For some buy-to-let landlords, it just happens. They don’t set out on an adventurous BTL journey, but circumstances dictate they end up there.
It might be because they’ve inherited a property. It might be because their job has relocated them, leaving their previous home empty. It can be for countless reasons.
However, converting your home into a buy-to-let goldmine is perhaps more complex than it might seem on paper. Through today, we’ll look at what you need to consider.
Does your mortgage allow this?
As you’ll soon find out, one of the biggest issues with this topic is the paperwork. If you’ve bought your property with a mortgage, you’ll need to make sure that this mortgage allows you to rent the property out. For most parts, this won’t be the case.
Now, there are a couple of ways around this. You can apply for permission to do this with your existing lender. Or, the long-term solution is to apply for a remortgage. This will involve switching to a different interest rate and product, but it will at least guarantee that what you’re doing is legal and above board.
There are a couple of things you need to consider from a tax perspective when you’re considering letting your property. The first thing is that you’ll need to inform HMRC that you’re receiving rental income.
This is relatively simple. They’ll send you a self-assessment tax return at the end of the tax year, and you need to include the relevant information.
The second thing to consider is that you’ll need to pay tax on this rental income. The amount of tax you pay will depend on many factors, including your annual income and the amount of rental income you receive.
Let’s also use this opportunity to talk about mortgages again. Under relatively new regulations, landlords can only offset a proportion of their mortgage interest as a valid expense.
Are you prepared for the responsibilities?
This is a big one. If you convert your home into a buy-to-let property, you’re effectively becoming a landlord. And, as a landlord, you have certain responsibilities.
These responsibilities include making sure the property is safe and habitable for your tenants. This means ensuring there are working smoke alarms, a Gas Safety Certificate, and that the property meets the Energy Efficiency Standards.
You’ll also need to insure the property against any potential damage. And, if you have a mortgage on the property, the lender will likely require you to have buildings insurance in place.
Are you prepared for the hassle?
Being a landlord can be a bit of a hassle. You’ll need to deal with tenancy agreements, deposits, rent collection, and property maintenance.
And, if you’re not prepared for this, it can quickly become overwhelming. There are several ways to make things easier on yourself, of course. You can use a letting agent, for example.
But, if you’re going to do this, you need to make sure you use a reputable letting agent. There are a lot of cowboys out there, so do your research and make sure you use someone who’s regulated.