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The rental market is currently experiencing extreme levels of competition in the United Kingdom. Prices are up, and demand is higher than ever. Yet with more demands on landlords and a raft of new legislations rumoured to be on their way, are rental properties still worth the time and effort? We discuss the current situation in the text below.
Are Buy-to-Let Mortgages Still Worth It?
Buy-to-let mortgages were once a golden ticket. You could take out a loan, and someone would pay it off by paying the rent for you. However, there are now more stipulations chipping away at that investment, which make buy-to-let mortgages less attractive than they once were.
The first is that you need a 25% deposit. With house prices so high, this is quite the outlay. Anyone buying a second property is also subject to a 3% additional stamp duty. This is 4% in Scotland. Landlords now also have to pay tax on the entire rental income, meaning it is not possible to offset mortgage interest rate costs.
Luckily, for anyone looking to sell a rental or second property, despite a fairly stagnant market, there are more selling options than ever. Websites like Sold can provide multiple options, ranging from quick turnaround cash offers to more traditional estate agent routes. This can free up cash and allow sellers to choose their closing dates. It is even possible to sell tenanted properties through them.
Current Advantages of Rental Properties
Even using a buy-to-let mortgage, there are still plenty of advantages to a rental in the current climate. The main one is that demand is high. You are unlikely to have a tenant leave, and if you do, it should soon be filled quickly afterwards. This means you will seldom be faced with a low occupancy rate.
The prices for rent are also high. Even though the government has announced plans to build new homes, this will take time. All of this signals that for the next year or two, these prices may continue to rise. As there are also plenty of tax cuts you can get from properties, this can be quite lucrative. With property values rising, you also stand to make a lot from appreciation.
Homeowners who are worried about the work involved in buying, developing, and maintaining a rental property will also be pleased to hear that it’s entirely possible to enjoy the benefits of property investment without committing too much of your time. That’s because there are now property investment companies that will take care of every stage of the rental investment journey on your behalf. As such, rental investments also provide the notable benefit of worry-free long-term returns that you would struggle to secure with pretty much every other investment option.
The Downside to Rental Properties
While owning a property is still lucrative, the free rein that has been given to landlords for some time seems to be coming to an end. The UK government is currently discussing a renters rights bill, which will cap advanced rent payments and tackle certain rent increases.
Those who are looking at buying holiday lets will also face resistance in certain areas. This is because of towns being taken over by short-term lets, pricing out locals. For example, in North Yorkshire, Whitby Council, has voted to prevent any new builds from being purchased as second homes. Double council tax will also be added for second homeowners.
Rental homes are still worth the time and effort. It is unlikely property will ever be a poor investment. However, the pros, cons, and changing housing market need to be taken into consideration. Depending on your circumstances, it could still be a great time to get in on the property.