Until recently, buy-to-let was one of the most popular choices for people who had spare income and wanted to invest wisely. Becoming a landlord has a lot of appeal – not only do you get a regular rental income but you also own a property that should realistically increase in value over time.
Last year, changes to stamp duty meant that those buying second homes received a considerable blow to their finances if they were considering going down this route. It led to a rush prior to April 2016 as landlords bought up rental properties with a consequent slowing down of the market in the following months. Other changes with respect to mortgage tax relief and the letting agent fee ban have given many potential property investors pause for thought. So is it all still worth it?
The Pros of Buy-to-Let
While there are plenty of doom-mongers out there who will tell you the buy-to-let market has been ruined by recent regulations and tax changes, even Brexit, it’s still a good option if you have the money to invest. Mortgages are a lot cheaper and the rental market is booming. If you can get your foot in the door and start investing and pick the right property, you can expect the value of your home to increase while you get regular rental income into the bargain.
As a long-term investment, buy-to-let still outperforms other options to make the most of your money especially in an era of low interest rates. There aren’t many investments which can be leveraged either. You do need to look at it as going into business rather than something that will accrue value as you sit back and watch.
Find the right property letting agent to support you as a landlord, however, and you don’t need to take on the considerable work and responsibility alone. You need to pay letting fees but this is often the best way of maximising profits and stay on the right side of your legal requirements at the same time.
The Cons of Buy-to-Let
- Stamp duty is probably the biggest change in recent times that has impacted on the industry. For second homes, you will need to pay it, if the property value is over £125,000 and it’s 3% higher than a normal house purchase.
- You will need to factor into your feasibility study things such as charges for preparing letting agreements and credit reference checks, the cost of which now goes back to the landlord.
- Another factor is that you are tying up your money for some considerable time. This is a long-term investment. Low mortgage rates at the moment are good news for buyers but stricter rules make it much harder for those who don’t meet the affordability testing now in place at many banks and building societies.
- If you are operating without the help of a letting agent handling the management of your property and its rental, you will need to put time and effort into maintenance and ensuring that you stay on the right side of the current legislation, including the updates. For a landlord ignorance is not a defence.
Is It Too Late to Become a Buy-to-Let Investor?
While it’s not an investment that should be undertaken lightly, buy-to-let still represents a good return if you find the right property and put a strong business strategy in place and of course if you have the support of the right letting agent. Find out more about how Northwood can help you as a landlord here.
Northwood is one of the largest and most recognised estate agents in the U.K. and the leading supplier of Guaranteed Rent
Find us on Twitter @northwoodUK or visit our YouTube Channel.