Buy to let Process | NatWest

The buy to let process

There's a lot to consider when buying a property to rent out. We explain the process to help you know where to start.

Check how much you can borrow

Before you start looking at properties, it’s a good idea to talk to a mortgage lender to get an idea of how much you might be able to borrow and how much repayments will cost. Buy to let mortgages are different to normal residential mortgages, because the amount you can borrow doesn’t solely depend on how much you earn. A minimum salary criteria may be required, but this is dependant on the lender.

 

The maximum you can borrow is linked to the amount of rental income you expect to get. Lenders usually need the rental income to be 25-30% higher than your mortgage repayment, and you’ll usually need a 25% deposit.

 

Don’t forget, you’ll also need to set aside some money to pay for other costs like solicitor’s fees, surveys, mortgage costs and Stamp Duty (or LBTT in Scotland). On top of that, you might have to pay agents fees, for redecorating and ongoing maintenance costs. Decide if you’ll use agents to manage the property or manage it yourself.

Decide what you're looking for and where

Do your research. Where do you want to buy? Nearby so you can manage the property yourself, or somewhere further away where the return, or yield, will be greater? Who are your target tenants – students, a family or young professionals? Do you want somewhere that’s ready to let or somewhere that’s needs renovating?

 

Look at websites like Zoopla to see how much properties are being rented for in the area. Speak to local estate agents and ask what types of properties are currently in demand. Draw up your own checklist and work out what are must-haves and what isn’t essential.

Start house hunting

Register with estate agents and start looking on sites like Zoopla. Sign up for email alerts so you’ll know as soon as a property that meets your criteria is listed online. And when you find something that you like, call the agent and arrange a viewing.

 

Remember to think like a landlord and about your target tenants. You won’t be living in the property so don’t think about it emotionally. Think of it as an investment. Look for a property you can rent out easily.

Make an offer

When you’ve found the right place, make an offer through the estate agent. Remember, the sale price is what the seller hopes to get and not necessarily what they realistically expect. You may be able to negotiate a lower price. Make sure you know how much you’re prepared to let the seller push your offer up.

 

Don’t forget the estate agent is working for the seller and a reduced price could lower their commission – so make sure they put forward every offer to the seller. Know what you can afford and stick to it.

Offer accepted? Time to finalise your mortgage

Make sure you’ve got a solicitor or conveyancer lined up. They will take care of the legal transfer of the property from one owner to another and do all the necessary land searches to check for past and potential problems.

 

Your Buy to let mortgage will need to be arranged so speak to your lender about what you need to do. You may need to show them that you have a tenancy agreement ready and that you’ll be able to cover the mortgage if the property is left empty for any period of time. They’ll also need to know what the property is worth so will arrange for a Standard Valuation.

Surveys and survey results

While it’s a legal requirement to have a Standard Valuation carried out, you might like to get a more detailed survey to aim to avoid any nasty surprises later. You can find out more about the different types of surveys in our jargon buster.

 

If your valuation or survey highlights problems with the property, get a tradesman or builder to quote how much it will cost to fix it. Use this information to lower your offer and renegotiate on price. Be prepared to walk away if you need to.

Exchange contracts

At this point your solicitor or conveyancer will have carried out all the land searches that are needed. You’ll need to have buildings insurance now too, just in case something happens to the property before you move in.  You’ll be asked to sign a contract that legally commits you to buying the property. 

 

Money will be moved, which your solicitor or conveyancer will arrange, and you’ll need to pay your deposit. The signed contract will be exchanged with the seller’s solicitor or conveyancer, and the two sides will agree a date to complete the sale. Your solicitor will also prepare for the transfer of deeds.

 

Completion

It’s time to pick up the keys from the estate agents to your new investment property. This is when the property becomes legally yours.

 

All the forms will have been signed, Stamp Duty (or LBTT in Scotland) has been paid and the money has been transferred to the seller’s solicitor.

Get ready to rent

Does the property need to be renovated or is it ready to rent? 

 

Make sure you stay on the right side of the law and know your legal obligations as a landlord and what taxes you’ll need to pay.

 

If you’re renting out the property furnished, it might be a good idea to take out contents insurance. If you’re redecorating, use plain styles and muted colours that won’t date.

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Useful links

There's a lot to think about when buying a property to let. Here are some useful links to help you research your investment.

Impartial advice about Buy to let mortgages
Money Advice Service

Safeguard a deposit
Deposit Protection Scheme

Understand your obligations
Landlord responsibilities

Support for landlords
National Landlord's Association

 

Research rental prices
Zoopla

About income tax for landlords
Paying tax

Work out what it'll cost
Stamp Duty Calculator

Find a surveyor
Royal Institute of Chartered Surveyors

These links are to non-NatWest websites. NatWest is not liable for the accuracy of the information provided on these websites. 

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A buy to let investment property can be a big commitment and property values can go down as well as up. It can be a long-term responsibility that you can't just put your money into it and forget about.

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