Buying a property as a rental investment has proved a popular choice in recent years.
According to global financial service company finder.com, in 2023, there were 4.6m buy-to-let properties being rented in the UK, which represents around one in every five households (19%).
Cheltenham and its surrounding areas have not been immune to the trend, with the town’s property market offering a wide range of opportunities for a buy-to-let investor.
Home.co.uk’s Cheltenham Market Rent Summary suggests that the average rent landlords in Cheltenham can earn is around £1,227 per month.
Average monthly rent for a one-bed property in Cheltenham is £802 per calendar month, £1,304pcm for a two-bed property, £1,538pcm for a three-bed property and £2,160pcm or more for a four or five-bed property.
The Cheltenham postcodes that provides the most lucrative yield for buy-to-let investors are GL51 and GL53, with figures showing these gives an average long-let gross yield of 6%, followed by GL50, which provides a long-let gross yield of 5.1%.
The Cotswolds has recently been named the most profitable place in the UK for holiday let owners.
A report by Sykes Holiday Cottages published in May 2024 revealed the area as the top earning region for holiday lettings, with annual incomes averaging £28,500, compared to the UK average of £24,500. Popular locations include Stow-on-the-Wold, Bourton-on-the-Water, and Blockley.
According to the latest figures from the Office for National Statistics (ONS), average private monthly rents rose to an average of £1,151 in the Cotswolds in September 2024, an increase of 2.3% from £1,126 in September 2023.
Buy-to-Let Solicitors Cheltenham
Conveyancing on a buy-to-let property involves a similar process to buying and selling other freehold and leasehold residential properties. However, if you are considering investing in a rental property, there are other factors to consider.
Here, our experienced Buy-to-Let Conveyancers round-up the key considerations you need to bear in mind if you are thinking of investing in a property as a rental investment.
- Buy-to-let Mortgages.
Investors who need to borrow money to purchase a rental property will need to apply for a buy-to-let mortgage. Lenders consider this higher risk than owner-occupier mortgages and the terms and conditions may be stricter.
Features of a buy-to-let mortgage can include, for example, a higher loan-to-value (LTV) ratio than other mortgage products, meaning you need a bigger deposit. You may also face higher arrangement fees and interest rates. Some lenders also impose a borrowing limit that is dependent on the expected monthly rental income and have a maximum age limit for borrowers.
Most buy-to-let mortgages are interest only, which can be helpful in the short-term, but you should consider this carefully as part of your long-term financial planning.
- Restrictive covenants.
Restrictive covenants are restrictions placed on property or land that prevent the owner from making certain alterations or undertaking some practices. This could include, for example, a condition that says a property cannot be turned into flats, used for commercial purposes, or prevents additional structures being built on the land.
Covenants ‘run with the land’, which means they do not automatically expire and are passed down from owner to subsequent owner. They are usually found in a property’s title deeds and should be discovered during the searches your solicitor undertakes ahead of a property’s purchase.
Buy-to-let investors should ensure nothing contained in the title deeds might limit their use of their desired property.
If you are considering investing in a rental property, speak to Langley Wellington. Our property team provides legal advice on all buy-to-let and rental property matters.
Whether you are a first-time investor or an experienced landlord with a large property portfolio, we can offer tailored guidance and advice.
To find out more about our buy-to-let legal services or to speak with one of our team, call us on 01452 521 286 (Gloucester Office), 01242 269 998 (Cheltenham Office), email lawyers@langleywellington.co.uk or fill in this contact form.
- Landlord obligations.
Renting out a property comes with various legal obligations and responsibilities. Landlords must:
- Keep properties safe and free from health hazards.
- Make sure all gas equipment and electrical equipment is safely installed and maintained.
- Provide an Energy Performance Certificate (EPC) for the property.
- Protect your tenant’s deposit in a government-approved scheme.
- Check a tenant has the right to rent your property.
Read more about a landlord’s legal responsibilities here.
Non-compliance can result in legal action and owners of buy-to-let properties must ensure they stay on top of requirements.
- Tenancy agreements.
A tenancy agreement is a legal document between a landlord and a tenant. It outlines the rights and responsibilities of each party, by including important information about repairs and maintenance, break clauses, rent, deposits, inspections and notice periods, for example.
Landlords should seek legal advice from a specialist solicitor with experience in property law to ensure a tenancy agreement is comprehensive and drafted clearly to best protect their interests.
- Tax issues.
A buy-to-let property can be a wise investment, but it is crucial that potential landlords do their homework on the tax implications before deciding whether to proceed with a purchase.
Buy-to-let landlords pay a 3% surcharge on top of residential Stamp Duty Land Tax (SDLT) rates. Any profit a landlord makes from rental income after tax allowances, relief or allowable expenses, will also be subject to income tax.
If a landlord sells an investment property for more than they bought it, they must also pay capital gains tax (CGT) on the profits.
Buy to Let Solicitors Gloucester
Langley Wellington has a dedicated legal department for our specialist conveyancing solicitors. Cotswold Conveyancing Centre offers legal advice on all property matters.
We are experienced in all aspects of buy-to-let conveyancing and can help if you are investing in a property as a source of income.
Our experienced conveyancers will work with you throughout the entire process, guiding you through every stage of the transaction and ensuring you are fully aware of your obligations.
Our buy-to-let legal service includes advice from our specialist conveyancers on:
- Ensuring the property is fit for purpose, including assessing any restrictive covenants.
- Progressing the property transaction though contract exchange and completion.
- Stamp duty.
- Liaising with HM Revenue & Customs.
- Legal issues with mortgages.
- Tenancy agreements.
To find out more about our buy-to-let legal services or to speak with one of our team, call us on 01452 521 286 (Gloucester Office), 01242 269 998 (Cheltenham Office), email lawyers@langleywellington.co.uk or fill in this contact form.
This blog is not intended to be taken as advice or acted upon. If you are seeking legal advice, please get in touch with our team of solicitors.
