Is Buy-to-Let Still a Worthy Investment? – Buy-to-Let Investment

When determining if buy-to-let is still a worthy investment, there are a number of advantages to consider, including recurring monthly rental income, capital gains upon sale, and a relatively safe and dependable location to invest money compared to other investment opportunities.

While buy-to-let investors have been hit by tax changes in recent years. However, the UK property market offers ample opportunity for those who are familiar with its regions and the best profit-maximizing tactics. There will always be a steady supply of people in need of rental housing, as the housing market remains robust.

Therefore, is buy-to-let a worthwhile investment? Before choosing if buy-to-let is a worthy investment plan for you, this article examines the benefits and downsides and the factors that investors must consider.

Why Invest in Rental Property?

When attempting to answer the question, “Is buy-to-let still a worthy investment?” It is useful to consider past and current market trends, which can indicate where the market may be headed. Looking back over the past two decades, the private rental sector in England experienced exponential development, with numbers more than doubling. In 2020, there were approximately 4.4 million privately rented households, a decrease from the previous year’s figure of almost 4.5 million. This minor decline is also reflected in the number of buy-to-let mortgages obtained: 64,500 in 2020 compared to around 73,300 in 2018 and 2019. London and Yorkshire are two places in the United Kingdom where the share of dwellings in the private rental sector has increased since 2019.

It’s evident why buy-to-let property remains a popular investment strategy. In the 1980s, the average price of a home was approximately £23,000, but it is currently £230,000. In the past decade, the average property price has increased by almost £80,000. There is still a continuous demand for rental property, despite the fact that such a rapid increase is unlikely to be repeated due to England’s home prices being close to their peak and the affordability constraints created by incomes and mortgage interest rates. Numerous cities in the north of England are witnessing high property price growth due to incoming investment and regeneration, making buy-to-let options in Northern cities quite appealing to investors. At the same time, the high property prices have led to a robust rental market among young professionals who are unable to purchase their own homes, providing landlords with a stable and long-term population.

What are the Advantages of Investing in Buy-to-Let Real Estate?

There are various benefits of investing in a Buy-to-Let property. The Top 3 are listed below:

Growth in Rental Income

Possessing a buy-to-let property is an excellent strategy to make monthly money through rent. As the value of the property increases, you can expect to earn a high rental income. If you choose a property with adequate rental returns, it may be possible for the property to quickly pay for itself, including maintenance and mortgage payments, and make a reasonable profit. Depending on the market, property, and location, rental yields will vary; while the average return in the United Kingdom is around 5%, yields in some places can reach 8-10%.

Steady Monthly Income

Possessing a buy-to-let property is an excellent strategy to make monthly money through rent. If you choose a property with adequate rental returns, it may be possible for the property to quickly pay for itself, including maintenance and mortgage payments, and make a reasonable profit. Depending on the market, property, and location, rental yields will vary; while the average return in the United Kingdom is around 5%, yields in some places can reach 8-10%.

Capital Appreciation

Since 1926, property prices have increased by 1,069% and are still doubling every 8-10 years on average.

When it’s time to sell your property, a buy-to-let investment affords you the chance to achieve capital growth as the property’s value improves over time, resulting in a lump sum profit. This might provide investors with two kinds of income: recurring monthly revenue and a big amount upon sale.

Secure Investment

While housing market prices vary, real estate remains a generally secure and profitable long-term investment. This is especially true when compared to other assets such as cash ISAs, which are more difficult to create a profit on, and stocks and shares, which can be risky. Although real estate prices fluctuate, they tend to rise over time, allowing you to sell for a profit.

Potential Drawbacks Of Investing Buy-To-Let Investment

Changing tax legislation, such as the stamp duty surcharge, modifications to mortgage relief, and the tax on capital gains, have reduced the profit available to landlords in recent years as compared to the past. Additionally, there are numerous requirements that landlords must follow to guarantee that their property is safe and up to code for tenants. Despite this, smart investors who understand the industry, and are aware of up-and-coming places that provide value, low property prices, and high rental yields may still make a substantial return from buy-to-let investments. Currently, opportunities, particularly in cities in northern England, are extremely attractive to investors.

Conclusion

So, is an investment in buy-to-let still worthwhile? Yes, we believe that buy-to-let investment can still be profitable for those prepared to investigate the market, develop the proper investment strategy, and avoid typical errors. Contact our team if you’re interested in learning more about buy-to-let investments.