Part Two – Is a buy-to-let right for you?

by Mark Johnston

The buy-to-let market maybe growing in popularity but does it stack up as a viable investment, is now the time to consider putting money into this area again or are there still too many potential downsides. According to a report published by Lane Fox estate agents property has beaten other financial investments over the last 5 years.

With so many people struggling to access the property ladder and therefore being forced to rent, shows that a demand will and is there for people who invest in a buy-to-let property. Research from rightmove.com showed that the return on investments for buy-to-let homes is now in excess of 6%, while the amount of rental stock available has fallen 23% since last year meaning rents are likely to increase further.

You need to decide if buy-to-let is for you regardless of the current market environment and ask yourself a number of questions, such as have you sufficient capital at your disposal? Are you able and happy to tie up your capital for a number of years? Do you have any other disposable income to cover all eventualities?  If the answers to any of these questions are no, then clearly but-to-let is not the best way forward for you.

However if you are still keen to get involved in this market or answered yes to any of the questions then make sure you are completely realistic about what you can afford, remembering to have extra cash available to cover unexpected costs and for periods when the property may be empty therefore do research everything thoroughly. Like any investments, buy-to-let comes with no guarantees, but for those who have faith in bricks and mortar rather than stocks and shares there are opportunities. Buy-to-let however should always be seen as a long term investment rather than a get rich quick scheme as at the moment interest rates can only rise from this point on.

According to Geoff Penrice an independent finical advisor for Honister partners, there are clear pros and cons when investing in the buy-to-let market which should be carefully weighed up before committing time and money. Some of these are:

Pros:

  • People need to live somewhere, so there will always be demand
  • Property can be seen and touched
  • Prices should increase in the future

Cons:

  • Interest rates can only rise from here
  • Investors may end up having too much tied up in one area (rather than diversifying their assets).
  • Could be difficult to sell a property should you wish to release capital
  • Buy-to-let investments have become increasingly popular in recent years, but some industry analysts have warned the market could be about to change.


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