I’ve been brought up to believe that if you have money to invest, then property is always worth it. When I was younger, property was an easy way to make money. I was lucky enough to be a first-time buyer during the property boom and 100% mortgages. I was working for the NHS and qualified for the part rent part buy mortgage with no deposit.
I lived there happily for two years during which time my now husband moved in with me. When we were ready to buy our own place, the flat’s value had increased by over half it’s value. This then gave us the deposit for our first house together. If we had to buy somewhere now together we would have struggled. Two more houses later and here we are in our forever home – unless we win the lottery of course.
If you have some spare money now, is a buy to let property still worth it? Let’s look at the pros and cons:
Pros
You can earn income through two different methods. Firstly by rental income which you receive monthly, and secondly from the property increasing in value. If you choose to sell you will get an increase in value back.
You can offset your expenses from your tax return, including:
- Interest on your buy to let mortgage repayments
- Any fees paid to letting agents
- Council tax and bills (if you pay them for the property)
- Cost of advertising your rental property
- Paying for repairs and maintenance
You can also get tax relief to cover renovations to furnishings, carpets and sofas as well as maintenance repairs (but not on home improvements like an extension).
Cons
You will be liable for any maintenance on the property, including if the heating breaks down on Christmas day! You need to have an emergency fund to cover these costs. Most landlords build that into the rent.
You will have to find and vet tenants, who may only stay short term. You could use a letting agency who will handle it all for you, but they, of course, take a percentage. You need to budget for landlord tax, and landlord tax can be complicated unless you outsource the accounts.
The goal is to find long term, reliable tenants you can have a good relationship with, but that is the dream. You may find that they default on their rent, damage the property or end up squatting.
If your property remains empty of tenants, you will still have to pay the mortgage repayments so you need to budget for this.
It’s so important to get landlord insurance, a comprehensive landlord insurance policy can cover against loss of rent or alternative accommodation expenses as a result of damage and also cover you for malicious damage and theft damage by the tenants (depending which policy you go for). You can compare landlord insurance and get more information before you buy.
When you buy to let, you have to pay 3% more stamp duty (tax) than if it was a personal property.
Buying smart
Where you buy is so important. It’s true what they say, Location Location Location! Look for up and coming areas or property that needs some work doing but you can quickly turnaround. Are there schools nearby, or universities. Think about your ideal tenant – is it a family, or do you want to go for a HMO (house of multiple occupancy). This will all affect the type of property you look for.
On the whole, there are pros and cons to buying to let, but even though property prices are not going sky high like they were, it is still a good long term investment. It’s always been my goal one day to own a second property to let.
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