Buy-to-let, is it still a good move?

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The buy-to-let option still appeals to many investors

Potential landlords and those looking to add to their portfolios face a challenging decision when it comes to determining whether it is wise or not to venture into the buy-to-let market.

With a general election looming and the housing market a hot topic, commentators differ in their opinions as to the direction in which property prices will go in the coming years.

As always with the property market it is, to an extent, something of a guessing game as the direction of travel depends on a plethora of factors.

However, with some predictors citing 50% of the population being in rented accommodation by 2050 and with the average age of a first-time buyer in the UK now 35, as opposed to 24 a decade ago, the buy-to-let option still appeals to many investors.

HM Lettings Operations Manager Stephen Reade of Harrison Murray Lettings says: “Becoming a landlord can be a rewarding experience and, if done correctly, provide a steady and sustainable return as an income investment, especially compared to lower savings rates and stock market swings.

“Investors are snapping up property in the hope that it will not only return a reliable yield but also a benefit from capital growth given enough time. Mortgage rates at record lows are helping buy-to-let investors make deals stack up.

“But beware low rates. One day they must rise and you need to know your investment can stand that stress test, a criteria sought by many lenders recently.

“There is also a tax rise coming, as buy-to-let mortgage interest relief is axed and replaced with a 20% tax credit. Additionally, from April 2016 landlords now have to pay an extra 3% stamp duty on property purchases.

“Many buy-to-let investors who bought in the boom years before 2007 struggled as mortgage rates rose. A sizeable number were thrown a lifeline when the base rate was slashed to 0.5%. Rates stuck there until this summer and then were cut again after Brexit, but they will rise again.

“Even considering the recent tax changes and potential for buy-to-let mortgage costs to rise, there are many positives. We are becoming a nation which sees renting as a flexible lifestyle choice and is far more sociably acceptable. With greater demand from tenants, rents that should rise with inflation and the long horizon for interest rate rises mean many investors are still tempted by buy-to-let. 

“Like any investment, buy-to-let comes with no guarantees, but for those who have more faith in bricks and mortar than stocks and shares the opportunities are out there.”

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