Passive Income: Buy to Let in the UK

What is BTL/Buy to Let?

If you had some spare cash, maybe £100,000, how would you invest it? Buy to Let is a good option. Generally, it can resist inflation. You must know that if your money is put in the bank, it will actually depreciate continuously. The interest given by the bank is not enough to plug your teeth.

BTL (Buy to Let, Buy to Let) The owner is to buy a house for rent. If you can pay the full amount, you don’t need to borrow money from the bank. The house you buy with the full amount is yours. You can do whatever you want. You can live or rent it if you want.

Under normal circumstances, we can pay a down payment (at least 25% for BTL), and then find a bank for a loan, which means that you and the bank partner to buy the house. The house bank is also involved, so there is a bit of an overlord clause. For example, the house can only be rented out and cannot be rented out to one’s relatives. This is because the bank lends you money, and you use the rent of the house to pay the interest. If you rent it out to relatives, you are afraid of not getting the rent back + damage to the house. These are all risky to the bank.

Buy-to-let conditions

The conditions of buying a house for rent are not as difficult as Residential. On the contrary, for banks, the risk of buying a house for rent is very small, because you don’t live in it yourself, and you use the rent to repay the interest loan. However, the bank will do a survey and have requirements for rent. The general requirement is 140% of your monthly mortgage loan. For example, if your monthly loan repayment is 1,000 pounds, then the rent must be at least 1,400 pounds (average).

There is no particular requirement for the applicant’s job salary, and even no salary certificate is required. Some banks are stricter and require an income certificate of about 10 to 20K a year. It is recommended to look for Mortgage Advisor. They generally have channels to find a bank to get a loan. Most of the paid Mortgage Advisor services are fast and good, and the cost ranges from a few hundred pounds. You have to pay after the loan application is approved.

Is the house worth investing in? Rent-to-sales ratio

Whether the house is worth investing in depends on the return ratio. You can calculate the rent-to-sale ratio, which is the monthly rent divided by the price of the house. Generally, it is between 1:200 and 1:300 per month. The house has to be lived in to make money for you, otherwise it is a liability. Because the house has to pay various fees, if no one lives, the landlord also has to pay Council Tax . If the house is empty within two years, the city government will make you pay 50% or even 100% more tax.

Tenant + Agent + Insurance

You can’t guarantee that your tenants will love your house, so you have to buy insurance, the kind of Landlord Buy to Let insurance, and add some emergency protection, such as heating failure, etc. If the house catches fire, it is definitely not the tenant’s compensation. Insurance is necessary, and the bank also expressly stipulates it when it lends you a loan.

Some tenants have a lot of problems, and they come to you to repair the house every three days. If it is troublesome, you can let the agency handle it completely. Of course, the agency will usually charge you 10% of the rent. If the house needs to be repaired, the agency will contact you first, and you can find it yourself. Contract workers can also be found by intermediaries (it will be expensive).

You can also buy that kind of insurance, that is, if the tenant deliberately fails to pay the rent (for example, has no money), he will not leave. In this case, it is very difficult to drive the tenant away in the UK, and it will take several months of legal procedures, and this is the case. The rent is paid by the insurance company. Especially common during epidemics .

loan

For Buy To Let, the monthly interest is generally set, and the principal can be repaid at your own pace, so that even if the house is not rented for a short period of one or two months, you only need to repay the interest. Generally BTL loans are renewed every five years, and the tenant contract is one year. The last time I met a tenant who moved to Cambridge to work, but the probation period was not over, so they had to move out. The agency quickly found the next tenant and moved in the next day, which greatly reduced the number of landlords (we ), we actually only pay a few extra pounds for one day’s Council Tax.

Tax

The rental income of the house is also your income, so you have to pay tax to the HMRC British government, and you need to self-report Self Assessment every year.

Is renting a house a passive income?

Generally speaking, yes, because the investment time is small, the tenant will wait to collect the money after buying the house in the early stage + cleaning the house. As long as the tenant does not bother, your house is good enough, and generally you don’t need to worry too much. In the monthly bank account There is money coming in, and then you can make a small profit after deducting expenses (interest + house maintenance). Besides, the house will also appreciate in value, at least outperforming inflation should not be a problem.

Several methods of passive income

• Passive income: virtual currency can earn 12% annual interest (DeFi blockchain financial products)
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• Sell ​​NFTs (EOS Blockchain) on Voice
• Some ways to save money and make money in the UK

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