Buy to Let Ex Council Flat

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Buy to Let Ex Council Flat

Anthony talks all about the mortgage process for ex-council flats.

Podcast approved by The Openwork Partnership on 7/6/2024

Can I rent out my ex-council flat?

You can indeed, but it massively depends on a few factors. First of all, if you’ve got it on a residential mortgage, you definitely can’t rent it out unless you get permission from your lender. This is called a Consent to Let.

That gives you permission to turn a residential mortgage into a Buy to Let for 12 months. After that you either have to apply for another Consent to Let or change it into a Buy to Let. 

If you’ve got a standard Buy to Let mortgage, that is issued on the premise that the property will be rented out, so that will be absolutely fine.

Can I get a Buy to Let mortgage on an ex-council house?

The only difference with an ex-local authority or ex-council flat in comparison to a standard flat is the potential issue of resalability. 

If the lenders believe there will be issues in selling the property later on, they will be reluctant to lend. There could be a few different risk factors, such as the rest of the block mainly having council tenants, or it being a high rise building with 15 or 20 storeys. That could reduce the amount of lenders we can approach. 

But it’s definitely doable. It just depends on the individual resalability factors of the flat and the rental income.

What are the pros and cons of buying an ex-council flat?

One of the big benefits of buying an ex-council flat to rent out is that you can often buy a slightly bigger property for your money. That is a massive plus. 

Prices aren’t usually as expensive as with standard flats in the same area. You tend to get a bit more for your money. And, in some areas, the rent you will get will still be the same as on a non ex-council flat. 

In terms of downsides, there’s the future resalability. This is what the lenders base everything on, so there can be hurdles in the way of the mortgage if the lender’s not happy with the particular area or the ownership of the properties there.

Do many lenders look at Buy to Let for ex-council flats?

Yes, there are absolutely loads. I’ve got a system in front of me where we can scour the market very quickly. For ex-council properties, other than five or six particular lenders, they can all do it.

Again, it’s all down to the actual individual property itself and the lender’s criteria. A lot of the lenders might say yes in principle, but once they go and value the property they may potentially kick it back.

Are ex-council flats valued lower?

They are often valued lower, mainly because the areas they are in aren’t always as affluent,  or there’s not been much investment locally to increase the house prices. 

If you look at a council area, or one that was council owned in the past, compared with a brand new housing development that has had a lot of time, money and effort put into it, 99% of the time the local authority area works out to be cheaper. 

That isn’t always a bad thing, because although the flats are cheaper to purchase, there’s often not a huge discrepancy with the rents. So you can potentially get better yields with these properties. 

In fact, in Canvey Island where we live, a standard three bedroom property may sell for £280,000 to £300,000, but in a particular ex-local authority area you can buy the same size property for around £210,000 to £220,000

Some of them have unusual constructions, but they still rent out for the same price as for the more expensive properties. 

I have a couple of clients whose sole strategy is buying these kinds of properties. The money they put down is substantially lower, but the yields they get is very similar to those for a property you may pay another £60,000 to £80,000 for.

Is it hard to sell an ex-council flat?

Not necessarily. There will be a market there for it. If it’s in an area where lenders may potentially not want to lend, there can potentially be issues. 

But if the lender is fine with it, it’s in an area that’s not majority owned by a local authority or local authority tenants, there shouldn’t be any issues with selling. Having a good estate agent will be the ultimate factor in getting this sold for you. 

Speak to an expert

Our highly experienced Advisers are ready to help you with either buying or remortgaging a home, protecting your property and lifestyle along with saving you time and effort, ensuring you have a competitive deal right for you.

Will I have trouble remortgaging my ex-council flat?

No, not in the slightest. Let’s say we got you a mortgage today for a Buy to Let on an ex-council property. When you go to remortgage in two or five years, you can always do something called a product transfer. 

Your current lender will just offer you a different deal based on what they currently have on the market at that time. The only time it could potentially be an issue is if you’ve had to go with a niche lender to get the particular property, because other lenders have kicked it back. 

You may then be stuck with that one lender. 

But if you have been able to get a mortgage, you’re always going to have options to stay with that same lender. If it’s not in a weird and wonderful area with majority council tenants, there should be other options available for you.

How do I find council flats in my area?

If this is a strategy you’re interested in and you want to invest in ex-council owned properties to rent out, the best thing to do is speak to an estate agent and ask if they have any ex-council properties. 

If you live in the area you’re looking at investing in, you probably know where to look. You can go on Rightmove and draw a grid around that area to get notifications. The second a property is listed in the area, you will get text messages and emails to highlight that new listing.

Can I still get a Buy to Let mortgage on an ex-council flat if I’m self-employed?

You can. As long as you own your own residential property already, they won’t pay too much attention to your income. A lot of lenders do need a minimum income, from £25,000 up to £40,000, so if you’re self-employed there will be ample lenders out there for you. 

The main thing that the lenders would look out for is the rental income for the property. As long as income for the property stacks up, and you can prove you’ve got some form of income from self-employment, there shouldn’t be too much of an issue in getting a mortgage – subject to credit score and valuation on the property, of course. 

Can I get a Buy to Let mortgage on an ex-council flat if I have bad credit?

Bad credit will always limit your options. Some lenders may disregard a certain amount of poor credit – for example, if you had an issue five years ago, it will have much less impact in comparison to something five months ago. 

It may mean that we need to approach a niche lender, and because of that, interest rates might be slightly higher and your return on investment may be slightly lower. These lenders believe that they’re taking a higher risk with you – because in the past you haven’t been able to keep up with your payments.

Can I still get a Buy to Let mortgage on an ex-council flat if I’m a first time landlord?

The only time that might be a bit of a sticking point for you is if you’re a First Time Buyer and a first time landlord. A lot of lenders want you to own your own residential property before you go down the Buy to Let route. 

If you already own a residential property, the majority of lenders are absolutely fine with you buying a property and being a first time landlord.

What else do we need to know about getting a Buy to Let mortgage on an ex-council flat?

If you are looking at applying to buy a property that’s an ex-council flat, it’s just a case of speaking to your mortgage broker well in advance about what you’re planning. 

As we mentioned, if it’s a high rise tower block that’s majority occupied by council tenants, it may restrict your lender options. 

Speak to your mortgage broker upfront, so when we’re doing the research we won’t waste your time applying to a lender that won’t actually be able to accept you. 

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

SOME BUY TO LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.

Bolt Mortgages is a trading name of Just Mortgages Direct Limited which is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.

Approved by The Openwork Partnership on 7/6/2024 

Your home may be repossessed if you do not keep up with your mortgage repayments.