Let-to-Buy – a good first move into the world of buy-to-let?

Let-to-Buy is a relatively new trend in the property market but it’s catching on fast amongst homeowners looking to move up, or simply along, the property ladder. The idea is that a homeowner who is looking to move home, often to buy somewhere bigger, holds on to their existing property and rents it out to tenants, rather than simply selling it and moving on.

Why opt for Let-to-Buy?

There are all sorts of reasons for doing this. You might be moving away and want to buy a new home but prefer to keep your current property in case you wish to move back in the future, or you may be moving in with a partner and decide to keep one of your properties as a rental investment.

With London property values continuing to rise, building a property portfolio is a good move for many – a chance to benefit from increasing capital values as well as take advantage of strong rental demand in London. In fact, high rental demand and the healthy investment income it brings, have been the driving force behind this growing trend.

How do you go about it?

The usual method would be to transfer your current mortgage to the new property and obtain a buy-to-let mortgage on the existing property. Most lenders should look on this more favourably than a straight buy-to-let investment.

This isn’t simply an option for ‘accidental’ landlords. For anyone who can afford a deposit on their next home without having to sell their current home, let-to-buy has many advantages. Landlords will be familiar with the local market and they’ll know the property well – so if a tenant phones you up with a problem, you may already know the solution. And you’ll find that mortgage rates are far better than for a typical buy-to-let mortgage, giving you a higher rental yield.

Some rules to remember

You need to be certain that your property will appeal to renters. So a one or two bed apartment in good condition, within ten minutes’ walk of a Tube station should be a great investment and will appeal to young professionals who account for much of London’s rental demand. If the property is more than 20 minutes away from transport links, your rental prospects are reduced.

Also, remember that your former home is now a business – if you’re furnishing the property, use good quality, contemporary furniture and fittings and remove any personal items. Inform your mortgage lender and your insurance company of your plans to rent out the property and make sure you abide by all relevant health and safety regulations. You can find more information in our Landlord’s Guide – Essential Information for Landlords