Buy to let mortgages for self employed

The recent buy-to-let boom fuelled by low interest rates and rising propert prices has made property investment an attractive proposition for a significant number of self employed people.

Fortunately a numbers of lenders have  responded to the buy to let needs of self employed borrowers, who have been considerably underserved in recent years.

Whether you're a first time landlord or an experienced investor, our knowledge of the market combined with our connections to specialist lenders means we'll help you get the buy to let mortgage you need. 

No matter how simple or complex your situation is, whether you have good or bad credit history, want to buy standard housing or HMOs, our expert broker team can assist you.

 

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Netting tenants

To be a winner in the cut-throat game of buy-to-let, play it through the eyes of the tenant.

“With the recent rising property prices and low interest rates, some people have come to expect too much from buy-to-let,” says Gareth Hardwick, head of policy at the Small Landlords Association (SLA). “But it’s just like any other business. You have to put some thought into your product and even then there can be delays in finding customers.” So, as a novice landlord how can you set yourself apart from the competition?

Location, location, location

The most obvious consideration when trying to maximise the desirability of a property is its location, which will ultimately have to work for both you and your tenant. In regional terms, look for an area that will provide a cross section of tenants, advises Malcolm Harrison at the Association of Residential Lettings Agents (ARLA). “Places such as Peterborough or Swindon for example have businesses and universities which broadens the scope of your potential tenants,” he says.

Try also to sift out areas in which property prices have some scope to rise, rather than where they may well have already peaked.

But the really crucial part of positioning your investment property is its whereabouts in that particular town or city - and that will depend upon your target tenant, says Hardwick. “If it is a young working couple in the city, they will want to be close to the centre and to some good restaurants for example. If it’s in London, tenants will want to be near a tube station - an extra 10 minutes walk in the cold winter months can have a surprising effect on the rent.

“Students will obviously want to be close to their university and if you are in the realms of corporate property, a wealthy Japanese banker will require a more upmarket part of an area.”

Sizing up

The size of your investment property will be determined by a combination of your target tenants and of course your affordability. But it is also important to find out what sort of property is in demand in the area. “Seek the advice of local ARLA-registered letting agents,” says Harrison. “It is their doors that the tenants all walk through and they are best placed to know what is currently in short supply and high demand.” In most with beginner landlords however, says the SLA, a two-bedroom flat is a safe as well as affordable option. It is also more likely to be safe and affordable for tenants.

On the following conditions

Once you have decided on a property, think about its current condition, because these days a landlord who shirks from basic standards simply won’t find tenants, says Hardwick. “Whatever you buy, it needs to be in good repair. Either buy a property in poor order and do it up, buy a new build property or one that has been recently renovated.” This approach will ensure that everything is safe and in working order, which is actually a legal as well as moral requirement. The gas supply must be Gas Safe registered and maintained and any soft furnishings should meet fire regulations.

These measures however hardly amount to a means of attracting tenants. For that, you will need to make an upfront investment into things such as decent kitchen appliances. “It’s not that people have higher expectations these days - more that they are simply used to a better standard of living,” says Harrison. “They want convenience appliances such as dishwashers and they want ones that work. Remember that’s part of the attraction of renting in the first place - it shouldn’t be your problem.”

This also means that the property needs to be easy to maintain on a daily basis. Harrison advises against a property with too much interior wood, while Hardwick considers a garden to often amount to a nuisance rather than an attraction in the eyes of a tenant.

Painting the right picture

Once the basics are in place, the décor you choose for the property is vital. It is important to put your personal tastes aside and present the property in a way that will appeal to the widest spectrum of tenants. “Keep the middle of the market in mind,” says Harrison. “Decorations should be broadly neutral. If you keep things plain, tenants can add their own personalities on top of that.” Having just purchased his eleventh investment property and after years of experience with tenants, Jonathan Roberts agrees: “Frankly it’s a case of white and magnolia on top of which the tenant can hang their own choice of pictures,” he says. “It’s just got to appeal to the widest range of tastes possible.”

Striking the rent

Only once the location, size, condition and decoration of the property have all been determined can you begin to calculate rental payment. Depending on your motive for buying-to-let, it is sage to say that you will at least want to break even on your property, although bear in mind that he average UK rental yield is currently 5.8 per cent. Build into your sums repairs and maintenance costs, as well as void periods. These total a current average of 28 days a year, says ARLA, although in Robert’ personal experience, it is longer. You must also consider that tax - payable at your prevailing rate after the property costs have been accounted for - will be charged on all rental profit. As for capital appreciation, which many landlords rely on, the taxman will take 40 per cent of your profit in capital gains tax when you come to sell.

These calculations will provide a workable ballpark figure for the rent you should charge, but they must also fit in with the particular market. Again, seek advice from a lettings agent, look in the local newspapers and at the wealth of property websites for average rents payable on your kind of property.

However, it’s when you get down to the last pounds and pence that setting the rent can become a delicate balance - and one that must work for both you and the tenant, says Hardwick. “You can’t learn overnight how to calculate rent for a property. Quite simply if the phone doesn’t stop ringing, you have set it too low and if it doesn’t ring at all you have set it too high,” he says. “But to attract the right sort of tenants it is often better to drop down rather than just taking anyone or having the property empty for months.”

Flexibility

It is this kind of flexibility that will be well employed when it comes to the tenancy agreement drawn up between you and the tenant. Under the government’s Unfair Contracts Legislation, a landlord cannot make unreasonable demands in a tenancy agreement anyway. But even giving a little could ensure that you net good tenants, and quickly.

For example, current lifestyles - especially among renters - are more mobile than ever. So why not build this into your contract? Although as a landlord you will want the security of a medium-term agreement usually lasting a year, add in a break clause to offer some flexibility to your potential tenant. “You could incorporate a break clause after eight months,” suggests Harrison. “That was the tenant has got the opportunity to leave early providing there is a good reason. Make sure it’s clear that this reason is beyond that they are simply bored - more likely that they are relocated in their job for example.”

The agent’s touch

But drawing up a tenancy agreement, as well as obtaining references, securing a deposit, compiling an inventory and, most importantly, finding prospective tenants, can all be carried out by a lettings agent. On this ‘lettings only’ basis, you will be looking at an average fee of 10 per cent of rent charged (usually plus VAT). If this is financially viable, the experience and local knowledge of a lettings agent can make sourcing and then attracting tenants a whole lot easier.

Firstly, there’s the logistics. If you are in full time employment, it is unlikely that you will be available to show a potential tenant around the property at the drop of a hat. A lettings agent is available all day to do this on your behalf, which means a greater scope of viewers and in turn, a wider scope of rental charge. And as well as being beneficial to you, from the tenants’ point of view, the procedure may also appear more professional.

Although you then have the option of going on to ‘full management’ with the agent, which will typically cost between 15 and 17 per cent of your rental income, this might not be necessary for a novice landlord, says Hardwick. “Although you might need help for the initial part of the let if you are doing it for the first time, full management can be expensive on one property,” he says.

Rightmove’s Shipside also adds that many amateur landlords with one buy-to-let property like to be in close proximity anyway. “It’s comforting to drive past and check everything is in order,” he says. “Although this can be a case of minimum risk, minimum return.”

But on the other side of the coin, Harrison at ARLA suggests that tenants feel more comfortable with a reputable agent managing the property in full. “ I would prefer it if I was renting,” he says. “You don’t want to be contacting your landlord’s Aunt Agatha down the road because he is off playing golf.” An agent will also serve in creating a distance between you and your tenants, which could be good for business.

The right approach

If you do not use a letting agent however, the marketing of the property will be down to you, so tailor your advertising to the right medium. “Common sense would suggest that it you have a bedsit in Brixton you are going to advertise in Loot rather than at a more upmarket agency like Hamptons,” says Hardwick. Make sure also that any documentation is professional. Tenancy agreements drawn up by a legal publisher, Lawpack, for example, can be bought over the counter at WH Smith.

Managing people

Finally, remember that tenants all have very different personalities as well as expectations. A lettings agent is paid to deal with this but if you can’t afford one or simply welcome the challenge of going alone, you will have to practise your people skills. “It has been said that being a landlord is nothing to do with managing property and everything to do with managing people,” says Hardwick. And if you can carry this part off, your next let might not be such hard work. After all, they say word of mouth is the best form of advertising…...

Top ten tips for attracting tenants

1. Buy in a town or city that will provide a cross-section of potential tenants.
2. Be sure that the actual situation of the property is near the tube, tram or train links and in walking distance from amenities.
3. Seek advice from letting agents as to what property is in demand in the area – two-bed flats are often a safe option.
4. If you do not intend to renovate the property yourself, ensure that its condition is up to a high standard and the safety regulations are met.
5. Make sure the décor appeals to the widest possible tastes and that the property is low maintenance.
6. Prepare to be flexible with the rent you charge. Remember it is a balance between paying for the property and attracting tenants.
7. If you do not use a letting agent, ensure you advertise the property through the most appropriate medium.
8. Tenancy agreements can be adapted. Consider what you can introduce that would be appealing for tenants.
9. If you do not live near the property or have little time, consider employing a letting agent to arrange and/or manage the tenancy for you.
10. Make sure that any documentation you compile yourself is professional.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBTS SECURED ON IT.