you will be liable to repair it.  If you were to refuse, the landlord is well within their rights to not return your deposit which was requested upfront.

You are also required to keep the house clean and tidy, so ensure you establish some basic cleaning duties into your working week with your flat mate(s)

Paying Utility Bills

Obviously as your living in the property it’s your responsibility to pay the bills such as TV license, gas, electricity etc if it’s not included in your rent.  If you move into a new property and there are outstanding bills then you are not expected to pay these.

House Safety

Always ensure that you keep the house as secure as possible, always lock windows and doors when you’re out and set the alarm if there is one.  This not only will keep your valuables where intended but it will prevent the property being damaged in anyway.  If the property was to receive any damages due to you leaving doors unlocked, etc. you would be liable for the repair costs.

Return the Property as you Received it

When you have decided to move out you should always make sure the house or flat is as clean as it was when you first moved in.  If there is anything that needs to be done you can expect to be billed for professionals to clean the house so it’s in your best interest to do so.

Finding the Perfect Houseshare or Flatshare

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Looking for shared accommodation can be a daunting task but by identifying a few simple tips, it will make this job much easier for yourself, you will also benefit from the results in the long term.

Before Starting

Many applications for shared accommodation will involve filling in an application so that you get the best suited options.  Take your time and ensure that it is 100% correct and thought about, this will then make it easier when deciding which property to go for.

Don’t be Boring!

A common mistake is often at the description section of the application, you need to sell yourself as much as possible.  Someone will actually be reading your application and if they feel you will not be suitable – they won’t take it any further.  Just make sure you stand out from the crowd.

Include a Picture

It can help if you include a picture on your profile, this will enable the other person to get a vague idea of the type of person you are.  It won’t hurt in any way so if you are looking for the most responses you should always include a picture.

Understand the Terminology

The most common mistake is the word “double room”, this doesn’t necessarily mean it’s for two people; this could cause problems if you are a couple who have just taken on a double room for you both.  Ensure that you understand what you are getting before you take it any further, try our Glossary to find meanings to the terms that you don’t understand.

Viewing the Property

If you have managed to get past the first stage you will then be asked to take a look at the property to see what it is like.  It can help if you take a friend along because it’s not only safer but it helps to get an idea from a third party of what they think.

The Day of the Move

Once you have found the perfect property, make sure you know what it needed for the day of move.  Ensure you understand what you need to do in order to make the process as smooth as possible.

Why Flat Sharing Is Ideal

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There are a number of reasons why people choose to share accommodation as opposed to buying or renting a flat or house on their own.  The main benefits of house or flat sharing are the financial savings.

Shared Accommodation versus Buying a House or Flat

Although flat and house prices have dropped during the recession and are now gradually starting to increase again, they are still generally very expensive and out of reach of people trying to get on the property ladder for the first time.

Flatshares and Houseshares can be a solution for young friends wanting to attain a property; they could purchase a flat or house together and rent out the spare rooms to bring in an extra income to cover payments such as the mortgage, council tax and utilities.  Sometimes renting out the property you own and live in, could be enough to cover the cost of the mortgage.  Home owners can also be eligible for the Rent a Room Scheme which is a government initiative to encourage renting out spare rooms.

Accommodation rentals can be a great way for young people to get on the property ladder without it costing an arm and a leg!

Shared Accommodation versus Individually Renting a House or Flat

For someone to rent a property on their own or even with a friend can still be very expensive as there are additional costs on top of paying the rent such as council tax and utility bills.  Shared accommodation splits these costs between the number of people that are living in the property.

House shares for students are probably the most cost effective means of living whilst at university.

The secret of shared housing and flats are to do your research!  Research flat and house shares in the city which you want to live and then try to meet the existing flat mates or house mates when visiting the property.