Despite the UK officially entering its first recession in 11 years, there are several signs indicating that now is a good time to become a buy-to-let landlord.
Additional source of income
Due to the Coronavirus pandemic, having a second source of income is a great way to ensure further financial stability. This means that for those considering becoming a buy-to-let landlord, now is a great time to do so.
In order to make the most out of this opportunity, choosing the right property is essential to ensure a good rental income – as you’ll be able to charge more for properties located in ideal locations and areas.
Other features that can significantly increase the rental value of the property include having bedrooms or bathrooms, a garage, yard and conservatory. To maximise your profits, you should also consider factors such as the safety of the neighbourhood, nearby transport links, proximity to schools and universities, and features such as drives and spaces to park a car.
House prices are falling
Due to the pandemic, house prices are expected to fall as many people become less likely to be able to afford a mortgage. This is beneficial for landlords, as you may be able to get a great deal.
While sellers may struggle to get a good price on their homes during a recession, buyers may find it easier to purchase a home. Many sellers may even be willing to quickly sell their property at a lower price.
Despite the chances of this changing in the future, you may still be able to secure a good price when purchasing a buy-to-let property. Additionally, as the value of the property may increase over time, this is also a great opportunity to generate capital growth.
Tenant demand is up
As many people are currently looking to rent, letting a property can prove really profitable at the moment as tenant demand increases.
According to a survey conducted and released by Rightmove on the UK rental market, tenant demand rose by 33% in May 2020 when compared to the same time period in 2019.
This can result in a good opportunity for landlords, as an increased number of people are renting in the current climate. However, it is important to note the factors listed above to ensure you purchase a property that will have a strong chance of turning in profits.
Reduced stamp duty
The reduced stamp duty, although temporary (until March 2021) may help you to consider becoming a buy-to-let landlord, as it aims to improve the property market.
If you’re purchasing property in England or Northern Ireland, you’ll be able to pay a reduced rate of Stamp Duty Land Tax or none at all if the amount you pay for your main home is below £500,000. This can result in big savings.
In essence, until March 2021, you’ll have to pay Stamp Duty only on the value of the property that falls within each band:
• If the price of the property is between £500,001 and £925,000, you will pay 5% in Stamp Duty.
• You’ll have to pay 10% if the price of the home is between £925,001 and £1.5 million.
• You’ll pay 12% for properties worth over £1.5 million.
But if you’re buying extra properties – for example, if you’re planning on becoming a buy-to-let landlord – you will have to pay an extra 3% in Stamp Duty on top of the rates above. This tax is applied to both freehold and leasehold homes, and it doesn’t matter if you’re purchasing it outright or with a mortgage.
This means that, if you’re purchasing a second home:
• You’ll pay 3% in Stamp Duty if the price of the property is less than £500,000.
• You’ll have to pay 8% in Stamp Duty for properties between £500,001 and £925,000.
• You’ll be paying 13% if the price of the home falls between £925,001 and £1.5 million.
• You need to pay 15% if the home is worth over £1.5 million.
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Mortgage sector improvements
Another factor worth considering is that the buy-to-let sector is currently improving, with positive growth recorded in the mortgage sector. For those looking to become a landlord, there are now more choices available.
According to BuyAssociation, between May 2020 and June 2020, the number of buy-to-let products has risen by 280. This means there are now 1,735 mortgage options for landlords, meaning you have an increased chance of finding something that fits your needs – whilst helping you to save money.
Rates are also becoming more competitive, which is a great incentive for anyone wanting to get a foot on the buy-to-let property ladder.
Long term security
It is also important to note that owning a property is a long term investment, and can provide a source of financial security for many.
If you’re not interested in stocks and shares but are looking to invest, then the buy-to-let market is the perfect sector for you. Despite some risks associated with the sector, there is no denying that it entails a lot of advantages as well, such as rental yield and long-term financial security.