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What is a Buy-to-Let Investment? An Introductory Overview


What is a Buy-to-Let Investment? An Introductory Overview

Despite almost two years of unprecedented adversity, the UK’s buy-to-let market continues to go from strength to strength. Not only are there more private landlords in the UK than ever before, but more newcomers are entering the sector.

The term ‘buy-to-let’ is used in reference to an investment where a person or a business buys a residential property to ‘let’ it out to tenants. With average UK house prices hovering at record highs, demand for quality rental properties is likewise at an all-time high.

Research suggests that more than half of all millennials will most likely rent privately into their forties. There are already around 1.4 million private renters within the 25 to 34 age bracket alone, a figure set to continue growing indefinitely.

The more would-be buyers who cannot afford to own their own home, the more attractive the buy-to-let sector will be for investors.

The Advantages of Buy-to-Let Property

A successful venture into the buy-to-let market can be rewarding in many ways. For those who own buy-to-let properties in desirable locations, the two biggest benefits of all are as follows:

1)  Regular Income

Landlords typically charge a rental income that covers both the mortgage payment on the property and generates ongoing income. While this rental income is taxable in the same way as any other form of income, sky-high rents can still translate to generous profits.

2)  Capital Growth

Average UK house prices are currently up around 10% compared to the same time last year. In some regions, property prices have spiked by more than 20%.  For the buy-to-let investor, this is the kind of capital growth that can generate massive profits when selling in the future.

The Future of Buy-to-Let

It is entirely likely that the events of the past 18 months will drive further interest the way of the private rental sector. Skyrocketing property values have effectively priced millions out of the market. Meanwhile, the shifting priorities of the public in general have prompted many to rethink whether they really want or need to own their own homes.

For the foreseeable future, demand for quality rental homes is set to continue outpacing supply by a huge margin. The UK government is once again expected to fall short of its own affordable house building targets.

What has already become known as ‘generation rent’ is a cultural shift that is not going to disappear overnight. The more difficult it becomes to get on the property ladder, the greater the demand for affordable rental homes.

All of which looks set to continue playing directly into the hands of buy-to-let investors indefinitely. Even with the potential challenges associated with becoming a landlord, the UK’s real estate market is still considered a safe haven for investors.

Particularly for those who purchase quality homes in-high demand areas; some of which have seen average monthly rents skyrocket by as much as 13% over the course of the past year.

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