But-to-Let Warnings

- Some Points to Consider Before Buying to Let -

Buying to let can be a serious proposition for some people. Potential borrowers should understand that the letting of property is a complicated business and it is important to get appropriate advice.

Please note that Buy-to-Let mortgages do not generally fall within the Regulated framework of the Financial Services Authority. Therefore you will not have the same protection as you would for your main home mortgage.

Mortgage Maestro Limited is pleased to arrange a loan/mortgage but cannot give advice on buying-to-let as a business proposition. Nothing on this website should be taken to indicate that buying-to-let is a suitable business proposition for any particular person. Before entering this market you are advised to consult your own independent professional advisers generally and in particular on the following matters.

- Acquisition and disposal costs -

These include stamp duty, conveyancing costs and agents fees. There is also the cost of furniture and fittings, Management of the property.

It is recommended that all applicants let their property through a reputable agent or organisation. These agents may provide practical assistance with selecting a property in a suitable locality, advising on rents, location of tenants and general property management.

- Political and economic factors -

Applicants should bear in mind the possibility that rent control for assured Tenancies could be introduced. There could be a fall in the value of the property - past performance is not necessarily a guide to the future and prices could go down as well as up - if the property has to be sold the applicant might not get back all he or she has paid.

There could be a decrease in rental income due to adverse economic conditions or as a result of a substantial increase in the supply of rented accommodation in a particular area. Rents will be affected by the particular locality in which the property is situated and by the condition of the property.

Interest rates could increase on any loan taken to acquire the property without a corresponding increase in the rental income to cover that interest.

- Business and Investment Factors -

There could be difficulties with tenants in breach of tenancy agreements including failure to pay rent and in obtaining possession under the relevant legislation.

There may be void rental periods when the property is not tenanted and so no rent is receivable.

Property Prices can fall.

The lower the sum borrowed the more the rental income is likely to exceed expenses and outgoings.

It may be in the applicant’s interest to realise, cancel or surrender an existing investment in order to purchase a property to let, please seek independant financial advice.

- Tax -

The disposal of the property may be subject to capital gains tax under current legislation.

The rental income may be liable for to income tax but any loan interest may be able to be set off against rental income for tax purposes.

Appropriate advice should be obtained from the applicant’s accountant as to the taxation implications of the letting of the property.