Buy-to-let is an income-earning property investment that has the potential of making capital gains when they are sold. In the short term, the investor can make money by rental and in the long term, when the investor sells it off, they can make a profit on it. These kinds of properties are stable and low-risk investments.
It is a form of purchase where you buy a residential property to rent it out instead of living in it. The beauty of this form of investment is that you do not have to pay the full amount by yourself. You can always pay for it with a mortgage.
Buy-to-let works by purchasing a property via a leasehold or freehold. This means you are the legal owner and this makes you responsible for keeping and maintaining the property and all that pertains to it. This also entitles you to let or rent it out to tenants for a period based on an Assured Shorthold Tenancy Agreement (AST).
If you are new to renting you might want to consider hiring a property management service, doing this will give you peace of mind that your property and tenants are being looked after correctly.
Income received from the rental of the property will cover any loan repayments, maintenance, utility bills, and every other cost associated with the property and also leave with you some profit. You can learn more about it here.
What are the Benefits of Buy-To-Let?
Investing in real estate is most times a viable and reliable means of getting increased returns but there are many ways through which you can invest in real estate. Buy-to-let is just one of many ways. Here are some of the benefits of the buy-to-let option.
Capital Gain
Buy-to-let allows you to make income in at least two ways. Through rental payments by tenants and capital growth. A property’s value will always increase in value and depending on where it is located, there may be an increase in demand making prices go up and rentals yield more.
You Earn More Income
One benefit is that you can buy using a mortgage and earn more over time than when you purchase the property out-rightly. Also, the rent can be used to offset the price of the house and still provide you with additional income. With this, you can invest your funds in more properties or other endeavors instead of putting it on just one property.
You will be able to Offset Cost against Tax
Every year you will need to fill a Self-assessment Tax Return and pay tax but you may be able to offset a part of the cost of the property against tax. These can include:
- Fees that are paid to letting agents
- Council tax and bills paid for the property
- Advertising costs for the property
- Interest on mortgage repayments.
- Possible tax relief when renovating or carrying out repairs and maintenance.
You can learn about more about this and other benefits by reading through this article https://www.money.co.uk/guides/should-you-invest-in-a-buy-to-let-property.htm.
Demand
Not everyone can afford to purchase a house so the demand for rental property will always be high. There is less chance you will not be able to let it out and even if a unit is not occupied, the long-term appreciation of the property will cover up for that.
Disadvantages
Buy-to-let can also come with a few disadvantages like lack of tenants which may affect your mortgage payment. The good thing about this is that this rarely happens as in most urban areas and places, there is always a demand for rentals.
Another possible disadvantage of buy-to-let is that the investor might also end up with a tenant that is unreliable and either refuses to pay or does not do so on time. This might then result in the investor having to resort to a drawn-out and expensive legal action against such tenant. This will also affect the mortgage repayments and the investor might have to pay from his funds.
When purchasing a buy-to-let, some things to factor in include stamps duty payments. There is a surcharge of 3% on these kinds of properties that you are required to pay as an investor.
If you desire more information on buy-to-let properties, you can reach out to companies such as TD Property Investment. They will be able to give you advice on how to go about investing in such properties.
Conclusion
Investing in properties is a good financial plan because it brings greater returns than saving and added to this, the value of a real estate is always rising. Buy-to-let investment offers a fantastic option for starting a successful property business.
