Is a BTL Investment Worth the Cost?

Is a BTL Investment Worth the Cost?

BTL has become a very profitable business in the UK.

There’s no denying that recent tax changes have made the BTL market less attractive for investors. Yet it’s still a tempting option with the potential for excellent financial returns. Donna McCreadie, partner and property specialist at Perrys Chartered Accountants, looks at the current landscape and explains why BTL is still a viable investment.

The demise of the BTL market has been much predicted over recent years. Major tax changes, a 3 per cent stamp duty surcharge, and increasing regulation have undoubtedly deterred some from entering the market.

Existing landlords have questioned the viability of their portfolio, and some have made the decision to sell up while house prices are on the increase. Indeed, a recent survey by Nottingham Building Society found that a fifth (20 per cent) of landlords are considering selling all, or part, of their portfolios.

Yet this means that 80 per cent are still keen to retain their assets, suggesting that predictions of a mass exodus of landlords is highly unlikely to happen any time soon. So what are the continuing benefits of investing in buy-to-let property?

Competitive mortgage deals.

After a Covid-induced lull, summer 2021 saw a surge of competitive buy-to-let mortgage deals, with many lenders increasing maximum loan to value (LTV) amounts from 75 per cent to 80 per cent. This means that potential investors do not have to raise quite such a hefty deposit to secure a mortgage. For example, on a purchase price of £300,000, the deposit at 75 per cent LTV would be £75,000, while at 80 per cent LTV it would be a more attractive £60,000.

Despite talk of inflation and a potential increase in the Bank of England base rate, interest rates on all mortgages remain historically low. In the buy-to-let arena, lenders have started to reduce interest rates and offer fee-free options.

The rise in rental demand.

Buying an investment property is the first step, but how can you be sure of finding a tenant? The good news is that rental demand has picked up significantly since the last UK lockdown ended in spring 2021.

The estate agency trade body Propertymark reported a record number of new prospective tenants registering for homes in May. In June this year, there was an average number of five viewings before a property was let, indicating strong demand and confirming that landlords are generally able to choose the most suitable tenant for their property.

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