Are you thinking about taking the plunge into buy to let property? It’s an exciting prospect, buying a place as a source of income, to generate capital growth, or even to help friends and family out. If you’re at the research stage, exploring the benefits of buy to let before making your decision, this article’s for you. Let’s take an expert tour of the ins and outs. Read on to find out the definition of a buy to let property, and the many inspiring benefits of buying to let. By the end you’ll have a clear picture of why it’s a good idea to invest in bricks and mortar.
What is a buy to let property
Buy to let remains an excellent choice if you have the means to fund a mortgage. Many see it as a business opportunity, others as a way to extend a helping hand to people they love. Whatever your reason, people will always need somewhere to live. And that makes it an unusually reliable investment. So what, exactly, defines a buy to let property?
Put simply, a buy to let property is a place you buy with the intention of letting it to someone else rather than living in it yourself. Why do buy to let properties exist? As an investment it gives landlords a regular source of income, as well as a great potential long-term yield from increases in its value.
Because there’s such a dramatic shortage of homes in the UK, there’s a correspondingly high demand for rentals. Property prices these days are so high that plenty of people can’t afford to buy. Others spend years saving for a deposit. Since the pandemic kicked off, average UK house prices have increased by nearly 17%, according to The Halifax, making the average house price a staggering £280,000. It’s only made worse by the fact that the drive to build the number of new homes needed in the UK hasn’t delivered the goods.
Maybe you’re thinking about buying a place to let that’s ready to let straight away, perhaps you’re planning to buy a place that needs attention cheaply and do it up yourself. You might want to buy close to where you live, or buy in an area where the rents are higher to make the most of your investment. It’s all part of the decision-making process.
Benefits of buy to let
A source of income
Times change, circumstances change, the world moves on, but unlike most investments it’s very unusual to see property prices going down. The economic theory of supply and demand sees to that, with more people looking for homes than there are places to buy or let. Rents tend to keep pace with the value of property, and some of the time the rent is more than a mortgage would be. Because mortgage interest rates have been low for so many years rents have increased, sometimes making it cheaper to pay a mortgage.
The value of stocks and shares can go up and down dramatically. So can the value of art and antiques. Cryptocurrency is about as volatile as it gets, thrilling but also very unreliable at the moment. Interest on bank savings and other typical financial services investment products is very low indeed. Even the best high interest savings accounts don’t deliver much unless you invest a fortune. All this means buy to let is a solid source of income for a landlord, an income you can rely on more than many, one that should keep on giving you a decent return for years to come.
Capital growth, also called capital appreciation, is simply the increase you see in the value of an asset or investment over time. It’s a tough call to find an investment that provides more capital growth than property. Take London, where average house prices have just hit a record-breaking £526,000, with no sign of slowing down. Unless something completely unforeseen happens, it’s highly unlikely British property values are going to fall any time soon, especially in wealthier areas.
The housing crisis, the amount of deposit you need to get a mortgage, the fact that there are more people wanting homes than homes to be had, it all adds up to a situation that benefits buy to let investors. There’s a fast-growing demand for rental homes, taken up by people who can’t get a mortgage, can’t afford a deposit, or are busy saving up. At the same time there’s a dramatic change in attitudes to property ownership among young people, few of whom can afford to buy a place of their own. They’re demanding good rental properties to live comfortably in, and that’s helping change the face of the rentals market. As the cost of living keeps on rising, the UK is steadily drifting into a European-style renting culture.
Property investment is so much more flexible than other types of investment. You have an enormous range of properties to choose from, everything from large multi-bedroom houses for families and groups of friends, to studio and one-bed flats. You can let to students, singles, couples, families and groups of friends. You can buy cheap, do it up and rent for a great price, or buy somewhere brand new that’s finished and ready to let. No wonder buy to let is known for being an investment offering greater diversity than most.
Can help out friends and family
There’s a strong trend for people investing in property to rent to friends and family, often the only way for young or low-paid people to get a place of their own. When you let a place to people you know, you’re in a great position. You trust them to pay the rent on time, every time. You know they’re going to look after the place well. You know they won’t up sticks and leave you without a tenant. Ultimately, you might even be able to sell it to them once they’re finally in a position to buy. It’s a wonderful thing to be able to do for people you love as well as a sound investment. Just bear in mind there are rules and regulations to take into account when you’re renting to someone you know.
Are you ready to buy to let?
High demand and higher rents are predicted to carry on. Property investment comes with unusual amounts of flexibility. It’s an excellent source of income and the opportunities for capital growth are equally good. There are so many benefits of buy to let property. Can we help you?