Buy to let

Low interest rates, the relative underperformance of the stock market and concern over the future value of pensions has fuelled a boom in the number of people buying investment properties, usually flats, to provide a nest-egg for their retirements. While rising property prices means that stellar short-term profits from rental income are a thing of the past, the historic long-term outperformance of the residential property market compared with stock market is still persuading thousands of new investors into the buy-to-let market.

Banks impose stricter criteria for investment properties

Mortgage companies' lending criteria for investment properties tend to be stricter, typically requiring a 20% deposit and projected rental income comfortably in excess of repayments although the days when by-to-let mortgage rates were 2% above residential rates are long gone. Otherwise, the legal process of buy-purchasing buy-to-let mortgages is very similar to that of buying your personal property although there is less regulatory protection because this is a commercial rather than personal transaction. Most of the legal issues of buy-to-let concern your responsibilities as a landlord rather than the process of buying the property itself.

What are landlords responsible for?

Landlords are responsible for the fire, gas and electrical safety of  the properties they let, as well as their insurance and general maintenance. Two other recent changes to be aware of are a new licensing scheme for houses in multiple occupation which will require much stricter safety for properties with more separate tenants (such as houses divided into bedsits) and, from 2007, landlords will have to use a tenancy deposit protection scheme for holding their tenants' deposits.

Tax

Would-be landlords would also be well-served to take advice on the tax implications of investment property – income tax is due on rental income while  capital gains tax may be payable when selling investment property.

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