Property within the UK offers a lucrative investment opportunity and is likely to become even more popular in the coming years. We all know how hard it is to get on to the property ladder, particularly for first-time buyers. One of the consequences of this is that more and more people are choosing to rent, instead of buying a home. In fact, research has found that by the year 2039, the UK will have more renters, than homeowners. Considering that renting is clearly the future, property investment, such as buy-to-let (BTL), is becoming an even more attractive option.
We have experienced a turbulent year due to the pandemic and it’s therefore not surprising that people are wondering whether property investment is still a viable and sensible option. The short answer is yes – if you are a suitable candidate.
Property investment remains lucrative for a variety of reasons. For example, property prices are on the rise, which will likely lead to many potential homeowners choosing to rent, instead of buy. We have also seen a forecast for a high level of rental growth, particularly in northern cities. Within most areas in the UK, the demand for rental properties is greater than the supply available. Therefore, those who are looking to join this market are very likely to receive a return on their investment.
First Time Buyer?
It is possible for first time buyers to get a BTL mortgage but it can be extremely difficult. Lenders tend to view BTL mortgages as having a higher risk and therefore they prefer applicants who have a history of owning property already. There are factors which can increase the chances of a lender granting this type of mortgage to a first-time buyer- these include age, credit rating, employment, income and of course, the deposit. BTL mortgages require a bigger deposit, a minimum of 25%, however, the larger the deposit that you have, the more likely that you will get the mortgage.
Property
As well as ensuring that you are a good candidate for property investment, the property itself is also key. How much is the property and will it provide a good rental yield? This information can be calculated using a rental yield calculator, which can be found online. Is the property situated in a good location, close to amenities and therefore attractive to potential renters? The costs involved are also important to consider before taking the first step. It’s not only your deposit that you will need but also the costs of buying a property, e.g. estate agents, valuations, surveys, land registry etc. Then if you do purchase a property, you will also be responsible for continual running costs, e.g., insurance, council tax and mortgage interest payments. It’s for this reason that those looking to BTL should have a decent starting investment to begin with before you expect to get any return.
Student Accommodation
A specific type of property investment which can offer a substantial return is student accommodation. Even with the pandemic raging and regular lockdowns, the demand for university and therefore student accommodation is high. There are two types of student accommodation in which you can invest- residential properties which can be used to house multiple students or purpose build student accommodation. Whilst both types have their relative strengths and weaknesses, purpose-built accommodation tends to be a safer bet. Not only are they often better located with built-in amenities, they also have a better retention rate when it comes to renters. Furthermore, these types of accommodation have building managers, reducing the responsibility that is placed on you as the landlord.
We are in uncertain times and property investment may not be as easy-going as it once was but it can still offer a decent revenue stream, if its right for you.
