Is Buy-to-Let the Best Way to Invest in Property?

The Buy-to-Let investment

Buy-to-Let remains a popular strategy for many considering an investment. Buy-to-Let can provide a sizeable monthly income when capital is invested properly in the right bricks and mortar in an area with a potentially high letting yield.

Increasing demand for rental properties and rental prices that are projected to continue to increase with inflation means the Buy-to-Let investment can seem an attractive opportunity for investors. That said, potential Buy-to-Let investors would be prudent to examine the industry thoroughly to ensure they inform themselves of the pros and cons.

Factors to consider

Void Periods

You may not always have tenants in the property throughout the year which means your investment won’t be making you any money during these ‘void periods’.

Additional costs

You will have to factor in costs that will eat into your overall income from your investment, such as; installation and replacement of white goods; maintenance and upkeep of the property; ground rent and service charges; Letting Agent fees; and mortgage payments; all of which will potentially impact your return on your investment. The property may need renovating before tenants can move in and an income can be generated.

Added Value

This said, renovation is an area worth considering when Buying-to-let, providing the investor with the opportunity to add value to the property in the long term.

Unseen costs

Houses can and do go wrong. A boiler breaking or a tree coming down on a fence cost money to fix, sometimes not inconsiderable amounts. These costs may have to be covered the owner and will eat into any potential returns.

Tax and Mortgage Downfalls

Increasingly stringent Landlord legislation, restrictive mortgage rules, interest rates and tax heavy duties on property ownership are factors that could put the potential property investor off committing capital to a Buy-to-let property.

Financial Gains

Despite the associated tax and mortgage downfalls Buy-to-Let is still an attractive investment opportunity since the offset of this is the potential to make large financial gains if/when house prices rise. The rental market is also a busy market, saturated with tenants in need of housing, meaning it’s highly likely investment in a Buy-to-Let property will see a steady, regular return, especially since rents are continuing to rise with the cost of inflation.

Property Bonds

The Property market is an attractive sector to make a sound investment in, but is Buy-To-Let the best way to invest in Property?

Property Bonds are, in essence, a legally binding loan between the investor and the property developer. An opportunity for the investor to invest in the property market and increase their capital and for the property developer it’s a means to secure the funds to buy land and/or commence with construction work on a planned development.

Property bonds are a comparably favourable option in many cases to investing in the Buy-to-Let marketplace, providing the investor with a secured return on their money, normally after a fixed term, once the construction is completed. The investment is secured against assets that will be sold to return the investment, such as the land the property will be built on.

This type of asset-backed investment can provide the investor with a realistic expected return and is one of the huge upsides when weighing up the risks of which type of property investment to entrust your capital.

Investing in Your Future

Putting your investment capital into a Buy-to-Let property could be the best way to invest in the prevalent property sector; but Property Bonds are an increasingly attractive alternative with considerably less commitment, other than the initial financial investment.

The decision should be based on how well your money will work for you as well as what type of investment will suit your personal situation, your financial landscape and your lifestyle. Being a landlord will have associated extra expenses and often extra time commitment, even when using a Letting Agency to manage most of the day-to-day facilitating and general tasks. Do you have the time and additional finances to spend on your investment? Or would you prefer a less hands-on investment/experience?

The ultimate desirable outcome of any property investment is to maximise your return of both time and money invested. Seek expert advice and conduct extensive research into all avenues of property investment; assess what type of property investment would best suit your individual situation, taking into consideration work/life balance and actual hours available or willing to commit; take calculated risks when the returns look sensible.