BUY TO LET – Is it really worth it?

Buy-to-let used to be a great business. Property could be purchased at reasonable prices and there was high demand for rentals. Then the new stamp duty rules came in and banks started to get fussy about buy-to-let borrowers. Is it still worth doing? Well yes, I think it is. I live just outside Manchester and when I go into the city I am driving passed development after development. There are cranes everywhere, the night sky over Manchester is lit up with red lights. Investor demand remains high hence properties sell out quickly.

Yields in the city can be as low as 2.5% PA but investors are hoping for circa 5-7% PA from some developments. Like most major cities the presence of a university boosts demand and hence yields so Manchester’s strong rental sector it is not unique.

Funding buy-to-let properties can be tricky. Traditional funders are very choosy about who they will back so small and new investors sometimes have little choice but to seek funding from alternative sources. You will need a deposit of circa 25% and the rates will be higher but it can be done. Challenger banks and P2P platforms can be a great source of funding for buy-to-let properties. There are lots of offers to be found on Google. I would apply to as many lenders as possible, that seems obvious but it can take some time and investors might not enjoy filling in numerous application forms.

Demand for rental properties is still strong and is likely to increase as economic uncertainty prevails around Brexit. Some indicators suggest that the number of properties for rent will decline in 2019 which should push up rents payable and thus increase yields.

NOTE: The views expressed in this article are mine and should not be taken as financial advice. If you are considering investing in buy-to-let properties you should seek professional financial advice before doing so.