Is it still worth investing in the buy-to-let market?

Molo Editor
Sep 27, 2018 · 4 min read
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Buy to let is dead. Long live buy to let!

Browse any column in the property press, and you will find negativity towards rental investments. The Stamp Duty increase, new tax regulations and Brexit have all played their role in the uncertainty over the buy-to-let market.

Speak to current landlords, and they will pine for days gone by where tax breaks were more favourable. These scenarios cast what would seem to be a pretty future picture for investment properties.

The doom and gloom make for interesting news, which creates clicks — which generates revenue. That’s not to say that all the negative news on the buy-to-let market is sensationalised for profit, but it also doesn’t mean that everything you read is as bad as it sounds.

Investing in the buy-to-let market in 2018 can still be a profitable venture, whether you’re a seasoned landlord or brand-new investor. We’ve put together some reasons we think it’s still worth investing in a buy-to-let property.

Supply and demand

One aspect that still favours the rental market is the demand for accommodation. Homeownership is currently at a 31-year low and one quarter of all UK households (almost 5.8 million) will be privately rented by 2021.

Factor in the record £50bn in rent paid in 2017, and it seems clear that the need for rental accommodation across the country is still strong. Rents in the private rental sector rose by 1.6 per cent in the year to August 2018, according to the Office for National Statistics (ONS).

The rise coincides with demand for rental accommodation and lack of available properties. Tenants are also spending longer in their rented homes now, which means landlords can expect fewer void periods and a consistent income stream.

Getting the numbers right

The yield is the most important component for any landlord. In layman’s terms, it’s the amount of rent they will get in comparison to the property value. If you buy a property for £350,000 and let it for £1,300 per month, the yield will be a healthy 5.2 per cent.

While prime Central London has seen yields drop, other areas in the capital still offer healthy numbers. East London towns such as Barking and Dagenham are as high as 5.3 per cent, while Wembley and Brent in North London offer 4.4 and 4.1 per cent respectively.

Moving away from London, and Manchester currently offers some of the best yields in the country at 5.5 per cent. A high student population and a rise in tech-related jobs have made the Northern city popular with many professionals and those who are studying.

Finding the right place to invest

London was once the hotbed for all rental investments. Recently landlords have seen more appeal in other areas of the country. As well as Manchester, cities like Liverpool and Newcastle are popular because of their high yields.

Parts of Essex and the Midlands are also proving to be hotspots for higher yields. However, it doesn’t mean that you should rule London out entirely. Research is the key to finding the best place to purchase an investment.

Looking at commuter towns, areas that are good for transport, which areas have good schools and where students stay will go a long way toward helping you identify profitable postcodes to invest your money in.

Getting the right price

When the buy-to-let market was booming, so were property prices. Since Brexit, property prices have seen slower increases across the UK, while London has seen a decrease. This might initially seem like bad news, but it puts the power in the hands of buyers.

There is more room for negotiation, and those still interested in the buy-to-let market can find some good deals in 2018. The money you could save on buying somewhere with the intentions of letting it out should be factored in when deciding if it’s worth purchasing an investment property.

Why invest in buy to let?

Many will have been put off investing in the buy-to-let market, but it can still prove to be profitable venture. While some landlords have sold up, not wanting to deal with the extra tax and stamp duty, others have weathered the storm.

It’s unlikely that you will struggle to find tenants for your investment property, and there are plenty of good deals to be done in this current market. If done correctly, a buy-to-let property is still a shrewd investment.

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