Is buy to let an investment opportunity? Part 5
If we haven’t already got one, lots of us would like a second property - and preferably a third and a fourth. Buying to let can give us an income, a pension, a nest egg and a rewarding place to put our money in a low interest environment.
But is buying to let the investment opportunity it once was?
House prices continue to climb and interest rates, after years in the doldrums, are predicted to rise - and carry on rising – according to the Bank of England. Rental properties are going to be more expensive and they’ll cost you more in mortgage repayments.
Britain’s biggest buy-to-let landlords, Fergus and Judith Wilson, are in the process of selling their entire portfolio of nearly 1,000 homes.
It is a deal that is likely to net the couple at least £100 million - and it has prompted speculation that the buy-to-let market has peaked.
So should those of us with one or two rental properties follow their lead and get out while the going is still good? And should people considering investing in a buy-to-let look for somewhere else to put their hard-earned cash?
Paul Offley, who runs the lettings division of the Nottingham Estate Agency and the Harrison Murray Estate Agency, knows the buy-to-let sector better than most. We asked him for his thoughts on the strength of the market.
“It’s still strong,” says Paul. “Finding tenants for good buy-to-let properties is not an issue for us.”
Rising interest rates are going to make mortgages more expensive. Existing and would-be landlords need to bear that in mind and plan accordingly, says Paul. The gap between your rental income and monthly mortgage outgoings may narrow in the months and years to come. Short-term profits may become harder to find.
But buying to let is still a good investment if you’re in it for the longer haul, believes Paul.
“The market is cyclical, it always has been,” he says. “Sometimes residential properties are strong and lettings slip back a bit. Then it switches. I’ve been in this business 36 years and I’ve seen it many times.
“At the moment we’re seeing an awful lot of movement in the residential market. Some people are selling their buy-to-lets because there is good money to be made on them. But in a couple of years the market will swing back again.”
Britain has a shortage of houses. Supply isn’t meeting demand. Saving a deposit for a first home is tough. While that remains the case there will always be a ready supply of potential tenants.
“You need to go into buy-to-let with your eyes open,” says Paul. “You need to find the right property at the right price that will attract the right kind of tenant for you.
“Get advice, speak to a lettings agent. Do your homework and don’t expect to make mountains of money straightaway. If you do that, buying to let can still be a good investment.”
If you would like advice on getting a buy-to-let mortgage talk to our advisers on 0344 481 0013 or find out more about our letting service.
Read our series of buy to let stories