Buy-to-Let is still in vogue

The would-be landlord needs to tread very carefully.

Investors from all socio-economic groups have realised that they can potentially make considerable gains by investigating in bricks and mortar, assuming they approach it in the right way. This is probably why around half of all mortgage lenders now offer buy-to-let mortgages.

Demand for rental property is buoyant. It's estimated that the private rental sector in the UK accounts for around 11% of all homes - and it's growing. (Source: Mortgage Council 2001)

Loan to value
More than half of the UK's mortgage lenders run buy-to-let schemes (Source: FT 2001). The maximum you can usually borrow is 75% of the property's value, so you'll need to find a 25% deposit.

You'll have to satisfy the lender that the property is a viable rental proposition and that the rental income will be enough to cover your costs. As a rule of thumb, most buy-to-let lenders look for a rental income that covers the buyer's total outgoings - which include the mortgage, maintenance costs, ground rent and council tax.

Taxing times
You pay tax on the income you receive from the rent. However, the Inland Revenue allows you to offset costs such as the amount of interest you pay on the mortgage, property management fees, and wear and tear on the property. Tax is paid through your annual self-assessment tax return, where you must declare your income from your investment property. When you sell the property, you could be liable to capital gains tax if the value has gone up.

Location, location, location
Getting the right location should be at the top of your list. Tenants who rent will generally look for easy access to a nearby railway, tube or bus station, and will want to be close to shops, restaurants and health clubs. If you can provide off-road or secure parking, so much the better.

And don't forget that, although a house or flat in the middle of the country or in a quiet seaside town might be picturesque, you run the risk of only being able to let the property for part of the year.

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Calculating the cost of your second mortgage
Interest rate (%)	Interest-only cost per £1,000 per month	Repayment Cost per £1,000 per month
3.00%	£2.50	£4.74
6.00%	£5.00	£6.44
9.00%	£7.50	£8.39
12.00%	£10.00	£10.53
Source: Money Facts 2001

The Financial Services Authority does not regulate mortgages. YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOANS SECURED ON IT. Written quotations available on request, loans subject to status. Insurance may be required.