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Should I Invest In Buy-to-Let Properties?

The number of landlords investing in property has fallen by 9.1 per cent for the first time. However, buy-to-let can still be a popular source of income for many landlords.

Are you considering investing in a buy-to-let property? We’ve put together a list of the benefits and risks associated with buy-to-let.

What is buy-to-let?

A buy-to-let property is a property which you buy with the intention of renting it out to tenants, rather than a property you may have previously lived in.

Investing in a buy-to-let property differs from just letting out a second home, as you’re essentially responsible for running a small business. As a result, you need to ensure you’re clued up and fully aware of all the elements of being a landlord.

Before you take a step into the world of buy-to-let, make sure you’ve considered aspects, such as landlord insurance, as well as the legal responsibilities for tenants including EPC ratings, the Fitness for Human Habitation Act and EICR reports.

The Benefits

There are plenty of benefits that come from owning a buy-to-let property.

For starters, property is often seen as an attractive form of investment due to its low risk and long-term returns. In fact, investment in buy-to-let has outperformed other assets in the last 10 years delivering a 92 per cent return. It has also even outperformed gold (60 per cent), cash (16 per cent) and fine art (-4 per cent).

If you’re concerned about the costs of a buy-to-let property, one of the benefits is that landlords can claim back some of the associated costs against tax. These include mortgage interest tax relief, insurance, letting agent fees, as well as some maintenance costs. However, landlords do need to bear in mind that mortgage interest tax relief is being phased out, and will only be 20 per cent from April 2020.

With statistics showing that almost one in four households in Britain will be renting privately by the end of 2021, property is becoming a lucrative market. This means there could be a lower chance of landlords left with empty properties.

Plus, if landlords select the location of where they buy their buy-to-let property, they can reap additional rewards. The latest research shows that some of the top most profitable postcodes in the UK include L6 and L1 in Liverpool, SR1 in Sunderland and TS2 in Middlesbrough.  

If you’re looking at a particular area for your buy-to-let property, why not use our property valuation tool to get an estimate of potential rental yields?

The Risks

Unfortunately, buy-to-let properties do also come with a few risks attached.

Owning a property has more costs involved than just the initial investment. Properties require continual investment, such as the ongoing maintenance of a property’s condition, which cannot be overlooked. With the recently introduced Fitness for Human Habitation Act, it’s even more vital that landlords ensure the properties they rent out are safe for tenants.

While the private rented sector is booming, this doesn’t guarantee that your property will house tenants constantly. Whenever your property is empty, you will lose this additional income you would previously have had with a tenant.

Another risk that comes with being a landlord is the problem of bad tenants. Whether that’s not paying the rent on time, or causing damage to your property, problematic tenants can overshadow many of the benefits of a buy to let. However, you can reduce the risks of problem tenants with thorough referencing checks.

There’s also the range of new measures the government is implementing to overhaul the private rented sector. From the upcoming tenant fee ban to the reduction in mortgage interest tax relief, landlords could be faced with having to cut their losses with increased rent. However, despite that, recent data shows that buy-to-let landlords are continuing to enjoy stable returns on their investment.  

If you’re looking for tenants for your buy-to-let property, why not list your property with us. Our ‘Good Landlord’ package includes advertising on Rightmove and Zoopla, plus Tenant Matching. Looking for an estimated value for your property? Use our free online valuation tool now - it's completely free of charge and takes less than 60 seconds!

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