The prospect of buy to let investing can be a frightening prospect for prospective buy to let landlords. Many potential investors are scared off by assumed complexities related with becoming a buy to let landlord. We will try and explain some of the main elements below that you'll need to consider if you want to enter the buy to let market.

Finance

Obviously you'll need to finance the purchase of a suitable property which you will then let out. In order to do so you'll need to get a specialist buy to let mortgage. These will be be slightly more expensive than a normal residential mortgage and most lenders will require a higher deposit. Usually LTV (Loan to Values) required on buy to let loans are around the 75-85% mark, meaning your deposit would be the equivalent of 15-25% of the property value.

Tax

You'll need to pay attention to your tax situation too. Any rental income you receive will be liable to income tax. This may mean that you have to start filling in a tax return to the inland revenue (if you don't already). One point worth noting is that any interest you pay on your mortgage is tax deductible. This often pushes buy to let landlords to take out interest only mortgages in order to minimize their tax bill.

Capital gains tax will also be liable on any capital gains when you come to sell the property. There are ways to minimize the charge; for example if you have lived in the property as you main residence during the last three years, you may be exempt.

Management

You should consider carefully how much time you can devote to managing your property. Letting agents can 'fully manage' the rental for you meaning that they will take care of the main tasks such as finding tenants, organising repairs and maintenance, inventories, taking deposits. Obviously the more the letting agent does, the more you'll have to pay them, thus reducing your potential buy to let yield.