Buying a property for the purpose of renting it out .

Buy to let mortgages come under the ‘Specialist Lending' umbrella so using inside knowledge of a broker specialising in this field helps. We often have access to better mortgage deals.

You will need to put down a bigger deposit on an investment property than that required for your own home (Residential). The deposit required for a buy to let property is typically around 25 per cent. Lenders will also usually employ a rent-to-interest cover formula; this is the proportion of rent received compared to the mortgage payments per month. The rent-to-interest cover multiplier is usually around 125 per cent e.g. £500 per month rent allows an interest payment per month of £400. Thus the size of mortgage available to you will depend on your rental income.

Don't forget that there are extra costs to consider too e.g. stamp duty (e.g. one per cent on properties of value between £175,000 and £250,000), valuation and legal fees.

When purchasing a buy to let property you may also have to pay tax at your marginal rate (dependant on total income) on profits from rents received - less allowable expenses ranging from decorating costs and maintenance to letting agent fees and even interest of mortgage payments.

It is also important to note that when you come to sell the property the Capital Gain on a Buy-To-Let could be taxed at 40% (assuming a profit is made!) after the initial £8,500 tax free amount. By putting the property into two names you are effectively doubling the tax free amount as there are now two Capital Gains tax personal allowances.

Another consideration when investing in buy to let property is maintenance; are you prepared to deal with such things as repairs and emergency calls yourself or would you prefer to employ an agent to do this on your behalf? The typical cost for this would be up to 16% + VAT of your rental income. It may be worth taking a guild of letting and management course, which can take around six months to complete. The benefit of these courses is that you will be more equipped to deal with these things yourself and cut out the agents and their fees.

For a more secure investment it may be worth looking into public sector lending where you can get a guaranteed rental. The Local Authority (LA) will let out your property for a period of generally 3 to 5 years. The advantage is that you are guaranteed rent; you do not have to pay management or maintenance fees. In exchange the local authorities get a discounted rate of around 15% although this may restrict the number of lenders available as some put restrictions on Local Authority tenants.

Insurance is a must! Most landlords also get additional insurance to protect their investment if the property is furnished. Some landlords opt for additional rental guarantee insurance to protect themselves against void periods (tenantless periods).

Location, location, location. You have heard it all before but it is extremely important to get the right location for a buy to let property. Think about businesses and universities, is it near transport links and is it walking distance from shops.

When looking for a property remember you are buying for your potential tenants and not for yourselves (two bedrooms are always a good bet). Be careful of heavily marketed off plan developments, this means a large number of new apartments for rent.

If you are not using a letting agent that will do it on your behalf, drawing up your own Assured Shorthold Tenancy Agreement (ASTA) is crucial. The agreement, which run for either six or twelve months, can be downloaded from the ARLA (Association of Residential Letting Agents) website. Remember that under the housing act of 1988 the landlord is required to give a two month notice period to tenants before the end of the relevant fixed term. It is also important to collect several references before signing a contract; bad tenants can be a nightmare. Write a clause in the ASTA so that either party can leave the arrangement if it is not working.