In May 2017, the Financial Times (FT) published its guide to investing in complex buy-to-let property.
Simple buy-to-let properties are houses and flats let to one household, but other arrangements are often defined as ‘complex’. Houses of multiple occupancy (HMO) are let to a number of tenants. The most common type of HMO is student housing.
Multiple-unit freehold blocks are several units of residential property in one freehold title. These include blocks of flats and large houses converted into flats.
Although these properties are classed as complex, finding a commercial mortgage to finance their purchases is not too difficult if using a mortgage broker.
The FT has a list of points to consider before investing in complex buy-to-let property, and these need to form part of a detailed business plan.
First of all, property investing can primarily be seen as a way to generate an income, or an investor can be more concerned with capital growth.
The next consideration is the type of tenant, as this will influence the location of the property. Some areas are attractive to families, while others are more student-orientated.
Voids (periods when the property is empty and not generating any income) are an obvious difficulty for landlords. The National Landlords Association recommends that landlords budget for an average of two months a year when the property is empty. There will also be refurbishment and maintenance costs.
Finally, the prospective landlord needs advice on how much tax they will pay on their rental income.