There’s no question that buy to let is the property investment buzzword of 2018. But the experts are offering different opinions over when is the best time to invest in such a property.
So, should you snap up your buy to let before 2018 is complete or wait until next year to gain the strongest investment?
The good news for budding and savvy investors is that buy to let still represents a strong and powerful asset class that is ripe for the picking. There’s no doubt that the investment landscape was more straightforward prior to the introduction of Section 24 which saw landlords take a major hit to their mortgage tax relief.
Along with the introduction of more stringent lending criteria, buy to let has taken a hit with some landlords choosing to reduce the number of homes that they own.
However, the buy to let sector is a robust and adaptable one. While the more traditional model has been superseded, savvy landlords are already finding ways to enhance their portfolio despite the changes. One of the most popular routes for smaller landlords is choosing to set up limited companies to circumvent the new tax rules.
This lending criteria is also more relaxed for landlords who pay a basic rate of tax. An option for higher rate taxpayers is for the lenders to take “personal income outside of the buy-to-let property into account” to potentially boost the amount they can borrow.
A key reason that so many are determined to stay in the market is that demand for private rental properties is rising all the time. In turn, this has meant fierce competition among mortgage providers which means that buy to let property mortgages are up for grabs at extremely competitive prices.
Many providers are also upping the game with some great deals, such as the five-year buy-to-let from TMW and Nationwide Building Society, with an exceptionally low rate of 1.99 per cent. This is just one example of how landlords can protect themselves against future interest rate rises.
By choosing a five-year or longer option, this is also a way of avoiding stricter affordability tests and stress-testing. The lending restrictions introduced by Prudential Regulation Authority back in 2017 are one of the key reasons that people are warier of the buy to let market.
This example just shows how there is still plentiful opportunity if you are willing to think outside the box. Longer fix also often means less risk. A property investment expert will help you to understand the level of risk you are willing to take and position your investments accordingly. It may technically be more difficult to make good returns, but those who are willing
In this landscape, the best route to take is research. There are plenty of buy to let hotspots around the UK and the Northern Powerhouse is booming with high yields. According to Savills, asking rents in the capital fell by 3.2 per cent in the year to June 2017, but rose by 1.7 per cent in England and Wales as a whole. There is plenty of good opportunity to be had.
Just like with any type of investment, there are better and worse locations depending on the current market situation and forecast. Regional cities including Bournemouth, Cardiff and Coventry currently have some of the strongest buy to let property markets with typically higher yields than London, where prices tend to be higher.
Research from earlier this year showed that both Liverpool and Nottingham enjoy average rental yields of 6.2 per cent while Southampton and Greater Manchester also made it into the top buy to let locations for 2018.
The research by Private Finance also showed that rental yields across the top 10 hotspots have risen by an average of 0.9 percentage points since May 2017.
Rents are also predicted to increase over the next few years which means it’s well worth sitting tight, playing the long game and doing some careful number crunching because your buy to let property investment will pay off.
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