Blog
Buy to Let - The Good News
Monday, April 26, 2021
Whilst the Budget in March offered a double bubble for property sales with its extension to the stamp duty holiday deadline and assistance for first time buyers, the Lettings market has also seen reason for optimism recently with the extension to the furlough scheme and support for the self-employed. February and March were good months for the lettings market, with UK rents holding steady and void periods dropping as tenants start to plan beyond lockdown. The South East, South West and West Midlands all saw average rents increase slightly.
Tom Mundy, COO of Goodlord, commented: "It’s been another strong month for the lettings sector and the drop in void average is a strong indicator for more positive months to come. Despite much attention trained on the sales market, the underlying strength of the lettings market over the past year should not be overlooked. With the roadmap now in place and the weather improving, steady rents and declining voids show consistent demand across the majority of England which will only grow as we head into summer.”
With low savings interest rates in recent years, many investors sought alternative investment options including buy-to-let (BTL). And despite UK tax changes, which made it harder to profit short term from buy-to-let, it remains the best option for a return on investment for those with a medium to long term strategy. If you’re looking for a return over a ten-year period then Buy to Let ticks all the boxes.
Demand is predicted to rise with more tenants chasing a limited supply of rental property. Depending on the type of property and its location, BTL yields can still reach 5-7% or more; significantly higher than any savings account returns. It’s a good option for those who prefer a tangible asset; in many areas, landlords can also be reasonably confident that property values will appreciate steadily to achieve a long-term profit via capital growth.
Strong rental demand is key and the demand is definitely there: the private rental sector now houses 20% of the UK population, including nearly 2m families with children. The big question is where to invest to maximise returns and achieve capital growth. At Frosts, with experienced sales and lettings staff in every branch, we have extensive local knowledge about which properties can deliver the best rental return. We can highlight the areas most in demand, advise on yields and minimising void periods. In some areas it may be worth spending more to refurbish a property and arrange property management in order to attract corporate tenants. Corporate lets are not just “easy money”, however; whilst they command higher rents, they have higher expectations. To be considered for corporate lets, a property must be fully managed with a high level of service and rapid response to any problems that arise.
Full management with Frosts provides peace of mind. As a landlord you benefit from a stress free let. Tenants are happy, knowing that problems will be sorted quickly and efficiently to minimise any issues. You can even let your property and go abroad, knowing that you’re leaving it in safe hands with an ARLA Propertymark licensed lettings agent. Our company philosophy is “looking after people and property” and we do exactly that, giving you peace of mind throughout the lettings process.
Before committing to a mortgage and becoming a landlord it’s essential to make sure you have considered everything that letting entails and factor in contingency for emergencies. Getting the best mortgage deal is vital. You need a mortgage specifically designed for BTL and must tell lenders if you intend to rent the property out. BTL mortgages typically cost 1-2 % more than residential loans because they pose a bigger risk to the lender. But there are competitive rates out there and we can help you find them through our association with The Mortgage Advice Bureau who can offer the best rates on the market.
The key lending criteria is how much rent you will be able to charge. Lenders typically look for a potential monthly rental income of at least 125% of your monthly mortgage interest payments. Speak to your local Frost office to find out how much similar properties are on the market for and use a BTL calculator to work out how much you could borrow. Factor in the cost of getting the property ready for market and ongoing costs such as maintenance, buildings insurance premiums and agent fees if applicable.
Never underestimate the work involved in letting a property. There are many considerations; legal and health & safety regulations, property maintenance, insurance and mortgages to name but a few. It is a big decision and you may feel you need professional advice to avoid the pitfalls. Our lettings guide will help you get started Be realistic. It’s not a “get rich quick” scheme and requires considerable effort to find the right property, prepare it for tenants, meeting health and safety requirements and legal obligations. Buy-to-let property can be a great way to invest for the future, but it’s important you go into it with your eyes wide open. It’s a good option for those looking for a medium to long-term investment and who prefer a tangible asset, currently offering better returns than savings accounts particularly when you factor in the potential for capital growth over the longer period.
Click here to view some of the current buy-to-let investment properties marketed by The Frost Partnership or for more information read our Buy to Let investment guide. To discuss Buy to Let and for FREE no obligation advice, please contact your local Frost office.
