Buy-to-let is when a property is purchased specifically with the intent of renting it out to generate income. Buy-to-let can make an attractive investment, whether you’re considering it as a full-time job or a potential side-earner. Investors can make money by generating a profit on the monthly property income when the rent received is more than the cost of the monthly mortgage repayments.
There are a number of considerations to take into account when considering buy-to let in Jersey, so we’ve put together this handy guide to help you understand what to expect when becoming a buy-to-let investor.
There are a number of aspects to consider before entering the buy-to-let market, most commonly:
If you are a ‘Registered’ or ‘Entitled to work’ individual (previously classified as Non-Qualified), you may purchase a share transfer property, as the sale of shares are not governed by Jersey Housing Law. The Housing Laws will control who occupies the property however. If you are purchasing a freehold property you must possess the necessary housing qualifications.
For more about Jersey Housing Qualifications and what they mean, see our guide:
All property transactions in Jersey are subject to a number of tax implications. The type of tax you must pay will depend on the type of property you are purchasing.
If you are purchasing a freehold or flying freehold property you are liable to pay Stamp Duty on your purchase. You can use our handy Stamp Duty Calculator to work out how much you will need to pay in addition to the asking price. You can find the calculator on each of our property listings. Keep in mind that Stamp Duty is assessed on the market value of the property, rather than the price, so transactions at an undervalue will incur Stamp Duty at the rate applicable to the market value of the property. On top of this amount, there is a £20 Jurat’s fee applicable to freehold property purchases.
Residential share transfer properties are subject to Land Transaction Tax (LTT), which is payable at the same rates as Stamp Duty. Share transfer properties are not subject to a Jurat’s fee, as share sales do not pass through the Royal Court.
The States of Jersey have proposed extending the bands and taper rates of Stamp Duty and Land Transaction tax, to take in 2019. Find out more here.
It is important to remember that Stamp Duty or LLT is also payable on the amount of any mortgage taken out to finance the transaction, either by way of what is known as ‘hypothec’ over a freehold property, or a ‘security interest’ over the shares relating to the share transfer property. The Stamp Duty or LLT rate for such borrowings is generally 0.5% plus an £80 registration fee.
All rental income is subject to income tax in Jersey, although some of these costs can be mitigated by claiming the relevant tax reliefs. It is important to declare any income from rented properties when filing your annual tax returns.
Unlike the UK, Jersey does not have a capital gains tax regime, so if the time comes when you decide to sell your property, this will be subject solely to the usual property transaction costs.
Before applying for a buy-to let mortgage, ensure you have fully assessed your finances, taking into account the relevant bank fees, legal fees, surveyor’s fees, stamp duty or land transaction tax and property maintenance costs.
Then, your next step will be to visit a mortgage advisor, who will be able to advise you on the range of buy-to-let mortgages available.
For a trusted local mortgage provider, contact:
The Mortgage Shop
Once your finances are in order and you’ve decided on what type of buy-to-let property is right for you, it’s time to buy! Take a look at our sales page, or even better, register with us and let us do the hard work for you!
For more information on buying property in Jersey, see our Property Buyer’s Guide, which contains useful information on viewings, making an offer, property surveys, conveyancing and instructing a lawyer.
Once you’ve purchased your buy-to-let property, there are a number of different insurance policies that you should consider:
Buildings insurance policies cover the financial costs of repairs should your property become damaged or destroyed by something outside of your control. These policies typically cover fixed aspects of the building structure, such as the roof, walls, floors and permanent fixtures. Building insurance policies generally include damage caused by, but not limited to:
It’s important to always thoroughly check what areas of damage are covered within your policy to ensure that there are no nasty surprises if you ever need to make a claim.
Whether you are letting your property furnished or unfurnished, it is always a good idea to take out contents insurance to protect your own items such as freestanding appliances (e.g. white goods) and any decorative items such as furniture, carpets and curtains. Your policy will only provide cover for your items; your tenants will be responsible for insuring their own belongings.
Landlords liability insurance covers you in the event of the injury or death of tenants and visitors on your property.
Being a landlord can quickly become a time-consuming role. Consider the level of involvement you wish to have with your property and if you don’t have the resources available to dedicate, then choosing a letting agent may be a better alternative for you.
If you decide that becoming a landlord is the right avenue for you, your next steps will be:
The Rent Safe scheme is an opt-in accreditation scheme, designed to improve rental accommodation standards. The scheme holds landlords accountable for maintaining their property and also helps potential tenants identify trusted landlords who prioritise tenant welfare and pro-actively resolve issues.
Details on how to register for the Rent Safe scheme can be found here.
You must ensure that your property conforms to the basic minimum housing standards required under Jersey law, ensuring that no elements of your property pose a risk to health, safety and wellbeing. Before you let your property you should also make sure that your fire safety measures are up to date and working. Your property may also require a fire safety certificate. Now is the time to also address any maintenance issues and make sure that your plumbing and heating are in good working order.
If you are decorating your property, it is best to use neutral colours and install hard-wearing, easy-to-clean carpets and flooring. Once your property is ready to let, take well-lit photos of each room to use when advertising for a tenant.
There are many different avenues you can use to find a tenant including:
Holding viewings can be time-consuming and often frustrating, especially when prospective tenants are late or don’t show up. However, it’s important to take the time to continue to meet prospective tenants until you find the right tenant for your property, rather than rushing the process.
From a practical perspective, when choosing a tenant you must ensure they have the required housing qualifications, a valid registration card and solid references, either from a current employer, previous landlord, or both.
Once you find the right tenant, it’s time to prepare a tenancy or lease agreement. Tenancy agreements are governed under the Residential Tenancy (Jersey) Law 2011 and a number of provisions must be included within the agreement, by law. If you are unsure of how to proceed in creating a tenancy agreement, speak to one of our lettings agents or your property lawyer.
Condition reports detail the physical condition and state of repair of the property and are a compulsory addition to every tenancy agreement. The first condition report must be completed within 7 days of the tenant agreeing to move in with any amendments noted at the end of tenancy. All items must be agreed upon and signed by both the landlord and tenant. If a condition report is not completed, landlords can be fined up to £10,000.
Find out more about condition reports here.
By law, landlords must place all rental deposits in the tenancy deposit scheme, mydeposits Jersey, within 30 working days of receiving it from the tenant. You can find more information about the deposit protection scheme on the mydeposits Jersey website.