People always want to know if it’s a good time to invest in Buy to Let and we’d say there’s rarely a bad time, it’s when it’s right for you! Here are five headline benefits of becoming or being a landlord in 2021.
- Tax savings. If you buy in England for under £500,000 and complete on the purchase before 1st July, you can take advantage of the Stamp Duty Land Tax (SDLT) holiday and only pay the 3% additional property tax. Between July and September, the same applies but up to the value of £250,000. So, if you were to buy for £350,000 before the end of June, you would save £7,500 in tax; if you completed between July and September, you would still save £2,500.
- A buoyant rental market across much of the UK. 2020 saw an increase in demand and rents are continuing to rise across most of the UK. Excluding London, average rents rose by 2.3% last year, with a 1.4% increase in just the 3 months to December. Total tenant demand this January was over 20% higher than 12 months previously, while the overall supply of rental property fell by more than 10% over the same period*.
Contact your local Reeds Rains branch to find out the latest on what’s happening in your area.
- An investment that’s been resilient through an economic downturn. For the first time, we’ve seen property deliver for landlords and investors during not only a national economic downturn, but a global one! We don’t yet know whether this is a game changer for the market going forward, but in the current climate, where people are forced to be separate from each other and spend more time at home, landlords have played a valuable role in providing much-needed housing. If the economy takes some time to recover and working from home continues to be necessary, the demand for rented accommodation should stay strong.
- Property can provide better returns than other asset classes. Over the long term, property has shown an ability to give good returns, both through rental profits and capital growth. For most, the key to the level of return landlords can realise, and the reason property can outperform other types of financial investment, is the benefit of leverage you get from a mortgage.
A very simplified example is:
Of course, there are purchase, ready-to-rent and ongoing management and maintenance costs to consider, but a well chosen property can still deliver good returns.
- You invest £200k in shares. If the market increases by 5%, you’ve made £10,000. That’s a 5% return on your capital.
- But if you split that £200k across two properties worth £200k, taking a 50% mortgage on each, you’ve got £400k worth of assets. Now when the market increases by 5%, you’ve made £20,000 – a 10% return on your £200k investment.
- And on top of the capital growth returns, you’ve got monthly rental profits.
- You can secure equity from a good refurbishment. If you’re able to buy a property that needs work at less than its true market value, you can carry out a cost-effective refurbishment and should end up with a property that’s increased in value by more. This initial capital growth can boost your income returns and equity and give a good cushion against any market fluctuations.