What to consider when buying a property to rent out

Purchasing a property for your own use or to rent out is a big investment.

Becoming a landlord is a commitment, which lasts longer than the first decision to purchase the property to gain an income.

If you want to get into the letting market, do you know what you need to think about?

Here are some practical questions you need to ask yourself:

• Is it the right time to invest? If you do not want your money tied up for a reasonable period of time, then buy to let may not be right for you.

• Have you researched the local buy to let market? Try to reduce risk and purchase the property at the right time.

• Do your sums - can you keep up the mortgage payments if you are not receiving rent on the property? Can you find the deposit to purchase the property?

Is buying a property to rent out worth the money? What will the value (capital growth) of the property be and what are the overall running costs for the property?

To answer these you need to work out your ‘yield’. Working out rental yields is not hard. If the property is worth £100,000 and it was rented out for £10,000 per year, then your gross yield would be 10%.

£6.600 divided by £100,000 is 6.6%. This represents the net rental yield.

Tax must be paid on the money you receive as rent and capital gains tax and inheritance tax are also relevant.

It is best to speak to a specialist to discuss yields and tax in more detail.

You may own a property that you want to rent out. Here are some important things to think about before you go any further.

Is there a mortgage on the property? You will need to obtain the lender’s consent to the letting and you may need to change your mortgage product to a 'buy to let' mortgage.

A lender may want to see the tenancy agreement and want additional clauses added.

Contact your building insurers to tell them that you are letting out the property - if you don't, your insurance is void.

If your property is leasehold (which is very rare in Scotland) then: check that the landlord will allow you to let the property; obtain written consent before letting; check how much the service charges and ground rent are; check the term of years left on your lease.