What is a Buy-to-Let Property?
Buy-to-Let Property is a type of investment, where the investor purchases a property, generally residential, to let out and earn rental income. A buy-to-let property is a residential investment that generates rental income and grows in value over time.
An investor purchases a property either off-plan or resale and earns money by renting it out, with the long-term goal of profiting from the property when it is eventually sold. s property is often seen as a secure, medium to long-term, low-risk investment and has become a very successful source of income for many people in the United Kingdom.
Investors who purchase buy-to-let property typically fall into one of two categories: those with a portfolio of properties who rely solely on rent from tenants or those looking for an additional income stream through the rental of one or two homes.
In today’s financial climate, property investing is usually seen as a more attractive investment alternative than saving at low-interest rates or the stock market’s volatility.
Advantages of Buy-to-let property UK
Whether you are taking the leap and investing in a Buy-to-Let property for the first time or you are an expert in the sector and just want to build your asset base, the benefits of Buy-to-Let continue to entice individuals to create their own property portfolio.
Real estate is one of the most trustworthy sources of investment since it is a tangible asset that can be analyzed and managed to a certain extent after gaining industry knowledge.
- One of the most significant benefits of being a Buy-to-Let investor is that you can diversify your income sources. Rental income or capital growth are two possible methods of increasing the value of an investment property. In London, regenerative districts are getting popular, hiking up property values and rental returns.
- As renting property is becoming a trendy lifestyle choice, the likelihood of vacant periods in your tenancy is reduced. However, if a unit remains empty, the loss of rental revenue at that time may be compensated by the property’s long-term value.
- Investing in apartments, in particular, is a great way to reap the benefits of Buy-to-Let; the price of an apartment is often lower than that of a house, so buyers are more likely to buy in quantity and expand their property portfolio more efficiently.
- Finding dependable, long-term tenants is advantageous for investors since it ensures a constant and predictable revenue stream.
Disadvantages of Buy-to-let property UK
In recent years, the elimination of buy-to-let tax relief on mortgage interest has been one of the most significant blows to higher-earning landlords. If you’re a basic rate taxpayer, you will be unaffected. Other pressures that have recently emerged include:
The abolition of Section 21 “no-fault” evictions
Section 21 of the Housing Act permitted landlords to terminate a ‘rolling’ tenancy with two months’ notice without providing a cause. The government currently plans to eliminate this, so landlords will have to show a cause and persuade a judge that it is legitimate. Although tenants will likely applaud this development, it threatens to make landlords’ lives extremely difficult if they are dealing with problematic tenants.
Keeping this in mind, any landlord entering into contracts with tenants should thoroughly screen them to minimize problematic occurrences. Luckily for landlords, the proposed changes would not be reversible, so they could still terminate an Assured Shorthold Tenancy (AST) under Section 21 if it existed before the legislative change.
Find out more about Buy-to-ley Property investments in the UK on Zoopla.
Private residence relief is withdrawn
If a rental property was formerly your primary residence, you could claim up to £40,000 in capital gains tax (CGT) relief on any rise in its value before April 2020. However, this will no longer be the case from April 2020 unless you are residing in the property (as your primary residence) at the time of the sale.
If you have a thorough understanding of the industry and conduct extensive research, you can quickly profit from the UK Buy-to-Let market. For further information on Buy-to-Let, please go here and explore our different resources, which will assist you in making the financial choice of a lifetime.