Buy to let market. For who or what circumstances is it good.

Retireby40

Hey folks.

I've read numerous threads regarding buy to let markets and as a form of investment. It does seem that it is an area that is becoming harder to actually make some for of semi passive income from.

However it would be interesting to know from people in the market or with more knowledge than myself if it still is a viable option and for who or under what circumstances it would be good for.

For example is it good for those with the cash to buy not needing a mortgage or is it equally as bad. Interest rates are so poor and while their are stocks and shares and other forms of investment a lot of people feel safer if they can get a solid house and rent it out.

Thanks

george4064

I am no expert but here are my two cents:

1. Buy-to-let in recent years has been in the sights of the government where the tax breaks for buy-to-let investors are being gradually removed and therefore it generates a greater tax bill. This includes additional stamp duty for purchasing as well as being unable to offset tax liability on rental income received from interest payments on mortgages.

2. Its common knowledge that house prices in the future will not increase as much as the have done since WWII, so in general there isn't going to be any massive capital gains to be made from investing in property.

I'm sure others will add more reasons.

eskbanker

I think it's good for those who can work it out for themselves rather than having to ask!

That sounds flippant but there's so much more to BTL than picking an account or fund from best-buy lists, etc - it entails serious research not just into property markets but also the detailed financial analysis, in terms of modelling all costs and taxes, occupancy rates, insurance, ongoing management, refurbishment, etc, etc, as covered repeatedly in the threads that OP will presumably already have read....

El_Torro

I own a Buy to Let property, though for most people my advice would be not to get into it, at least not deliberately.

I would say that Buy to Let is for people who already have a fair bit of exposure in other areas (for example equities in pensions and ISAs). Buy to Let adds diversification, which isn't a bad thing.


I would say that people who want to get into Buy to Let because they think it's easy and more secure than investing in the stock market are not the most suited to it.

Retireby40 wrote: »

For example is it good for those with the cash to buy not needing a mortgage or is it equally as bad.

Personally I have an interest only mortgage on my Buy to Let, which I don't intend to pay off unless I sell the property. Sure, paying off the mortgage adds security, but it also ties up a lot of money which could be put to use elsewhere.

Albermarle

as covered repeatedly in the threads that OP will presumably already have read....

Also often mentioned in these threads is that BTL is more suitable for people who are already connected to the property/construction industry and/or are handymen/tradesmen/builders themselves.

AnotherJoe

Retireby40 wrote: »

For example is it good for those with the cash to buy not needing a mortgage or is it equally as bad. Interest rates are so poor and while their are stocks and shares and other forms of investment a lot of people feel safer if they can get a solid house and rent it out.

Feelings do not equal reality.
We've even seen people intending to let at loss on some bizarre grounds they think it will work out ok in the end or that property is "safe" and "hands off".
It's also an increasingly regulated, taxed and politicised area making it even more uncertain asa long term investment.

ThemeOne

Most cash buyers are still going to be caught with the extra stamp duty so it's not as good as it used to be for them either.

jaybeetoo

I recently sold a buy-to-let. The government made it much less attractive. Although the return was better than a savings account, the return was not guaranteed and I thought the return no longer justified the risk.

If you do go down the buy-to-let route, location is very important. In 12 years the property was unlet only for a handful of weeks. Most tenants were there for several years at a time. The property was near a city centre, a large hospital, a university, a major employer (with lots of contractors) and on a main bus route.

steampowered

The key advantage of investing in buy-to-let is that it is easy to leverage your investment with high levels of debt.

Of course, borrowing up to the eyeballs dramatically increases the level of risk you are taking.

These days BTL is extremely tax inefficient - particularly for people who can get tax relief by investing into a pension and using their ISA allowance.

18cc

If you do consider buy-to-let remember that it is almost inevitable that section 21 is being scrapped which means effectively that you will be allowing your tenants to stay there as long as they want with no way of terminating the lease unless the tenant misbehaves for example by not paying the rent

This could cause you a capital loss should you ever decide to sell the property because it will be sold with a sitting tenant

Retireby40

Thanks for all the input. I'm not in the position to look into buying something purposely for letting just yet but its having one eye on the future.

I do have a relatively high amount of disposable income its just knowing what to do with it.

Being self employed I dont have a work place pension so that might be another avenue to look into in regards to some sort of private pension.

It's just interesting to hear so many stories of those who were in the market selling up. For those that did sell up what did you invest in? Or did you just spread the money across various isas or fixed term accounts?