For property investors, buy-to-let can be an attractive proposition, offering the potential for rental income and, over the longer term, capital growth.
But the market has become increasingly diverse, with landlords now considering everything from traditional longer-term tenancies to holiday lets and Airbnb-style short-term accommodation, combining these approaches can make the legal and financial picture considerably more complicated.
That is the subject of the latest podcast episode – Legally Sound hosted by Managing Director, Sarah Reid, joining Sarah to unpick the topic are Hannah Cullen, Richard Reed’s buy-to-let specialist, and Steve Lightley from First Mortgage North East. Together, they explore the considerations investors need to understand when purchasing a property with the intention of using it for different types of letting.
Buy-to-let can take many forms, some landlords may purchase a single property as an investment, while others build portfolios over time. The strategy can also vary, from providing a property to a tenant on a conventional residential tenancy, to furnishing properties for corporate tenants, holidaymakers or short-term visitors.
For Hannah, the first consideration should be funding, particularly for buyers who are not purchasing with cash. She advises: “Not all mortgage products permit short-term or holiday letting, making it important for investors to establish whether their proposed use is compatible with the finance available before proceeding.”
Steve agrees that this is an issue encountered regularly, particularly when moving from residential mortgages to buy-to-let. Steve adds: “Different mortgage products carry different conditions regarding how a property can be used, while lenders can view short-term letting as a potentially higher-risk proposition.”
This is particularly relevant for investors who see the potential to switch between longer-term and short-term lets depending on demand. While that flexibility may be commercially attractive, it cannot simply be assumed that a property can be used in whichever way the owner chooses. Mortgage conditions and the terms attached to the property need to be considered alongside the investment strategy.
The implications can extend into the conveyancing process too, understanding how a property will be occupied and operated from the outset can help ensure the legal and financial arrangements align.
This is where Richard Reed Solicitors’ wider expertise can play an important role with the firm providing a broad range of legal services for individuals, families and businesses, its property team also advises clients on buying, selling and remortgaging property, with specialist knowledge of investment and buy-tolet transactions.
For landlords and property investors, having a solicitor involved at an early stage can provide reassurance that the proposed purchase, financing arrangements and intended use of the property are properly considered. This can be particularly important where a property is intended to operate differently from a conventional residential home.
For Sarah, this practical approach is at the heart of Legally Sound. “The power of the podcast is that it allows us to take complex legal issues and have conversations about them in a way that is accessible and relevant to people’s everyday lives and businesses.
This episode is a great example of why those conversations are so valuable, by bringing together Hannah’s legal and buy-to-let expertise with Steve’s mortgage perspective, we can give listeners a much more rounded understanding of the issues they need to consider.”
richardreed.co.uk