There’s no doubt that it’s a difficult economic period at the moment. Rising interest rates and a scarcity of oil and gas are contributing to a significant cost of living crisis here in the UK. It’s little wonder, then, that people want to make the most of their money, and, as property has traditionally been seen as a “safe” investment opportunity, they could be thinking of buying a property in order to rent it out. So, is now really a good time to be considering a “buy to let” venture?
A Popular Move
There are already plenty of properties being operated as lets, with the latest figures showing a huge 4.4 million English homes being private rentals. And, for those who are already landlords, the trend for increasing rental prices has until recently been coupled with historically low mortgage rates, making it very financially rewarding indeed. Indeed, around a third of the current cohort of “buy to let” landlords were planning to add more properties to their portfolio as a result [1].
Of course, there are other financial costs to consider before you take the plunge and buy an additional property with a view to renting it out. Talking to a specialist such as Parachute Law can help you to clarify the full cost of the venture, and advise you of ways to save money, for example by establishing a “declaration of no interest in property” if you already own your own home, but wish to buy a second home with a partner or family member who isn’t on the property ladder. Such steps can help to mitigate expenses such as Stamp Duty.
Location Matters
If you are keen to maximise your yield from a buy to let, then it’s tempting to look to the South East, where average rents are rising fast, especially in areas of high demand such as London. However, a quick look at the figures show that looking further afield could be more profitable. That’s because the higher initial costs of purchasing property in the South East will mean that the subsequent percentage yield from future rents will be lower. This means that the South East has an average rental yield of 3.11%, whilst rental properties in the North East of England can deliver average yields of 4.29% [2].
Remember, too, that whilst that renovation project can look like a tempting bargain, the longer you spend making it fit for tenants, the longer you are not earning rent from your investment, yet you will still be spending on the mortgage and other costs. Look instead for a property that meets the criteria that renters want in your chosen area. More and more people are looking for economical studio apartments, whilst larger properties with outdoor space are also popular as people now tend to spend more time working and relaxing at home. Ask a letting agent about the kind of properties that are in highest demand, and begin your search there.
A Smart Investment
The “buy to let” market remains relatively buoyant, although interest rate rises will have a significant downward effect. However, with careful thought and planning, you may be able to secure a property bargain and begin to enjoy some attractive financial returns.
Citations
[1] https://homehousebuyers.co.uk/things-to-consider-when-buying-property-to-let/
[2] https://conranestates.co.uk/is-now-a-good-time-to-invest-in-buy-to-let-property/
