Buy-to-let is the purchase of a residential property as an investment, specifically to be let out, often by means of a buy- to-let mortgage designed for the purpose.
It has a proven track record of delivering great returns over the medium to long-term, providing a monthly income along with the potential for capital growth.
The popularity of buy-to-let has grown as demand for homes to rent has increased across the UK, and while interest rates and returns on savings have fallen.
Longer-term house price growth is around six percent per year, according to most reliable measures, and in most good buy-to-let areas, rental yields of five per cent or more are achievable.
Rental yield is the amount of money a landlord receives in rent over one year, shown as a percentage of the amount of money invested in the property. The lower the purchase price and the higher the rent, the greater the yield will be.
Stability for investors
Demand for rented accommodation has been strong for many years, and is still increasing, with more people renting than ever before. In many areas of the country there’s not enough rental property to satisfy demand, rents are rising, tenancies are getting longer and good quality properties don’t stay empty for long.
This paints a very stable picture for landlords who are enjoying minimal void periods and more security than ever before.
Like any investment, buy-to-let comes with no guarantees, but, done with proper care and planning, you can mitigate the risks and enjoy the many benefits buy-to-let offers.
Every landlord has different priorities, budgets and expectations, all of which will impact on the decisions they need to make at the start and throughout their investment. But regardless of your investment criteria, buying the right property in the right location is key to overall success.
In an ideal world, a good rental income –i.e a good yield – and strong capital growth is what every landlord would choose. However, it isn’t always possible to achieve both in equal measure. Some landlords may opt for a higher monthly income instead of long-term gains while to others a steady but modest income with a higher return when they come to sell is more important.
To successfully fulfil your property ambitions, it’s important to understand what matters most to you before you take your first step into buy-to-let.
We take the time to get to know you and your priorities and then use our in-depth local knowledge of the market, rents, demand and property prices to guide you through the many decisions that have to be made before buying a property to let.
Our experienced local team will give you free and impartial advice on rental values for any properties you are considering as a buy-to-let investment, to help you find the best property to fulfil your investment criteria.
The most important factor in any buy-to-let is location. You need to identify a prime rental spot which is attractive to tenants. These are usually areas with excellent transport links; close proximity to employment opportunities; good schools, colleges and universities; and a range of local amenities such as shops, leisure facilities, parks and restaurants.
Within each area, the rental market can vary significantly, even from one street to another. That’s why consulting an independent expert is so important. Our teams know their area inside out, from which specific roads and apartment blocks offer the strongest and most consistent demand from tenants to which specific locations are less desirable.
The right property
Once you have identified your location, you need to consider the property type. This will vary depending on the market you’re aiming for. Two bedroom apartments close to town centres and railway stations are always popular with young professionals; a three bedroom house with a garden would be best for families, and houses with four or five bedrooms are ideal for students.
There are so many variables to consider when identifying the perfect buy-to-let property. This is where the experience and advice of a local property specialist like Open House is invaluable. Because we know the area and property market so well – property prices, rental values, areas of high demand, less popular streets or blocks of flats, and much more – we can guide you through all the key decisions.
Our teams know exactly what types of properties let best and will get you the best yields and/or capital growth, and which properties to avoid and why.
Access to strong performing properties
We can also put you in touch with landlords looking to sell their property, via our Investor Network service, often with a tenant in place.
This is an ideal way into buy-to-let because all the properties have been assessed as strong performing investments and, with a reliable tenant already in place, you can start receiving rent from the day of completion.
Investing in a property to let means you could take out a mortgage – to be paid off by your rental income – while you enjoy the potential capital growth. Most buy-to-let mortgages are done on an interest-only basis, so the amount borrowed won’t be paid off over time. This is tax efficient, because you can offset mortgage interest payments against your income tax bill.
If you secure the right buy-to-let property and mortgage deal, your rental return could still be substantially higher than your mortgage payments, giving you the option to save the extra cash to supplement your life, invest in another buy-to-let or use it to pay off the mortgage at the end of its term.
During the time that you own the property you’ll benefit from the capital growth across the full value of the property, often giving you a higher capital return than on a cash-only purchase.
There are a range of buy-to-let mortgages available at competitive rates, choosing the right mortgage will enable you to get the best return on your investment.
No investment is risk-free, but with buy-to-let there are a number of practical steps you can take to limit the risks. Consulting a letting expert to guide you on where and what to buy for maximum return is the best first step for a solid investment.
A good letting agent will also find you a reliable tenant, ensure you stay on the right side of the law, take care of your property and protect your interests at all times.
You also have the option to take out specialist landlord insurance to cover you in case of rent arrears, damage to you property or legal fees. This comes at a cost but can save you money if anything goes wrong and gives invaluable peace of mind.