Funding a property to buy-to-let is different to funding your own home. The key difference is that you need to approach buying to let as a business, throw personal choice and preference out the window and consider carefully how and what you spend money on within the property. You may need some professional advice from your preferred real estate company in Malta.
There are specific costs you will come across when buying and preparing a property for letting that you need to add to the formula when you are looking for a buy to let property in Malta. You have to calculate the notary fees, stamp duty, tax on rental, architect fee’s if they are required, as well as the costs to redecorate and furnish the property. You have to keep your eye on the ball as there will be real estate agents in Malta that will calculate a percentage rental income without including these costs so ask the question. They may not do it maliciously but only through inexperience and lack of training so you need to always be a step ahead. Especially in today’s market, if you buy incorrectly you may find yourself with a financial burden that you can be stuck with for a while until you manage to sell. You also need to calculate that if you are buying a property to let in Malta or Gozo then you need to plan long term and look at eventual appreciation of the property.
It is recommendable to speak to an accountant and view what expenses you can claim back against rental income. If it is furniture, plumbing works, rental commission, a brand new kitchen, VAT from rent or other expenses it is important that you are in cue. Planning is key.
However, as with buying a property for yourself, one of the first considerations along with the above should be how you are going to fund the purchase. You may have the cash to buy the property outright, or need to part fund and part-borrow. You may be able to borrow more money from your existing lender, or you may be able to borrow most of the money through a buy-to-let mortgage.
As this is a business and not a personal purchase, most investors prefer to borrow as much as they can. The reason is that any expenditure on arranging the mortgage, such as advice and fees for securing the loan plus the interest paid on the mortgage, is tax deductible. However you decide to do it, if you borrow you must advise a lender in writing that you intend to buy-to-let. A real estate company with a letting department will be able to assist you on where to go and will be able to value the property for bank purposes.
RESEARCHING POTENTIAL PROPERTIES
It is important that you do our research and find out what customers are renting, who are renting these properties, what location is the most propular and what types achieve best rental income. One would not think that percentage of rental income achieved from a one bedroom apartment would be more than a three bedroom apartment and neither would anyone think that a appreciation of a one bedroom apartment would be less than a luxury apartment in Portomaso.
It is important that you lay all the cards on the table with your real estate agent and discuss all possibilities. View as many properties as possible and consider the options so you make a knowledgable decision.