Many investors see buy-to-let property as a reliable venture, especially since house prices have been rising in the UK for nearly 10 years.
Buy-to-let is a popular investment because it has the potential to provide both short-term income and long-term gains.
While the buy-to-let landscape and housing market may have changed more recently, there are still plenty of reasons to invest in buy-to-let property in 2022 and beyond.
Is buy-to-let worth it? What are the advantages of buy-to-lets? And is a buy-to-let a good investment?
Read on to find out.
Is buy-to-let still a worthwhile investment?
For many years, buy-to-let properties have been popular with investors because of their potential to provide long-term gains in the form of capital growth as well as a monthly rental income.
Recently, the Government has made several policy changes that have made investors question whether buy-to-let properties are still a sensible move.
In 2016, a three per cent surcharge was added to the cost of stamp duty on additional properties like buy-to-lets.
Then, in 2017, the amount of tax relief buy-to-let landlords could claim was reduced too.
While buy-to-let landlords now face higher costs than previously, that’s not to say that you can’t make impressive returns on buy-to-let properties.
Of course, the success and profitability of a buy-to-let venture depend on several different factors including house price growth rates and tenant demand in the area where the property is located.
Some locations are more profitable for investing in buy-to-let in UK than others, so it’s wise to do your research before taking the plunge.
According to Zoopla, the best rental yields UK are in Scotland and northern England.
If you buy in a city that’s home to a university, then student buy-to-lets often provide higher rental yields than regular buy-to-lets.
Advantages of buy-to-let
The top three advantages of investing in buy-to-let property are:
High-yield property investments
A property’s rental yield is the percentage of profit that it makes. Generally, buy-to-properties are profitable investments that provide landlords with high rental yields.
The rental yield is worked out by dividing the amount of rental income a landlord receives each year by the total cost of the property (including renovations and other costs) and then multiplying by 100.
Most landlords aim for a rental yield of between five and eight per cent with anything above seven per cent considered to be very good.
Potential to generate capital growth.
As well as providing a monthly rental income, buy-to-properties also have the potential to present landlords with long-term gains in the form of capital growth.
Capital growth is the amount by which your buy-to-let property increases in value over time.
You can work out a property’s capital growth as a percentage by subtracting the purchase price from its current value, dividing the increase in value by the purchase price, and then multiplying the answer by 100.
Capital growth is not guaranteed, but house prices have been increasing steadily in most parts of the UK for some time now. Many investors who are looking to gain capital growth choose attractive buy-to-lets in nice areas, where properties are less likely to lose their value.
High demand for rental properties.
Buying property has become increasingly unaffordable for many and as a result, the demand for rental properties has soared over recent years in the face of the UK’s chronic housing shortage.
In February this year, the Guardian reported that the UK needed a further 230,000 new rental homes to meet the growing demand.
The article also found that ‘private rents in Britain rose at their fastest rate on record in January and the average advertised rent outside of London was 9.9 per cent higher than a year ago.’
High demand and short supply allow buy-to-let landlords to charge higher rent on their properties and makes finding tenants easier, meaning rental properties are left empty for less time.
Despite increases in the costs that buy-to-let landlords face, the advantages of buy-to-lets still outweigh the disadvantages, making buy-to-lets a profitable investment for many.
If you’re searching for buy-to-let properties for sale or require further help with investing in buy-to-let properties, get in touch with our friendly and knowledgeable team here at the Mistoria Group by calling us on 0800 500 3015.