- Choose the right property. Ensure the location attracts a steady flow of tenants.
- Get the right financing. Speak to lenders to establish how much you can borrow.
- Take a long-term view. Always treat entry into this market as a medium to long-term investment.
- Consider the hidden costs. Ensure the rent covers not only the mortgage but the ‘hidden costs’ of maintenance and insurance as well.
- Think about a contingency fund. Ensure you have the equivalent of three months rental income put aside to cover mortgage payments during void periods between tenants.
- Choose a letting agent. For a fee of around 15% of the gross rental income, a letting agent will take care of tasks such as finding tenants, getting the necessary references and collecting rent.
- Put the right tenancy agreement in place. Always have a tenancy agreement in place before a tenant occupies your property.
- Ensure you have the right insurance. As the owner, you are responsible for insuring the structure of your property, which will include any permanent fixtures and fittings.
- Comply with fire regulations. Local authorities require you to comply with fire regulations. This could mean putting in fire doors and smoke detectors. Ring your local authority for advice and a fact sheet.
- Sort out your tax position. Rental income is taxable but the mortgage repayments are tax-deductible. Any profit you make when you sell the property will be liable to capital gains tax charged at the highest rate of income tax.
- Before tenants move in, produce a detailed inventory. Include all the contents in a furnished property to safeguard against any missing or damaged items.
- Always get a deposit. This will protect you against any damage caused by the tenants or default on the rental payments.
Article taken from 'What Mortgage' magazine