If you looked at this article's title and thought, "So what? What will I let happen if I buy? What am I going to buy? ", then you'll want to read this article. First, I want to make it clear that "buy" means "buy a house," and "let" means "rent that house to someone else." It basically means that you buy a house and let someone else live in it while they pay the mortgage. Like everything else, this kind of arrangement has some really good parts and some really bad parts. This is not a deal you should make on a whim, because if you do, you may be sorry for the rest of your mortgage.
How the Buy-to-Let Agreement Works
Buying to let, or buying to rent, means that someone finds a house, gets a loan for it, and then rents it out to someone else right away. The buyer's name is on the deed, but a rental or lease agreement gives the house to the tenant.
What would be the point?
This is a great way to make some extra money, buy a house to sell later for a profit, or buy a house to live in later.
More money coming in
When you buy a house to rent it out, you go through the loan process the same way you would with any other house. Once you know how much you will pay each month for the mortgage, you can decide how much you will charge for rent. You decide what the rent will be, and it can be anything you want. If you pay $500 a month for a place and want to rent it out for $800, you make $300 every month. You can charge whatever you think the market will bear for rent.
Buying For Selling
You can buy a house to rent by taking out an interest-only loan, which usually has the lowest payments for the first few years. If instead of paying $500 a month, your mortgage is now only $400, but you are still charging $800, you will have a lot of money to put back into the house each month. You don't have to spend or save the money you get from renters. Instead, you can put it back into the house by making repairs and improvements. The people who rent from you think they are getting a good deal because you are always fixing up the house they live in. You will be thankful to the renters because they will pay for your mortgage and the repairs you are making. After a few years, you can sell the house for more than you bought it for because of all the work you did to it. This will make you a lot of money.
Getting Money To Live
If you don't have enough money to pay the mortgage right now, you might want to think about renting out your home for a while until you can afford to live there. Or, maybe you want to buy a summer house but can't afford to. You can buy it now and rent it out until you have enough money to pay the extra mortgage yourself.
If it seems too good to be true, it probably is.
Renting is not a great and easy way to make a lot of money and become the next big real estate mogul. There are also some bad things about it.
Landlords and other things that are bad
You are the landlord if you buy a house and rent it out. You have to make sure the rent is paid on time and fix things that break. If you can't fix them yourself, you have to pay someone to come fix them. If you are renting out a house so that you can sell it later for a profit, you need to make sure that the people who live there won't trash it and leave it in a mess when they move out. Any landlord will tell you that having good tenants is great, but having bad ones is the worst thing that could happen. If you don't find tenants who will take care of the property as well as you do or better, you'll probably lose money on the deal.
What now?
If you think being a landlord is something you'd like to do, go out and start looking for a place to buy. Make sure you know exactly what you want to do with the property and get the loan that works best for you. If you don't think you'd be good at fixing the roof, sealing the pipes, spraying for termites, or any of the other many things that need to be done for a house, you might not want to be a landlord. A bad landlord might be the only thing worse than renting to bad tenants.
