Is Buy to Let a Good Investment in 2022?

Tuesday 8 February 2022 Landlords

To let sign outside of a house

 Is Buy to Let a Good Investment in 2022?

Having the ability to cover the costs of a mortgage, whilst also profiting from rental income has long since made investing in a buy-to-let property a lucrative option for many.

But along with its benefits, buy-to-let comes with its fair share of both hassle and costs: landlords not only need to worry about finding the right tenants, maintaining the property and sourcing a team of trusted contractors; but must also consider the large transaction costs, legal fees and taxes.

Furthermore, the Covid-19 pandemic has posed significant challenges to the property landscape, and along with changes to mortgage interest relief and a surcharge on stamp duty for second homes, many landlords are asking the question: “is buy-to-let still worth it?”

Benefits of Buy-to-Let vs. Other Income Methods

If maintained and managed correctly, any property, including buy-to-lets, is an asset and can be a great way to invest your savings as opposed to other methods. Certainly, when it comes to leaving your money in a traditional savings account, rising inflation coupled with abysmally low interest rates means your cash will only depreciate over time.

Many choose instead to invest their money into stocks and shares, which although requires less upfront cost than a buy-to-let, can be risky and volatile. Stock prices can be erratic, rising and then declining significantly over short periods of time, and can fluctuate in times of economic uncertainty (Covid Crash), meaning there is some level of risk.

Buy-to-let on the other hand, carries a much smaller risk and if handled well, can generate a profit large enough to replace employment income. Not only will landlords earn a profit from rental income but are likely to generate capital growth as the value of the property increases over time.

While it might be true that investing in buy-to-let properties has become more challenging in recent years, it still remains one of the best “dry” investments, meaning it comes at a relatively low risk to the investor and as a liquid asset, can be used to secure their future. It’s also one of the only investments whereby landlords can borrow money from the bank rather than cover the full cost themselves.

How to Maximise the Value of a Buy-to-Let Investment

For both existing landlords and landlords-to-be, there are many ways in which you can maximise the value of your buy-to-let investment:

Know the Area

As tempting as it may be to snap up a bargain property in an area you have little knowledge of, not doing your research can be detrimental to your profits. It’s essential to know how high the demand for rentals is in the areas you are considering and also the type of people who live there – are they students, young families, elderly?

It's also worth knowing that some areas across the UK have a higher rental yield than others. Areas such as Glasgow and Manchester for example have a high rental yield of around 5-8% whereas in areas such as London and the South East, the average rental yield sits at around the 3% mark.

There are some helpful online tools which can be used to determine the rental yield of a property.

Furnish the Property to Suit a Certain Type of Tenant

If you know what type of tenant you are trying to attract, furnishing the property in a way which is appealing to them is likely to give you the results you want.

The kitchen and bathroom are generally considered to be the most important rooms in a house and so keeping these areas functional and appealing to the eye is a great way to entice prospective tenants and encourage them to stay.

Use Social Media and Online Property Platforms to Market the Property

Your chances of finding a tenant willing to pay top rent are higher if you advertise your property across a range of platforms including social media. Invest in high quality photographs and a professional floorplan to make the listing as appealing as possible. The higher the demand is for your property, the better your chances.

Streamline Your Viewing Process

Technology has come a long way in assisting the property landscape. Virtual tours for example are a great way to give prospective tenants a feel for the property beyond what photos can do alone. Being able to view each room from different angles really shows what the property has to offer meaning only those who already have a good feeling about the property will move through the process.

You could also consider using a booking management system to manage viewings and be sure to keep in touch with prospective tenants throughout the entire process.

Choose High-Quality Tenants

You of course want to look for a tenant who is financially responsible and able to pay their rent consistently and on time. Getting a credit check is the most common way landlords can determine a prospective tenant’s financial behaviour.

It might also be worth asking for previous landlord references to determine how well the tenants looked after the property and if there were any issues with paying rent etc.

Use a Property Management Company

Whilst the idea of self-management may seem attractive economically; unless you are prepared to invest a huge amount of time dealing with paperwork and getting to grips with constant legislative changes, it’s likely to be more hassle than it’s worth.

Putting your assets in the hands of a professional management company  will not only save you time, but ultimately protect you against any legal issues which may arise. As buy to let becomes more complex, having a property agent helps ensures essential elements such as deposits are protected and any vital information is given to tenants and landlords in the right format and on time.

Property management companies deal directly with tenants, managing everything from ensuring rent is paid on time, to sorting any maintenance issues and other responsibilities such as legionella testing with their own in-house professional team.

With a working knowledge of the local area, a letting agent will be able to guide you on rental rates and help you find better tenants, what’s more, they will also be in tune with local licensing rules which are area dependent.

This reduces the amount of pressure on the landlord and ultimately, gives them the freedom to live wherever they choose without worrying about managing their buy-to-let property.  

Property Management From Abode

Using a property management company such as Abode can help you receive better returns from your buy-to-let investment, without the pressure of managing everything yourself.

At Abode, we have experience working with landlords based both in the UK and abroad and so can tailor our level of support to your preferred amount of involvement. We also offer free valuations on rental properties for landlords, helping you maximise the value of your investment.

So, if you are looking to invest in, or better manage your buy-to-let, get in touch with a member of our knowledgeable team and discover how we can help. Call us on 0117 973 8866 to find out more.