Buy to Let is Still a Good Investment

During the economic slump of the past few years it has been a difficult time for both savers and those looking for a good investment. There are hardly any savings accounts that keep pace with inflation and even the price of gold has seen some dramatic falls.

However, there is one sector in the UK where investors can still achieve a good medium to long term return on their investment and that is in the buy to let property market. UK government schemes such as Funding for Lending and Help to Buy, designed to kick start the property market, have resulted in the ready availability of cheap mortgages, which are tempting more people into property investment.

Indeed, the number of private landlords in the UK is now getting up to around the million mark so clearly the buy-to-let market is booming. The easy access to cheap mortgages and strong rental demand continues to drive this market sector.

Buy-to-let lending has increased substantially in the past couple of years and many experts believe this is due to the wider availability of investment mortgages via the Bank of England’s £80 billion Funding for Lending scheme. The scheme has had a significant impact on lending by improving liquidity and encouraging lower mortgage interest rates, which has helped first-time investors and is one reason for the good returns available to investors.

The other reason investment returns are good is that there is a continuedhigh demand for rental property because, ironically, those people renting are finding it difficult to buy their own homes because they do not possess a large enough deposit. This has resulted in increasing tenant demand and, at the same time, a shortage of properties. Of course, not all of the rental demand may be long term; some renters could simply be waiting to save enough deposit to buy a home, others may be renting temporarily while trying to buy or as the result of a job relocation.

Many investors feel that a buy to let property will make their capital work harder and earn them more especially since average rental yields are around 6 per cent per annum; certainly a higher rate than any savings accounts or bonds in the current market. Since buy to let returns comparevery favourably with savings accounts, stock market performance and other types of investment it is not surprising that more people are turning to investment property.

However, buy to let is not always a straightforward type of investment; there are numerous laws and regulations that every landlord in the UK must comply with. There are also the logistical issues of property maintenance, finding new tenants, handling the rental payments and chasing non-payment. Of course, this could be handed over to a letting agent but that would eat into the profits.There are also dozens of buy to let mortgages available to choose from and new investors should take professional advice from a mortgage broker to find the most appropriate deal for them, as well as investigating all the legal issues and risks associated with this type of investment.