The pros and cons of buy to let

Buy-to-let properties are an excellent option for those looking to invest and earn some extra cash from their savings. However, the buy-to-let market has taken some hard hits with tax surcharges and skyrocketing property prices in recent years. A buy-to-let property refers to a property that has been purchased to be rented out to tenants.

It’s essential to be aware of the advantages and disadvantages of investing in a buy-to-let property. While previously properties were an excellent investment, now they come with a few drawbacks. There are different rules around buy-to-let mortgages and additional fees, taxes, and prices to watch out for.

Here are the advantages and disadvantages of a buy-to-let property.

Pro: Value will increase over time

The property market is well-known for its rapid fluctuation. Overall, house prices tend to increase over time despite experiencing a few ebbs and flows along the way. If a property is well-maintained, it can increase by 34% in value over ten years and by a whopping 212% over 20 years. Prices change rapidly, and these fluctuations can be stressful to manage if you are on the property ladder. If you care for your property, the value of your investment is set to rise over the years.

Pro: adds extra income

If your mortgage repayments are relatively low and rent payments are high – you can make a staggering profit. Millennials and Gen-Zers, especially those between 20 and 35, have hugely increased the demand for rental properties.

You need to find a location that you know well and has a high rental demand. With an optimal location, you can find tenants easily and start reaping to rewards of extra income much sooner.

Eventually, you might be able to replace your other revenue streams with property investments over time. You can retire knowing your finances are secure and profitable.

Pro: Security

In most areas, there are always people looking for a place to live. As house prices continue to rise, you are in an excellent position to make a profit in the future.

Con: Non-payment of rent

Landlords need their tenants to pay rent. If you are a first-time landlord, always seek the help of an experienced letting agent to help you navigate managing a property. You need to be aware of new legislation, tax rates and any unexpected fees. Landlords have a lot of responsibilities, and it’s important that you understand all of them.

Con: Increased stamp duty on buy-to-let

There is now a 3% surcharge for any additional property purchases. For most buy-to-let investors, this property will be their second or even third purchase. The additional stamp duty charge increases costs and makes the initial investment much higher.

Always do your research, keep an eye on your finances and seek help when you need to.