[col type=”one-third”]
Our property investment expert is Jeni Browne, Sales Director at
Mortgages for Business
www.mortgagesforbusiness.co.uk
Tel: 0345 345 6788
[/col]
[col type=”two-third last”]
Question
How do I calculate the rental yield?
I am hoping to purchase my first buy-to-let property at the start of January 2022 and am weighing up some potential areas and dwelling types.
I understand rental yield is vital when deciding on the best property. Can you please explain how I might calculate the yield and also whether the yield will impact the mortgage deal I can obtain.
Answer
While yield is important, you need to consider many other things when investing in a buy to let property.
How much demand there is for the property, capital appreciation (will the capital value increase over time or is the property at the top of its price range/in an area where prices may decline) and the property’s condition are just a few.
However, to answer your question, if you take the expected annual rent, divide by the purchase price and multiply by 100, this will give you the yield.
Regarding its relevance to obtaining a mortgage, lenders want the property to generate sufficient rent to cover the mortgage interest costs plus surplus for maintenance costs, void periods and tax. A strong yield will make the mortgage application more attractive to a lender.
[hr style=”single”]
Question
Letting an HMO – do I need a specialist mortgage?
I have a question regarding a buy-to-let property. I am looking at purchasing a four-bed house, converting the dining room to a bedroom and letting it as a ‘house share’ to professionals.
Do I need to obtain a special mortgage for this purpose, or will a bog-standard buy-to-let suffice? Also are there any particular rules or regs which apply to HMOs which I need to know which may impact my application?
Answer
Generally speaking, if you have more than one tenancy agreement for the property, you will need an HMO mortgage. If you will let to sharers on a single AST, then some normal buy to let mortgages accommodate this.
If you’re a first-time landlord, you will find the choice of lenders willing to offer an HMO mortgage quite restrictive, as they tend to want one to two years of landlord experience. However, a few will consider you, so speak to a broker about your options here.
Rules and regulations around HMOs depend on the local authority and differ slightly from one place to another. I suggest you speak to the relevant local authority to understand the requirements in place.
[hr style=”single”]
Question
Limited company – is this compulsory for landlords?
I am building up my buy-to-let portfolio and hope to purchase my third property soon. I have heard there are advantages to limited company status but wondered whether there were any restrictions surrounding minimum numbers of properties or income levels required. Any advice would be gratefully received.
Answer
This is a great question and one we get asked all the time! Since the Section 24 changes in 2016, the limited company lending space has grown significantly, and it’s very landlord-friendly.
Many of these lenders have no limit on the number of properties you own and no minimum income requirement. However, mortgage rates for limited companies are still slightly higher than for individuals, so this is something to consider.
You must seek professional tax advice before making a decision here, as whether a limited company structure is financially suitable for you depends entirely on your circumstances.
[hr style=”single”]
Question
Ex-pat advice needed on buy-to-let
I am a Brit living in France and am considering purchasing a buy-to-let in Gloucestershire, where my family live, to rent out as an Airbnb.
Do you have any ideas if I can get a mortgage in the UK for this and whether there are any lenders who specialise in not only Airbnb/holiday lets but also expat mortgages! I realise this probably very niche.
If I can’t go down the holiday let route, I am happy to rent to private renters but would just like to establish the basic rules first. Thanks so much!
Answer
There are certainly lenders that accept expat borrowers; however, the rates are slightly higher as it is a little niche.
You’ll have more choice of lenders with standard letting compared to Airbnb, although income for holiday letting can be a lot higher. I’d speak to a specialist mortgage broker to look at your options.
[hr style=”single”]
[/col]
