What Are The Risks?
This post was submitted by Sterling Woodrow.
Buy-to-let properties can be a great investment option for those sick of seeing their savings earnings them next to nothing in the bank due to low-interest rates. However, despite the fact that such an investment option has the potential to provide great returns, it’s important to remember that it is not without its problems and risks.
Perhaps one of the greatest risks associated with buy-to-let properties is getting a problem tenant. You might think it would be easy to evict a tenant that is destroying your investment property and failing to pay their rent on time, but the process can be lengthy and requires expensive correspondence with the courts. Of course, you can decrease your chances of encountering a problem tenant by vetting all potential tenant thoroughly.
Another risk that makes people wonder “Is buy-to-let worth it?” is the volatility of the real estate market. It might seem like property prices in the UK will do nothing but increase in the coming years, but there is always the chance of a housing market crash. You have to remember that the political climate in the UK at the moment is heated and no one is certain how Brexit will affect many industries. There is a chance if the pound falls that foreign property investors will try to cash out early and flood the market, sending house prices falling.
Buy-to-let investors who are prepared to hold onto their investments for the long term are almost guaranteed to see good returns. Not only do they earn an annual income from rent payments, but the value of their property is certain to increase over the decades. Many people would struggle to give a definite “Yes!” to the question “Is buy-to-let worth it in the short term?”, however.
One of the best ways to reduce your risk in the buy-to-let marketplace is not to over leverage yourself. With banks offering 100% mortgages to buy-to-let newcomers, many people end up falling into a trap and having to sell their investment at a lose. You might be able to afford the mortgage repayments today while interest rates are low, but if rates increase, could you still afford the monthly payments? Would you be able to cover the repayments in the event that your property was vacant for a couple of months? Those are two important questions you need to think about before taking out a very large buy-to-let mortgage.
Buy-to-let in UK has been through poor press over the past few years as many people have been believing that it has contributed to rampant house price inflation. By August 2007, some figures and commentators even stated that buy-to-let is “undoubtedly contributing to the overvaluation of housing”. But some very misconceptions about the best places to buy-to-let , UK real estate market is still very attractive.
Why invest in buy-to-let in UK?
UK is and will remain London, with its language, its economic and cultural dynamism, its universities, airports. The United Kingdom is a space that attracts those who succeed, those who want to succeed and those who succeed. Because it provides a fairly stable political and security environment. The legal and fiscal context favours even privileges the owners. In addition, its many cultural and tourist attractions make it a very pleasant state to live. Finally, the real estate market, although stable for 2 years, has taken on average 10% of value over the past 20 years. This is because the housing stock is dramatically below needs. Not to mention the very favourable exchange rate if you have funds in euros or dollars. In any case, there are many reasons to buy a residential buy-to-let in the UK.
How to invest in an apartment Buy-to-let in UK?
The buy-to-let allows you to access the loan and repay you partially or fully thanks to the rents you receive. You will enjoy a very dynamic real estate market and a high capital gain on resale, this is called the “capital gain” (10% per year on average from 2000 to 2015). In the United Kingdom, Buy-to-let is governed by specific legal provisions.
What are the best places to buy a Residential Buy-to-let in UK?
Though there are many common misconceptions about the best places to buy Buy-to-let in the UK it is obvious that the magic of the United Kingdom remains unique. This is probably due to its ancestral charisma, its modern dynamism and its pace that make it one of the most attractive places in the real estate market.
Located east of Marylebone, north of Oxford Circus and south of St Pancras, Bloomsbury is a neighbourhood renowned for its institutions such as the British Museum, the University College of London, the Royal Academy Arts and its many medical centres. Offering a comfortable living and an ideal location for people working in the City, this chic neighbourhood attracts more and more workers.
This district is an enclave of greenery in the middle of London. Its park, which extends like a stream as its name suggests, is the neuralgic centre of the district where children enjoy meeting in the “playground” and adults play tennis in an enchanting setting. It has excellent transport links to central London and its proximity to Notting Hill and Kensington, and its incredible shopping centre “Westfield London” makes it an ideal living environment.
Notting hill and Shoreditch
The vibrant neighbourhoods of Notting Hill and Shoreditch are still very popular as many real estate buyers want an exotic atmosphere. Here the houses are colourful, the buildings offer beautiful gardens, the small shops as well as the street-art of Shoreditch, and the trendy restaurants, make it a very valuable real estate choice.
Short Answer: Yes! (In The Long Run)
It is always surprising to hear someone ask the question “Is buy-to-let UK still relevant?” because in many ways investing in real estate has never been more relevant for those who have the funds. The truth is that the population of the UK is growing at an alarming rate and the housing crisis has only just begun. As the years go on, the value of land and housing is only set to increase, and monthly rent payments are certain to increase.
When house prices rise so much that many people can’t even afford a deposit, competition in the rental market is going to increase and landlords will basically be able to set their own prices. This is good news for buy-to-let property owners who are in it for the long game.
Of course, in the short term, many people, when asked “Is buy-to-let UK still relevant?” might say “No”. This is not surprising as in the short term, buy-to-let owners can lose a lot of money. For example, if a tenant defaults on rent payments, it costs a lot of time and money to deal with them. In addition, many tenants can cause damage to an investment property that requires the owner to carry out expensive repairs in order to avoid being sued. Many local authorities place strict guidelines on landlords renting to housing benefit clients, which often mean property owners have to pay premium prices to contractors to have repair work carried out of hours or risk large fines.
One area in which buy-to-let investors can make a lot of money relatively risk-free is the student accommodation marketplace. Student numbers are increasing year on year and those attending university are always going to need a place to stay. One of the good things about renting to students is you can receive five or more sets of rent from a single house if you rent rooms out on an individual basis. In addition, students always have money to cover their rent due to government maintenance student loans.
While most would say it’s a good idea to start getting involved with the buy-to-let real estate market, it’s important to remain cautious when it comes to using loans and mortgages to fund your investments. Brexit is on the horizon and no one knows what could happen to interest rates, the value of the pound sterling and the UK property market over the course of the next five years. Proceed with caution and don’t over leverage yourself.
What Is Buy To Let? Buy-to-let is a phrase pertaining to the purchase of a property specifically to let out, that is to rent it out. Buy to let properties are normally residential but the phrase also incorporates student property investments and hotel room investments.
If you have been thinking about a buy to let investment property, you might be a little nervous because of recent economic events. The fact is, economic trends always move in cycles. This includes property values, mortgage rates and the popularity of different types of investments. When it comes to buy to let, remember that as long as people are letting houses and flats, there will be opportunities in this kind of investment.
Here are some factors to keep in mind for any buy to let property:
Location: Think of the Future as Well as the Present
Choosing the location of a buy to let property is never easy. The decision requires proper and careful planning. When finding a buy to let property, you should take into account the location and price of the property. The location of an investment property is possibly the single most important factor. You should research as much as you can about the location. Statistics, such as the economy, demographics, and crime are all important, but so is your general impression of a place.
The Property: Suitable for Letting?
When you look at the property, try to see it through the eyes of someone who might be letting it. If you were such a person, does it look presentable? How convenient is it to downtown areas, major roads, public transportation, and schools? You also have to look at the property as an investor, of course. As with the location, you have to consider the future -especially the near future- as well as the present.
For a buy to let investment to be profitable, you have to be able to do an accurate estimate of your costs versus the revenue the property will bring. This may sound obvious, but many investors do not consider all of the expenses, or they overestimate the income they will be generating. These are some of the things to consider before entering a buy to let investment property. If you choose carefully and do the research, this can still be a profitable opportunity for UK investors.
Why Do People Still Invest in Property?
What makes investing in property really a good investment option? When there are other investment avenues open, why is it that investment property never fades out? Even while the other avenues are offering better rates of return, people still go in for investing in the real estate. The reasons abound, from the purely financial consideration based on profitability to the more emotional and psychological reasons. Let us explore some of the reasons which make investment property hot.
Absolute returns matter:
Investing a big sum in the real estate sector over a period of time can actually make you earn big after some period of time. While some other options may be offering you better returns, there might be the requirement of lower sums which might, in fact, make you diversify more rather than putting all money in one option to get maximum returns. In property, you have to invest big.
A thing which you can own and use:
Commodities or metals, most of the times, can not be used. These can only be used by selling these off or mortgaging them to convert these into money which is then used for doing anything else. Property can be used as such either for living or for work anytime that you like.
Earn income in more than one way:
With investment property, you can take the rental income by leasing out your unit or you can even sell off the same during the peak rate season to get the maximum profit. Rental income can be substantial in some areas. You can retain the title to the property even while earning income from it.
Why is it that investment property never fades out?
Even while the other avenues are offering better rates of return, people still go in for investing in the real estate. With investment property, you can take the rental income by leasing out your unit or you can even sell off the same during the peak rate season to get the maximum profit.