One of the most common questions I get, both from prospective landlords and those who have been in the sector for years, is whether Buy To Let (BTL) remains a good option for investment. The doubt is perfectly understandable, since we seem to have both a government and a media who love nothing more than to put the boot in to those who provide over 5 million homes to UK tenants.
The government, for reasons it has never fully explained, seeks to reduce the involvement of private landlords in the private rental sector, in favour of larger corporate groups in sectors such as Build To Rent. This much is clear from the various legal and tax changes over the past few years, which clearly favour corporations over individuals. However, it is hard to imagine that even wealthy companies in the BTR sector are going to be able to put up enough new housing stock to house all tenants in the UK, whilst the government simultaneously pushes the building firms to make affordable housing for sale to meet the massive deficit in homes required over the next decade and beyond. There simply are not enough plots of suitable land, builders, and bacon rolls to get the job done promptly.
The market for rental properties has, after all, been driven by successive governments – first the Conservative government in the 1990s who wanted to reduce their obligations in social housing, and sold them to residents at bargain prices (without replacing stock for future generations), then the Labour government that followed encouraged ever higher numbers of students into higher education.
It’s hardly surprising then that the private landlords stepped in to fill a need in the market. According to Knight Frank’s ‘Multihousing 2017 PRS research report’, the proportion of households living in the PRS has doubled in the last 10 years or so, and it is expected to continue to grow:
- The proportion of households in the Private Rented Sector will rise to 24% by 2021;
- Some 68% of renters still expect to be living in the rental sector in three years’ time.
It’s also worth noting what is happening with the supply of rental properties coming to market. Although the various tax changes have slowed the uptake of investment properties, the reduction in supply has been driving a rise in rents in some areas, as tenants outbid each other on the better properties for the area. This is where existing landlords can potentially make significant extra profits, by using void periods between tenancies to upgrade, renovate or redecorate their properties. This allows you to get the best possible price for the area, and will likely lead to higher income tenants being attracted to your property. However, a careful cost/benefit analysis should be completed beforehand, to ensure that you do not overspend. We are always happy to provide our landlords this kind of service, free of charge, so if you are considering this kind of work please get in touch and we can advise you on your specific circumstances, and what the best possible rent for that area might be. It is also worth regularly reviewing the mortgage deal you are on, as significant savings can be made here.
The rental market continues to be a profitable place for all landlords, large and small, to invest. But no matter what type of investment you make, whether it is in the stock market, currency trading or property, it pays to take advice from the experts to maximise your returns. That is one of the many reasons we are here to help – so call us any time to discuss your needs.
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