Over the course of the next few weeks I am going to attempt to answer some of the most commonly asked questions when one is considering purchasing a property to let. The most poignant question being...
Should I buy a property to let?
Assuming that you probably have the means to purchase one to even ask the question of yourself, this should not be a difficult question to answer, although the answer given if asked, is often “It depends on your personal circumstances”. Frustrating isn’t it.
To make things clear – the answer should be - yes. Assuming you have considered all possibilities, a tangible asset is a better investment than one that is not. One that does not really exist, or one that is reliant on others efforts to guarantee your return is high risk and offers less control. Short term quick investments in stocks can be fun, and one can often see typical gains. You are betting on a number increasing. If the number increases, you will win. If it decreases, you will lose, or you can wait and possibly get back what was put in. In real terms, we might be talking a few thousand pounds floated on the stock market and not a major risk to your future if you lose a few. If you make a mistake with a buy to let property that costs thousands of pounds to invest in, you might lose heavily. But will you?
With the exception of perhaps 2 or 3 years which saw house prices recede, the market has increased consistently from 1998 (That is nearly 20 years). Increased in some cases more than 200% - 400% (depending on location). We may have experienced a 20% lull in some cases, but minimal by comparison. There are not going to be many, if any, other investments that can boast that sort of security. What if the market really did crash? Not a problem, sit on the investment. The bricks and mortar are always there. There is still very high demand for rented property despite what reports may say. As long as there is a tenant in residence, the capital value is of no consequence in real terms.
Variety is lacking in our areas. Because of the nature of most investments, we have an abundance of 2 bedroom homes (as they are cheaper to buy), but always have a need for larger 3 and 4 bedroom homes. Attitudes towards renting homes have shifted in the last 10 years. We (the nation) have had it drummed into us that we must buy and own a home for generations now. We are told we are wasting money if we rent a property long term. All valid arguments, but if a first-time buy is realistically going to be later in life for most individuals nowadays, they will therefore have more possessions, more outgoings, they may already have a family of their own - to buy a first home that offers all they need (let alone want) is for most, unaffordable. I know many individuals who will challenge the norm and will reason that they can have more home, a better home renting than buying one and are quite content to rent for life, similar to most of the continent. The only negative for these people here in the UK, is that there is no long-term guarantee for them, unlike on the continent. Landlords here are free to sell, or reoccupy the home with just two months’ notice (after the initial six-month term). It is this attitude that actually needs to shift. There are as I see it, three possible ways to solve this problem – either we all reduce the value of our homes and sell them cheap, lending becomes more realistic and accessible, or we alter the way in which we let our property and allow for the security of prospective long-term or even life tenants. 15% of all residential units currently being constructed in the capital (4% across England and Wales) are for build to rent. This is private sector mimicking social housing for life time tenants. Which brings me back to the top of the page, and the question “should I buy to let?”. First one must establish a reason. Perhaps ask why do I need a buy to let? One possible answer is that it must be a sure investment if there is clear demand and low supply – A constant that will only increase if the market were to dip.
THE QUESTION THEN IS PERHAPS,
why wouldn’t I buy to let?
In the next issues, I will address compliance and how to avoid heavy fines or even a prison sentence , how long it will take to find a tenant, the costs associated with letting a property, how to ensure the property is looked after, Deposits & where to keep them, Insurance, rent arrears, and many more commonly asked questions by our clients.
Great Torrington Lettings team and myself are happy to answer any questions you may have ahead of the next issue and can be contacted on:
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by Mark Spratley, Partner | Great Torrington | 01805 624426