Why It’s A Great Time to Be a Landlord

As interest rates continue to rise, you might be excused from thinking that now isn’t a great time to have a mortgage, or to invest in property. You might even thing that taking on additional properties with the view of operating them as rentals might seem like more trouble that it’s worth. However, as house prices start to dip, rental prices are surging to an all-time high, with demand outstripping supply across the rental market nationwide.

If you’re considering buying your first Buy To Let property, or expanding your existing portfolio, there are a few things to consider before making your next purchase. 

If you’re new to the Buy To Let market, you’ll need a larger deposit than is required for a residential property, generally around 25% of the total cost, vs 5% for many residential mortgages. 

You’ll also have to contend with the new government regulations, including a stamp duty surcharge of 3% on rental properties, and a change to the tax laws, meaning you can’t deduct mortgage costs from rental costs when calculating income; instead, you now have to pay tax on the entire rental amount. There is a 20% tax credit available to landlords, which is helpful, but these additional costs are something to keep in mind if you’re looking to dip your toe into the Buy To Let market. 

Mortgage fees and interest rates can also be higher, and you will have to demonstrate that the property will be profitable in order to qualify for a mortgage.

If you’re looking to invest capital, most income-based investment funds tend to offer returns of 5%, so if you’re going to take on the additional fees and work of letting a property, the yield needs to be more than this to make it worthwhile.

And, finally, decide how hands-on you’d like to be; do you want to run all the marketing, maintenance and tenant management yourself, or would you prefer to let a company do that for you? If you do choose to put your property in the hands of an agent, their management fee is another cost to add to your calculations when working out if this is the best decision for you

However, don’t let that put you off! 

As a landlord or investor looking to get their first Buy To Let property or even expand their portfolio, this is a market in which to create some fantastic yields. With rents at an all time high and more tenants than ever before looking for properties, it’s a great time to get into the lettings market. The key to success is to do your research, know the area and which type of properties are in demand, and not pay over the odds. Buying the right place for the right price at the right time can bring in excellent returns. 

Plus, if you’re looking to minimise those fees (and aren’t we all?), consulting with an independent mortgage broker to get the best possible deal can save you in the long run, as can setting up a limited company through which to rent the property. However, once again we recommend consulting with an expert before doing so, to make sure that this is the best move for you in financial terms. 

As the rental market continues to surge, this can be a fantastic time to get into Buy to Let, or to expand your existing portfolio. Birmingham, with its mix of students, young professionals and families is a vibrant and growing city. There’s a huge mix of property types, from central studio flats to suburban detached houses, offering plenty of variety for prospective landlords. Add in national transport links, an exciting arts and entertainment culture, and continued regeneration projects, and you have all the elements you need to drive a growing rental market. 

It’s a great time to be a landlord, so do your research, pick your property, and take the plunge!

Are you thinking about letting your property? To find out more about our Landlord Services, visit our website here: https://jameslaurenceuk.com/lettings/letting-your-property/