The UK housing market appears to be undergoing a seismic shift. More and more people are choosing to rent, and with that comes an increased demand for rental properties.
As such, buy-to-let (BTL) investing has become an increasingly attractive proposition in recent years – but is it worth it?
In this blog post, we take a look at the benefits of buy-to-let investments and explore why you should consider venturing into this lucrative business.
What is Buy-To-Let?
Buy-To-Let (BTL) is a form of investment where an investor buys a property with the primary intention of renting it out. It allows you to generate income from your property, as well as potentially capital growth over time.
Buy-To-Let can be an attractive option for those who want to take advantage of the rental market but don’t have the money or inclination to become landlords themselves.
By investing in buy-to-let properties, investors can benefit from the stability and long term security that comes with owning a property without having to manage tenants.
The popularity of BTL investments has risen significantly in recent years, with many investors turning to this form of investment instead of traditional high street options such as stocks and bonds.
What are the benefits of buy-to-let?
Benefit 1: Generating Income
One of the main benefits of investing in buy-to-let (BTL) properties is that landlords can generate income from their investments.
As long as tenants are paying rent, this money will cover some or all of the mortgage payments on the property, which helps to reduce your costs and give you a steady stream of income.
This is one key advantage BTL investments have over other types of investments, such as stocks and bonds; even if prices fall, you still have the potential to make a profit from rental yields.
Additionally, depending on your situation and location, there may be tax incentives available to help further reduce costs associated with BTL investments.
Benefit 2: Capital Growth Over Time
In addition to generating income from rental yields, buy-to-let investments also offer the potential for capital growth over time.
Property prices in certain areas can increase significantly, meaning investors can make a substantial profit when they decide to sell their BTL property.
The key is selecting the right investment; if you choose a property in an area with high demand and rising house prices, you have a much better chance of making a significant gain on your initial investment.
While it’s important to consider all of the associated costs before committing to buy-to-let investing, it could be worth considering as an option if you’re looking for long term capital growth.
Benefit 3: Tax Incentives And Lower Entry Costs Compared To Other Investments
Another benefit of buy-to-let investments is the tax incentives and lower entry costs associated with these types of properties.
Landlords may be eligible for various tax deductions related to their rental income, such as mortgage interest relief and wear and tear allowance.
Additionally, given the current property market in many parts of the UK, it can be much more cost effective to invest in BTL properties than other types of investments such as stocks and bonds.
This means that investors have less money tied up at any one time, allowing them to reap the rewards of investing sooner rather than later.
Benefit 4: Good Yield On Properties Due To Demand
Finally, landlords can enjoy good yields on their BTL properties due to high demand in many areas across the UK.
As long as they take time to research and choose the right investment, landlords can be confident that their properties will have a steady stream of tenants and generate steady returns over time.
Additionally, with more people now working from home thanks to technology and flexible working practices, there is likely to be an increase in demand for BTL properties which should benefit landlords who are looking to make an investment.
What is the current demand for Buy-To-Let properties?
The UK buy-to-let market has been on the rise, with more people looking to buy properties and then rent them out.
According to UK Finance data, the total value of buy-to-let mortgages in 2019 was £39.5 billion.
In Quarter 1 of 2022, £8.5 million of buy-to-let properties were purchased by landlords.
Currently, around 5.4 million homes in Great Britain are privately rented, with an additional £2.9 million through Private Registered Providers and 2 million through local councils. It means that the private rented sector has increased by 24% in the 10 years between 2010 and 2020 and 126% since 2001.
In London, privately rented properties represent 27.3% of the market. Competition for homes has driven up the cost of renting in the region as a result.
How does it compare to other forms of property investing?
There has been significant changes to the Buy-To-Let sector in recent years with changes to legislation, which some quarters regard as unfavourable to landlords.
These include changes to tax credits, business tax and the EPC (energy performance) standards.
Therefore, while buy-to-let is often the first strategy used for investors, it may not been the strongest performing.
This was the case for property investor Keli Pirie, who changed property strategy from buy-to-let to serviced accommodation.
In a recent Success Story, she said: “I had six buy-to-let (BTL) properties and owned a large childminding business and I was completely stressed out with the amount of hours I had to work to continue childminding. Last summer I had turned one of my BTLs into serviced accommodation (following advice from Touchstone Education) and it is doing well. It makes at least x4 the amount, which is how we have now bought three cottages.”
Likewise, property investor Alison Trenholme explained that she has switched from buy-to-let to commercial property and serviced accommodation: “I have had a couple of buy to let properties which I’ve had for a number of years and I’ve seen over the years the benefits of owning properties. I’d been feeling frustrated in my current employment and have been looking at ways I could build up a bigger passive income and gradually step outside from my full time job.
“My first project (since being with Touchstone) has been a rent to rent Serviced Accommodation property which went live on 1 December 2022.
“I obtained my first booking on 19th December, with the guests arriving on 21st December and staying for 23 nights. Most importantly, the landlord of the property is happy as they are getting a nice, regular income stream and I’m happy at turning the knowledge I’ve gained through Touchstone Education into real income.”
Read more Success Stories here.
What are the next steps for property investors
To find the right property strategy for your circumstances and to get started in real estate investment, benefit from Touchstone Education’s Wealth Through Property event.
Wealth Through Property is the UK’s leading 2-day property investment course. It is designed to provide you with specialist knowledge of proven investment strategies. Learn how to get started and build your property portfolio and gain real-world advice.
Alternatively, make the first steps on your property journey, claim your free Wealth Through Property e-book.
To find out more information about the property investment courses we offer call us on 01302 897131 or email office@touchstoneeducation.li.
