Buy-to-Let: Factors to Consider for a Smart Investment

Here are some issues that lenders may not like when it comes to buy to let properties as well as other factors to consider when making a purchase:

  • Structural problems: Look out for any signs of structural damage or issues with the building’s foundation. This can include cracks in walls or floors, sagging roofs, and uneven floors. These problems can be expensive to fix, and lenders may be hesitant to approve a mortgage on a property with structural issues.
  • Damp: Damp can cause a lot of problems for a property, including damage to the building’s structure and potential health hazards for tenants. Check for any signs of damp, such as musty smells, damp patches on walls or ceilings, or peeling wallpaper.
  • Electrical and gas safety: Ensure that the property has up-to-date gas and electrical safety certificates. These documents are required by law and ensure that the property’s gas and electrical systems are safe for tenants to use.
  • Fire safety: Look for smoke alarms and carbon monoxide detectors in the property. These are required by law and help ensure that tenants are safe in the event of a fire or gas leak.
  • Japanese Knotweed: This invasive plant can cause significant damage to a property’s structure and can be expensive to remove. Take a ladder with you and look over any garden walls.
  • Planning permission and building regulations: If the property has been extended or altered in any way, ensure that the appropriate planning permission and building regulations were obtained.
  • Leasehold issues: If the property is leasehold, ensure that the lease is long enough to meet lender requirements which is usually 85 years, the ground rent is not over £250 pa and the service charge is no more than 0.1% of the purchase price. Also, check for how the ground rent can be increased, any arrears and the freeholder is contactable.
  • Ex-council properties: Properties that were formerly owned by the council may come with some limitations or issues if their is still a high proportion of council properties in the area with limited owner occupier demand.

Other factors to consider:

  • Electricity pylons and substations: These can have a negative impact on the value of a property, as well as potentially affecting the health of tenants.
  • Noisy or smelly shops and offices: Properties located near noisy or smelly commercial premises, such as bars, restaurants, or factories, can impact the quality of life for tenants and potentially impact the property’s value.
  • Railway lines: Properties located near railway lines may experience noise pollution and vibrations, which can be a nuisance for tenants. Additionally, properties located near railway stations may experience higher foot traffic and potential security concerns.
  • Flood risk: Properties located in areas with a history of flooding may be at higher risk of damage, which can impact the property’s value and insurability.
  • Radon gas: Some areas of the UK are known to have higher levels of radon gas, which can pose a health risk for tenants.
  • Rental yield: The rental yield is the annual rental income expressed as a percentage of the property’s value. A high rental yield compared to other properties in the area may indicate that there are issues with the property, such as high maintenance costs or an undesirable location. It’s important to balance rental yield with other factors, such as location, property condition, mortgage rate and tenant demand, when making a purchase decision.
  • Energy performance certificates (EPCs): An EPC rates a property’s energy efficiency on a scale of A to G, with A being the most efficient. From 2025 or 2028, it may be a legal requirement for all rental properties to have a minimum EPC rating of C in order to be let out. It’s important to ensure that the property has an up-to-date EPC and that the rating can meet the minimum requirement, as failure to do so can result in fines and legal penalties. Improving the energy efficiency of a property can also help reduce energy bills for tenants and increase its appeal to prospective renters.

When considering a buy-to-let property, it’s important to thoroughly research any potential issues or limitations of the property before making a purchase. Working with a professional property valuer or surveyor will help.

Looking to invest in a buy-to-let property? Let Searchlight Finance help you secure your buy-to-let mortgage for your investment. Contact us today for a free consultation and expert guidance on your property investment journey.

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