A buy to let investment could be a wise proposal if you are looking for periodic earnings or capital growth. Low interest rates mean that your savings might not be yielding a satisfactory return, putting property investment firmly on your detector. But how to look for these types of investments?
What is Buy-To-Let?
Buy-to-let is the denomination given to buying a house which you are going to rent out, instead of live in yourself. Mortgage brokers have certain houses for investors who need a mortgage to obtain their buy-to-let property. Normally, these have significant interest rates because of the added significant risk to the mortgage giver.
Pros and Cons of BTL Properties
Demand for rental house
There’re plenty of locations in the United Kingdom that are still too overpriced for persons to be able to purchase a property, for others renting their home suits their choices. Hence, there is high demand for UK rental houses. Some studies from the UK housing market predict that by 2045 60% of the UK population will be living in Buy-To-Let properties.
In case you are looking for BTL Deals, there is 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 put money into a buy-to-let house, regardless of 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 viable to assure yourself a very good deal.
Rental yield and capital growth
With UK buy-to-let investment, you can get an income on investment in two different ways. Firstly, your buy-to-let property can provide a rental yield; this is the amount of money you get in rent less the purchase costs and other administration costs.
You can also earn more money when you sell the house if property prices have increased. House prices will always be subject matter to fluctuation but would be expected to grow over years passed. It might be some months or even years before you enjoy significant capital growth.
Secondly, you could be lucky and make a splendid profit quickly. 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 issues such as void periods and bad tenants.
Mortgage tax relief
Most UK property investors in buy-to-let will need to pay income tax on the rental payments that they collect. Until the 2017 tax year, buy-to-let owners were able to deal with 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 rates from rental income to reduce your tax statement.
Capital gains tax
When you sell your property investment, you will need to pay capital gains tax on any gain that you produce beyond your capital gains tax allowance.
Stamp Duty Surcharge
When you buy a house in the UK, which is not the home where you live, you will have to pay an additional 3% on each stamp duty band.
Minimum Energy Efficient Standard Regulations (MEES)
You may incur costs guaranteeing that your investment property follows the Minimum Energy Efficient Standard regulations. All rental houses must have a valid Energy Performance Certificate (EPC), and from 2021 proprietors can no longer let houses with an Energy Performance Certificate rating of below E.
Maintenance and administrative costs
You should estimate either the rental income you can get will cover ongoing maintenance, administrative and insurance costs besides 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.