A buy to let investment could be a prudent proposal if you are looking for monthly income or capital growth. Low interest rates mean that your reserves might not be yielding a satisfactory return, putting property investment firmly on your radar. But is it worth it in 2021?
What’s the meaning of Buy-To-Let?
Buy-to-let is the term given to buying a property which you are going to rent out, instead of live in yourself. Mortgage lenders have particular houses for investors who need a mortgage to acquire their buy-to-let property. Generally, these have bigger interest rates because of the added significant risk to the mortgage provider.
Is Buy-To Let a Good Investment?
Demand for rental property
Many areas of the United Kingdom are still too expensive for many people to be able to buy a property, for others renting their home suits their choices. Consequently, there is high significant demand for UK rental properties. Several studios from real estate business predict that by 2045 55% of the UK population will be living in Buy-To-Let houses.
In case you are looking for Buy-To-Let properties, there are a lot of proptech software where you can find them. One of the best-known is DealSourcing. This proptech software has been able to automate this process and create a platform that becomes your very own property sourcer. Through algorithms and the power of automation, the platform is able to find properties from all across the internet and sort them by ROI.
It saves you time, money and energy! The key feature of this platform is to find High Yield properties. It’s a no brainer to have DealSourcing.co if you are looking to Buy-To-Let property investment.
The software also calculates the return on investment for every property on Rightmove and locates below market value properties for sale, saving investors hours of time spent on research.
Low interest rates
You can invest in a buy-to-let property, despite the capital to cover the entire purchase price, because a lot of mortgage lenders offer buy-to-let mortgages. With low interest rates and mortgage suppliers competing for business, it is possible to assure yourself a low rate deal.
Rental yield and capital growth
With UK buy-to-let property investment, you can get a profit on investment in two manners. In the first place, your buy-to-let property can provide a rental yield; this is the quantity of money you get in rent less the purchase costs and other running costs.
You can also gain money when you sell the property if house prices have increased. Property values will always be subject matter to fluctuation but would be expected to grow over the long term. It might be some years before you enjoy significant capital growth. On the other hand, you could be lucky and make a splendid profit fastly.
Recent changes to legislation and taxation have impacted the gainful of buy-to-let investments. But your challenges don’t finish there; you should also consider other problems such as void periods and bad tenants.
Mortgage tax relief
Most investors in buy-to-let will need to pay income tax on the rental payments that they collect. Until the 2016 tax year, buy-to-let proprietors were able to assume mortgage interest with other deductible costs from their rental income before calculating their tax liability. As of 2020, you are no longer able to deduct any of your mortgage expenses from rental income to reduce your tax bill.
Capital gains tax
When you sell your property investment, you will need to pay capital gains tax on any gain that you make beyond your capital gains tax allowance.
Stamp Duty Surcharge
When you purchase a property in the UK, which is not your main home, you will have to pay an extra 3% on each stamp duty band.
Minimum Energy Efficient Standard regulations
You may incur costs ensuring that your investment property complies with the Minimum Energy Efficient Standard regulations. All rental properties must have a valid Energy Performance Certificate, and from 2020 proprietors can no longer let properties with an Energy Performance Certificate rating of below E.
Maintenance and administrative costs
You should evaluate either the rental income you can get will cover ongoing maintenance, administrative and insurance costs additionally to your mortgage payments.
Brought to you by DealSourcing.co
DealSourcing.co puts the power of automation in your hands. Search over 200,000+ Below Market Value deals (Buy-To-Let, HMOs and BRRR) with ROIs above 15% with the click of a button. Find High Yield properties with our efficient and easy-to-use tools.