We explore the benefits of buy to let.
With UK inflation on the rise, regular interest heights and questions around house prices, many investors are wondering whether the UK buy to lets remains a worthwhile investment. We explore particular reasons it might be for investors;
Regular source of income
If you are planning for retirement or simply keen on making your money work harder a buy to let can be a great source of regular income with years to come.
The average UK rental yield is about 3.6 but you can obtain a lot more return than that. There are some returns to be found in the UK market.
It is predicted that renters will out number homeowners by 2039 in the United Kingdom. Buy to let investments don’t just have a potential for a short term income but also long term. It all depends on what property you purchase, where you purchase and the purchase price. Not forgetting the condition of it. Why not ask us for a free valuation at any point on a property you are thinking of purchasing.
While you can get regular returns one of the benefits of investments is capital growth. This is the potential for the property to increase over a long period of time.
Through the last 5 years United Kingdom properties have increased over 5% annually. Obviously, that is a huge amount of capital growth. However, you need to be aware that properties can go up as well as down and you should never rely on a capital growth on a buy to let investment. It is important that you realise it is a long term investment. Whilst it may work in the short term long term is one of the most resilient forms of investments.
It can be recession proof to a point. Property is always a basic need. In difficult environments people still need to have a roof over their heads and at this moment in time demand from renters remains extremely high. The cost of living is now putting a lot of people off purchasing a home. With people in homes also coming out of their properties due to the increasing rates. They are selling their properties and moving back in to rented. This is all driving up demand for high quality rental properties across the United Kingdom.
The private rented sector has seen supply increase
However, the demand still outstrips the supply and many people are deciding not to move and staying where they are which is contributing towards the increase in rent.
The rental therefore is a stable income. There will be some years where it goes up and others where it comes down but it will always be due. It makes one of the buy to lets a quite relative stable and potentially predictable earner over a period of time.
This kind of stability is quite unique to property and is not like stocks or bonds.
High Demand and Rising
The Government believe that the country currently requires 3,000 new homes each year just to meet demand. Unfortunately, they recently amended one of their housing bills to take out this amount that was compulsory for councils to build over the whole country. It often means that there isn’t enough accommodation in the United Kingdom for renters. For instance in the year to June 2021 only 166 houses were built. There is a huge amount of under supply. This makes it much more likely that you will get a tenant for your buy to let investment a lot quicker. This helps keeping the property empty, known as a renters void, to a bare minimum. Rents have definitely increased.
It is important however when you are renting property that you do look to rent it in the correct time of year.
Our statistics for the last 25 years state that January has always been our best months for letting property but as long as it doesn’t fall within November and December which are the most quietest months.
Don’t hesitate to contact us if you have another property for any free advice.
Guard against inflation
It can be a guard against inflation. The United Kingdom is currently heading to one of its highest rates of inflation in decades. No-one knows in the future where this will actually go but it means that buy to let investments can be a hedge against inflation.
Property prices do have a tendency to move up and down with inflation but in the current market with difficult mortgages you may find that prices do come down. In this instance therefore it is a good time to purchase knowing that some point in the future they may rebound back. As we have stated previously it is a long term investment.
Rental income has not only increased with inflation but in certain areas has actually outstripped it. We have seen rents increase in the Brighton and Hove area quite substantially over the past 2 years as demand still out weights supply.
Obviously, it is always best to try and purchase any type of investment in cash allowing you not to have to worry about interest rates going up and down. But, if you are not able to try and take out a fixed rate term for as long as possible. This will help to know how much you need to earn on a month to month basis. When purchasing a buy to let you will often find that once you have paid off the loan is when you will really receive the best return of your investment.
We can advise you on areas and what type of property to purchase. Don’t hesitate to contact us.