How Secure Is Buy-To-Let Property Investment?

Is Buy-To-Let A Secure Property Investment Option Aspen Woolf

Investing in buy-to-let properties has traditionally been seen as a simple way of making money. However, this isn’t necessarily the case. In fact, some people who make unwise buy-to-let investments find that they lose money in the long run. This is because there are a number of factors which can influence just how much profit can be made from any given property.

With this in mind, is a buy-to-let investment a secure one?

The Importance Of Research

Obviously, the stock market is a clear comparison – everyone knows that share prices can go up or down – however when it comes to property, some potential investors are under the impression that their investment cannot fail. This is not the case.

Just like stocks and shares, property prices can fluctuate. Some people who invest in property discover that the value of the home increases dramatically over the years thanks to improvements in the local area. Others, on the other hand, find that the area in which they purchased the property takes a downhill turn and becomes less desirable for tenants and buyers alike. This means that research is key to determining which property is the right one in which to make an investment. Aspen Woolf have over 15 years of experience in identifying excellent opportunities within the property investment sector, so instead of going it alone, talk to our advisors to ensure you’re getting excellent advice in the current property market.

The Potential Profit

It comes as no surprise that buy-to-let investments are frequently seen as being extremely secure. After all, property investments can be extremely profitable since they offer two distinct forms of revenue stream. Firstly, investors receive ongoing revenue every month from the property’s rental income. Secondly, when the investor decides to sell their property they receive more profit from the sale.

Today, there is an unprecedented demand for rental properties across most regions. There are ongoing shortfalls in local housing, and this is now paired with the inability for many young people and families to afford a property of their own. Both of these factors mean that if you carry out your research well, it’s possible to invest in a desirable property which will be popular with tenants and command a good rental yield. With infrastructure developments across the UK, such as the HS2, the road to London is becoming faster and more accessible, meaning that properties along the route will be highly prized. Aspen Woolf stay abreast of these changes to ensure we curate the most desirable properties.

For many investors, buy-to-let properties are often viewed as a longer-term investment instead of considering the rental yield. They purchase properties with a view to selling them at the perfect time so they can reap large gains on their capital value. However, if the income earned from rent is put aside, none of the property sale profits will need to be used as a deposit when making your next property investment.

How Secure Is Buy-To-Let Property Investment? Aspen Woolf
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The Potential Pitfalls Of Buy-To Let Investment

Although there are clearly many benefits to investing in a buy-to-let property, there are a number of potential pitfalls which should be borne in mind before taking the plunge. Potential investors must  acknowledge that no investment can be guaranteed when it comes to offering the expected returns. Although many buy-to-let properties turn out to be very lucrative investments, making more profit than previously imagined, others can end up costing the investor a lot more money than they intended to spend.

There can be a number of factors which can impact on the profitability of any buy-to-let property. While some can be foreseen, others may emerge out of the blue. For example, the recent uncertainty about the implications of Brexit has led to a number of unpredictable property market changes which could have a serious impact on any buy-to-let investment.

Also, for some considerable time, the interest rate has been at a very low level. Investors have been able to reap the benefits of this thanks to cheap mortgages. Unfortunately, however, there has now been a rise in the interest rate, and there is now a distinct possibility that more interest rate rises could follow. This means that landlords must ensure that they are in a secure financial position in order to rise those increases out. Interest rate rises mean that mortgage payments will increase at some point, whether that be immediately or once a fixed rate deal ends, so it’s essential to ensure the rental income of the investment property will cover those payment increases in order to avoid damaging losses.

Changes In The Property Market

When the property market goes through changes, this will impact on the success of any buy-to-let investment. House prices have seen growth, however in some parts of the country this growth has now slowed down. This means any potential property investor must always be vigilant on what this could mean for their property’s value. It’s always important to have a viable exit strategy which should centre around when the best possible price can be obtained for the property. This means that landlords need to decide whether or not they are financially able to wait and hold onto their property until the prices have increased should its value have fallen.

The Danger Of Empty Properties

One problem which a lot of landlords experience is their property lying empty for extended periods. This often comes as an unexpected shock since the rental market is so buoyant in many parts of the country. However, there are a number of reasons why a property can be empty. Sometimes, tenants will end their contract early. Sometimes, work has to be carried out before the property can go back onto the rental market. Other times, there is just a drop locally in demand.

When there is no income from rent for any period of time, landlords have to be certain they can still make their monthly mortgage repayments. If a tenant falls into arrears with their rent, this could also pose a potential problem, with landlords having to cover the mortgage themselves. With this in mind, rental property may not be such a lucrative choice as many investors think.

Overall, a buy-to-let property can be a very profitable investment. However, doing adequate research and keeping a close eye on the property and financial markets is essential for success. A successful landlord will also have a clear contingency plan just in case of an unexpected change.

Short Term Lets Could Boost Your Rental Income

short terms lets include utilities furniture

Short term lets can offer a remarkable return on investment. More and more entrepreneurs are feeling the benefits of buy to let investment in the UK and cities like London, Manchester, Birmingham, Glasgow, Newcastle, Cardiff and Liverpool. The short-term let is becoming one of the hottest trends in the property investment sector.

Lucrative opportunities

In the past, most landlords gravitated towards long-term lets due to the security on offer. However, growing numbers of tenants are now showing more enthusiasm for short-term lets. This trend is delivering more lucrative opportunities for landlords wishing to take advantage of the Buy-to-Let market.

The difference between long and short-term lets

The definition of a long-term let is generally one that lasts for at least 12 months. Short-term lets commonly involve contracts of less than six months. Things like internet access, TV and utilities will normally be covered by the rent. The increased popularity of short-term lets can be linked to a range of factors. Today’s world is regarded is regarded as more transient than ever, with many young professionals eager to relocate frequently. There is a growing appetite for cheaper alternatives to hotels that still offer all-inclusive living.

Why opt for a short-term let?

Individuals may decide to rent out properties on a short-term basis for many different reasons. Some people require accommodation whilst their main home is being renovated or refurbished, whilst others look for short-term lets to deliver accommodation during temporary work contracts. Short-term lets can be advantageous for buyers who wish to get a taste of a specific area before they commit to a purchase, as well as people on extended holidays and those in need of temporary homes whilst they are in the process of buying and selling a property.

Other benefits of short-term lets

Landlords drawn to the short-term lettings market often include those that spend extended periods away from home and wish to monetise their property whilst they are elsewhere. The market is also attractive for landlords who live in popular tourist spots as well as those that are renting out a property for the first time and wish to see how they fare before they commit to a long-term let.

Reduced waiting times and administration

The amount of administration attached to a short-term let is much more modest compared to the paperwork involved in a long-term let. This delivers welcome flexibility and frees up valuable time. In a short-term let, the application process will normally be shorter, and all the rent will be paid upfront, in advance. This is another reason why the short-term let is so popular amongst those who need to secure accommodation quickly. Many people choose to opt for short-term lets as a stepping stone to finding a long-term home, either to rent or to buy. When tenants don’t know exactly how long they wish to stay for, they can sign up for the minimum period then ask for more time later. The popularity of Airbnb and other sites shows us just how big a force the short-term let has become in recent years.

Short Term Lets Could Boost Your Rental Income Aspen Woolf

Short term lets vs hotel stays

With short-term lets, bills are normally covered by rent. This provides tenants with greater clarity and makes it far easier to budget. Rents will be higher than those charged for properties where bills aren’t covered, but it may still be possible to make savings. In any case, the figure paid will normally be much cheaper than the cost of staying in a hotel for the same period of time. Tenants can also expect to enjoy more freedom and privacy than they would in a hotel, not to mention more space. It is generally much easier for tenants to make themselves feel at home when they opt for a short-term let rather than an extended stay in a hotel.

Is a short-term let right for you?

If you have a vacant property or expect that you will in the near future, you may well wish to opt for a short-term let. Short-term lets are generally better suited to landlords with more than one buy-to-let property, especially if this is their only or main source of income and the property still has a mortgage left on it. Should you expand your portfolio in future, it may well make sense to enter the short-term let market.

Charging a premium

You may be able to charge more than 50% more for a short-term let than you would for a longer-term tenancy. The extra cost is justified by the flexibility, convenience and inclusive bills offered by a short-term let, and many tenants are more than happy to pay this. You do need to ensure you have a plan in place for when the tenancy comes to an end and may need to start looking for new tenants quickly. When your property becomes empty, it will stop generating cash for you. Make sure the cost of offering the tenancy is covered by the rent that you charge.

A hands-on approach

You may need to adopt a more involved, hands-on strategy for dealing with problems when they arise. Short-term tenants are less likely to be patient when repairs and maintenance work are needed, and you will normally be expected to take action within 24 hours. This means you will have less time to source tradespeople to deal with the work if you are not carrying out yourself and may need to pay more as a result. Your reputation will hinge on the reviews that your tenants leave you, so expect to go the extra mile to keep them happy if you do wish to cement your status as a trustworthy, reputable landlord.

Is your property right for short-term lets?

Make sure your property adheres to all health and safety regulations, has suitable insurance cover and has undergone a fire risk assessment. Check your mortgage agreement permits you to let out your property on a short-term basis. Your short-term let plans are more likely to pay off if your property is located within a mile of public transport links and venues such as shops, bars and restaurants.