As an income investment for those able to put down a sizeable deposit, buy-to-let is once again looking like an attractive prospect. The wheels of the housing market are finally back in motion, with experts predicting prices to rise as much as 25% over the next five years.
Here are 5 reasons to consider dipping your toe into the buy to let market this year:
1. You can do it anywhere, anytime
Wherever you are in the country, there’s property – and where there’s property, there’s money to be made. But the great thing about property investment is that, unlike most ventures, it can be managed really flexibly; just because it’s not achievable or lucrative in your current neighbourhood, doesn’t mean that it can’t be done.
If you live in London, for example, where funds won’t go far in your immediate locality, you might choose to instead buy somewhere where the house prices are quite a bit lower. Given the options available these days, including letting agents and property management companies, it’s entirely possible to be a distant landlord. If you live in Boston, you could look to hire Boston Letting Agents.
However, you’ll pay more for the service and therefore glean less from your investment, so if you decide to go down this route, you’ll need to work out whether it’s still lucrative to do so. In addition to the cut your agency will take (typically 15%), a buy-to-let mortgage lender will usually require the rent to cover 125% of the mortgage repayments, and a good rule of thumb is to factor in at least one month in 12 of the property standing empty.
This in mind, you’ll need to be careful that you don’t price your property out of the market.
2. You get to be your own boss
There are very few situations without setting up your own company, where you get to be your own boss. With buy-to-let investing, you can do just that. Although how you govern the business is up to you, generally with buy to let, you get out what you put in.
Providing you’re a fair and attentive landlord with a smart portfolio of properties, you’ll probably find that you have less hassle with tenants moving in and out and less periods of zero occupancy.
3. Tax breaks
Landlords are eligible for tax deductions on ‘allowable expenses’, which are expenses incurred ‘wholly and exclusively’ for business purposes. According to Gov.uk, this includes things like:
- Letting agents fees,
- Some legal fees,
- Accountants fees,
- Buildings and contents insurance,
- Interest on property loans,
- Maintenance and repairs,
- Utility bills,
- Rent and service charges, and;
- Council tax.
4. There is something for everyone – be as or as little involved as you like
Some investors prefer to be really hands-on, buying houses on the cheap that need to be fixed up before they can be rented at a price that offers a good return. Others prefer to acquire a portfolio of properties that are proven to provide a steady income, and others invest as a means to build a nest egg for retirement.
It’s really up to the investor, and with letting agents available to manage the properties on your behalf, you can have as much or as little involvement as you like in your investment.
5. Property is on the up
Speaking at The Mortgage & Protection Event, Jeremy Duncombe, director at the Legal & General Mortgage Club, predicted that sectors expected to perform in 2014 include buy-to-let as well as new-build and the remortgage market. And experts predict that the forecasted rises in house prices could actually spell good news, especially for current landlords who may have seen their portfolio’s value drop by up to 25% in recent years.
In addition, the renewed confidence in the property market has meant that as a whole it’s regaining some fluidity, with second and third steppers tempted back into the market. The increase in housing stock available means greater opportunity for budding proprietors.
But, beware low rates. As interest rates are set to rise and property on the up, landlords need to make sure all their calculations are in order before investing to be sure to avoid any costly errors.
