For the last couple of decades buy to let property has become increasingly popular as a way of investing and becoming wealthy. But will property investing continue to be a wise investment well into the new millennium?
At the time of writing the property market is going through a rough period where home owners are seeing the price of their property drop considerably.
We are also seeing a record number of repossessions. These repossessions are not just happening to money strapped home owners, they are also happening to a large number of buy to let landlords.
Is it Still a Good Time to Become a Landlord?
Anyone looking at the property market at the moment could be forgiven for thinking that becoming a property investor is the last thing they want to do. However, while some investors are struggling and cashing in their portfolios, experienced investors are snatching up properties at reduced prices.
What happens when a record number of people get repossessed? What happens to these people after repossession? Every homeowner that is being repossessed still requires a place to live. Some maybe able to move in with family and friends but many can’t or don’t want to.
Landlords are cashing in on repossessions by providing a place for people that have been repossessed to live. They are doing this either by doing a sale and rent back or by providing another suitable property for them. People that have been repossessed have probably been through financial hardship, hence will probably not be able to buy a property again for a long time. In fact many no longer wish to ever own a property again. Providing they can manage their finances correctly, these people can be ideal candidates for becoming long term tenants, .
Below is a list of just some of the benefits of becoming a landlord
The Benefits of Buy to Let
- If bought correctly the rent can cover the loan and other fees, therefore the tenants are paying for your property for you.
- Historically property doubles in price every seven to ten years. So it can be a great investment for capital appreciation.
- Hassle free despite the scare mongering you hear in the media about nightmare tenants, the fact is that most tenants are reasonable. If you have bought the right property and you use a good letting agent, it can be a relatively passive, hands off investment.
- You can easily and predictably force the appreciation of a property. There are many other investments where you can accurately predict in advance roughly how much gain you will make by changing something i.e. you can have a good idea that moving the bathroom from downstairs to upstairs will put about £20,000 on the value of a property, just by looking at comparables in the local area.
- You can make a healthy extra income each month with the excess from the rental.
- Flexibility and it is a straight forward option for someone who wants to move house or even live abroad and is unsure whether they want to sell their house. With the buy to let option, they can decide to move now, rent out their property, and decide at a future date whether to sell or not.
- You can make a sizeable tax free income from releasing equity periodically from your portfolio. In fact many people make much more money a year from this simple activity than they did in their day jobs. And it’s tax free.
These are just the tip of the iceberg when it comes to the benefits of investing in buy to let property.
Another thing you need to keep in mind when you consider buy to lets as a way to make money, is the costs involved. To many people only look at whether they can get a buy to let mortgage on the property and whether the rent covers the mortgage, but what about some of the other costs involved.
Buy to Let Costs
- Set up costs. These potentially include things like, stamp duty, legal fees, property survey, deposit, renovation/refurbishment, furnishing the property,
- The Mortgage. This is likely to be the biggest ongoing expense and you need to take into account potential interest rate rises and factor these into the equation as well. Give yourself some leeway in case rates go up.
- Void Periods. If you have bought correctly and are following some basic rules, these shouldnâ€™t be for to long, but you should factor in at least one months void period in your calculations.
- Insurance. Buy to let insurance.This could potentially include such things as building and contents insurance, maintenance insurance, void period insurance, and landlords liability insurance, just to name a few of the insurance options open to you.
- Opportunity Cost. This is to do with whether your money could be better employed else where. If you had kept the money in the bank, would it be working harder for you or if you had invested else where such as in the stock market would you be getting a better return.
- Any Service Charges and/or Ground Rent Charge
- Repairs. Any ongoing Repairs and maintenance costs.
- Managing agent. The ongoing cost of a managing/letting agent if you use one.
This list is not an exhaustive list, it is just a list to give you an idea of some of the costs involved.
Will Buying Rental Property Continue to be A Wise Investment in the Future
That fact is that buy to let is looking very healthy in the long term in the UK. With the cost of buying a property still to high for many people to afford, a continued influx of immigrants coming to the UK to work, and increased repossessions, the savvy UK buy to let Landlord has many reasons to view the future as being bright.
Investing in property is a big decision and requires a suitable amount of commitment on your part. However, if you know what you are doing (or are prepared to learn) then becoming a landlord could be a feasible option to help the average person on the street to secure themselves a solid financial future.
Research and your level of property education are the key. Know what you are doing and the World can be your oyster. Investing in things like a good property investment guide or mingling with other property professionals could be the difference between success and failure. If you donâ€™t know what you are doing, then you are could end up becoming bankrupt within a blink of an eye.
Property has helped many people to become millionaires. However, if you wish to join their ranks, instead of the ranks of the failures, be weary of companies and people that promise to do it all for you.
Becoming a buy to let property investor, can be the most important financial decision of your life. It could provide you with wealth that far outstrips that of what you can get from the standard university education. Yet, we hesitate to take a few hours out a week to learn about how to become a landlord while we drop everything to invest thousands of pounds in a university education.
Take time out to learn the ropes and pick up as much buy to let tips a long the way as you can, and in years to come, you will thank yourself for taking your property education seriously.