Keith Park

Residential Property Finance - advice from DIY Funding


The residential property investment market has boomed in recent years. But is becoming a landlord as easy as you think?


Residential properties are let on an Assured Shorthold Tenancy (AST). The AST, which is signed by both the Landlord and the tenant and is normally for a period of 6 or 12 months, was introduced over 10 years ago. It was the advent of the AST which has resulted in the massive increase in the Buy to Let market in the UK.


If you are using property finance to acquire your buy-to-let property, then your property finance lender will insist that the property is let on an AST.


A landlord has certain obligations to the tenant (see below):


As a landlord you will be responsible for:


  • Repairs to the structure and exterior of the property, which could result in a requirement for additional property finance. As with the purchase of any property, a full structural survey should be carried out before you buy.

  • Heating, hot water and sanitary installations. Again, any property finance you arrange needs to include provision to replace expensive items such as boilers.

  • The fire safety of the furniture and furnishings and the safety of gas and electrical supplies. No matter how tempting it may be to stretch your available property finance budget by supplying second hand furniture, it should meet the fire resistance requirements. YouÕll also need to employ a CORGI registered worker to check and provide a gas safety certificate.

  • Ensuring that the property is fit for habitation.

Residential Property Finance - managing the property


You may decide that you don't have the time or inclination to manage the property yourself. You can put the property in the hands of a letting or estate agent who will do this for you, but they do charge a fee which should be factored in to your property finance plan.


Occasionally you will encounter problem tenants. If a tenant owes you money, this will have a knock-on effect on your outgoings. In a worst-case scenario you may have to pursue the tenant through the Small Claims Court. However, in order to avoid this you should take up references for any potential tenant before agreeing to their tenancy.


Residential Property Finance - tax and your rental income


You will be taxed on your rental income. However, you can offset most property finance expenses, such as legal and professional costs, renewing fixtures and replacing furniture. In addition the interest charged by the lender on the property finance you borrow can also be offset against the rental income. Your tax office or a qualified accountant can offer advice on this aspect.


Residential Property Finance - do your research


Before you buy to let, know your market. As with all ventures, your property finance plan should be based on market research. You may fall in love with a property but you won't be the one living in it, and practical considerations should come first.


If you are looking to buy in a city, check out the student areas and consider a larger property that can be shared by a number of tenants. If you hope to attract young professional tenants, transport links or parking are likely to be of importance to them. And don't be tempted by properties with high maintenance gardens - you might think that it enhances the appearance of the property, but you'll be lucky to find a tenant who is an enthusiastic gardener prepared to do the work for free.


For more information about finding the right property finance for you, apply online at www.diyfunding.co.uk


Keith Park