Renting a home can give a high return, which is why it is increasingly common to invest in a home to later rent it with the aim of obtaining great benefits. However, there are several factors to take into account when buying to rent.
The main one is to analyse future earnings to see if renting is worth it or not. In this case, the best option is to use our home rental profitability simulator and contact our team of experts for advice.
Learn here more about renting your house from SPV Mortgages. Let us begin!
Buy Housing to Rent
The real estate market is considered one of the most stable for investors since real estate is tangible and appreciates over time. That is why there are more and more ways to invest in housing to obtain passive income.
How to carry out a real estate investment or another only depends on the profile of the investor. Some of the most frequent investment options are:
- Buy Housing to Rent
- Buy to Reform and Sell
- Buy to Sell
- Crowdfunding
However, one of the best-known options and the one that we will talk about in this article is the fact of buying to rent. It is one of the best strategies to obtain long-term profitability.
5 Keys to Keep in Mind If You Want to Buy to Rent
Apply for a Mortgage
In this case, unlike crowdfunding, it is you who has to provide all the necessary capital for the purchase of the home. For this reason, if you decide to choose to buy a home to rent, you should surely request a mortgage to finance the purchase.
Banks usually ask to offer 80% of the appraised value, with which, as a buyer, you must have the remaining 20% ​​and other expenses associated with the purchase of a flat.
It is important to set a competitive price that in turn allows you to pay the mortgage and additional expenses. Calculate the profitability of your rental before setting a price.
Home Purchase Expenses
In many cases, we assess whether the operation is profitable or not based on the sale price of the property. However, one of the factors that you must take into account is the expenses of buying a home without a mortgage. Since, in both cases, the additional costs associated with the purchase of the property must be considered, as well as taxes.
Buy to Let Based on Location
One of the fundamental aspects before buying to rent is to analyse the area in which the property is located. Is it in a highly demanded-neighbourhood? Do you have services nearby?
All these factors can condition the rental price to increase over the years, and therefore, achieve greater profitability. So it is important to study the location and analyse all the potential before making any decision.
In addition to the specific area, we must also take into account the city. As is logical, there are cities where it is more profitable to invest in rentals. Find out and compare all the options available to you.
Housing Type
It is important to know the needs of the sector. What are the most demanded apartments in that area? How many rooms does it have? The type of housing will help us determine the target audience we are addressing.
If it is an area where there are many students, they probably do not opt ​​for long-term rentals. However, if it is a large house in a residential area, you should surely focus on families with children. In this way, every little detail matters, both the number of rooms and whether it has a terrace or not.
Finally, the characteristics of the home will also help you determine the value of the property, since it is one of the factors that influence when calculating the profitability of the lease.
There are Risks
Although it is one of the most traditional and common ways to invest in real estate, it is not without risk. Firstly, you must find tenants and, secondly, that they are solvent and reliable. On the other hand, it may be that you find them but they stop paying the monthly payments. In this case, it is important to have non-payment insurance to cover any incident.
Do You Know What Home Rental Taxes Are?
When you decide to rent your apartment, you have to take into account that there are some home rental taxes that you will have to pay, but also how to declare it in the Income.
Council Tax: What It is And Why You Have to Pay It
When renting a house in the United Kingdom, in addition to the rental price, there are various expenses and bills that we must take into account. Among these expenses, we find the council tax.
What is Council Tax
The Council Tax is a tax that every home in the United Kingdom must pay. It is a monthly payment that we make to the government to pay for public services in the district, such as garbage collection, maintenance of streets and gardens, and libraries…
How Much is the Council Tax?
The Council Tax is calculated according to the cadastral value of the house and the district in which the house is located. Taking these two factors into account, homes are classified into groups ranging from group A to group H. In the UK this is called a “Band” and basically, your home will be within a “Tax Band” and it will correspond to a letter from A to H.
Knowing the postal code of your home, you can find out what letter of the Tax Band the house in question has, you simply have to enter the postal code on this website: Council Tax. You can access the official website of the town hall of the district where the house is located to learn the amount of the council tax after you know which Tax Band corresponds to the home.
Why It is Important to Know How Much the Council Tax is?
It is important to know how much the Council Tax is for the house you are thinking of renting because you will have to pay it for 10 of the 12 months of the year. So to the monthly rental price, you must add the cost of the Council Tax. It must be paid whether you own a home or rent it or if you are in a shared flat.
The cost of the Council Tax may occasionally be included in the rent for a room or a house. If so, there is no need for concern on your part. However, if council tax is not included in the rental price, it is something you should consider because, depending on the district (borough) in which your home is located, council tax can range from £600 to £ 1600 per year. As you can see, this is a difference of almost £1000 annually.
Exceptions
Yes, there are exceptions, and that is that if you are a full-time student you do not pay the council tax.
