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Buy-to-let remains solid investment

Buy-to-let remains a solid investment with demand for rental housing stronger than ever, Andrew Turner, chief executive at specialist buy-to-let broker Commercial Trust, has argued.

He said that it was inevitable that tax changes, which could potentially suppress profitability in the short-term, would impact upon the perceived desirability of buy-to-let.

Turner said: “The expectation was that this would be most keenly felt by those with fewer properties, because adjusting to the changes would be a more painful process for new investors or those with less experience.

“However, the simple fact is that buy-to-let remains a solid investment option, with strong potential for an attractive and profitable return on capital invested.

“Investors should not be deterred from buy-to-let. Demand for rental housing is stronger than ever, the cost of debt remains relatively cheap and the housing shortage is likely to continue. Even so, any investment decision requires care and expertise.

“Many headlines have focused on one and two property investors who have left the market because they have found it difficult to adjust. The real story has really not been about buy to let becoming unattractive as an investment option.”

Data from UK Finance indicated an evolution in buy-to-let, rather than a mass exodus.

Jackie Bennett, director of mortgages at UK Finance, revealed in November that forecasts for 2018 buy-to-let purchase activity were likely to fall about £3bn short of expectations.

She said: “This is undoubtedly the impact of various tax, regulatory and legislative changes that have happened to landlords in the buy-to-let sector.”

However, Bennett went on to add that buy-to-let remortgaging exceeded forecasts for 2018, with lending likely to reach £27bn, representing a £3bn surplus on what was anticipated.

Turner added: “The market continues to grow and in Q2 2018 increased by 6% over 2017 levels. UK Finance statistics revealed that much of this growth was in remortgages, which grew by 15%, while purchases dipped by about 12%.

“In early August 2018, the Bank of England decided to increase rates by 0.25%. Although there has been limited market reaction so far, I expect to see market rates increase, because margins are wafer thin.

“The Bank of England has said as much itself, with repeated messages that rates are anticipated to rise gradually over the long-term.

“Landlords have responded to this and there has been significant interest in fixed rates, useful to guard against rate rises.

“Investors are likely to continue to do this as their renewal dates come up and therefore I’m sure the remortgage market for buy-to-let will remain buoyant over the coming months.”

Source: Mortgage Introducer

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Attention buy-to-let landlords! You could boost your returns with this simple trick

Over the past few decades, buy-to-let investing has generated a tremendous amount of wealth for investors.

According to the Office for National Statistics, over the past 10 years, the average house price in the UK has grown at a compound annual rate of 3.1% from £168,000 to £228,000. Including an average annual rental yield of 5%, this indicates that the average buy-to-let investor has seen a yearly return of 8.1% since October 2008.

These are just estimates based on averages. The actual return achieved by individual investors will vary greatly because there are so many different factors to consider here like mortgage rates, maintenance costs and taxes.

The end of buy-to-let

My figures show that after including the impact of the government’s recent tax changes and slowing home price growth, buy-to-let investors getting into the market today will be lucky to walk away with an annual rental yield of 3.4%, excluding mortgage costs. Capital growth is also likely to be much lower over the next decade than it has been during the prior one. All in all, I estimate buy-to-let investing could produce a 6% annual return for investors getting into the market today.

A return of 6% per annum does not seem like much, especially as this does not include mortgage costs or the cost of property maintenance. But never fear, if you are worried about this low level of return, there is one simple trick you can employ to improve your investment returns.

Diversify, diversify, diversify

The way I see it, the biggest problem with buy-to-let investing is diversification. If you only own one or two properties, it won’t take much for your returns to evaporate. A property sitting empty for a few months or a broken boiler could eliminate a year’s worth of rental profits.

The solution to this problem is to increase diversification, but for most investors, this option is not available. Adding an extra five properties to your portfolio at today’s prices would cost around £1.1m (on average).

With this being the case, I believe the best solution to the diversification problem is to invest rental profits in equities. If you invest your income from rental properties into the stock market, you can achieve diversification and an extra passive income stream, that requires almost no extra work on your part.

Over the past decade, the FTSE 250 has produced an average annual return for investors in the high single-digits. Buy-to-let investing has matched this return since 2008, however, with returns set to fall going forward, I believe the FTSE 250 will outperform property. And, because you can own a FTSE 250 tracker fund inside an ISA, you don’t have to worry about the impact of tax (or changes to the tax regime) on returns.

Overall, if you want to improve your returns from buy-to-let investing, diversifying into equities could be the best decision you will make, I believe.

Source: Yahoo Finance UK

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How you can become a buy-to-let investor with just £1,000

Over the past few decades, buy-to-let investing has generated a considerable amount of wealth for investors. But rising property prices, which have helped investors who are already in the market, have made it harder for others to set up their own buy-to-let enterprise.

Today, the average house price in the UK is approximately £260,000. On average, a buy-to-let mortgage requires a down payment of around 40% implying an upfront payment of £140,000 is needed to get on the buy-to-let ladder. Ten years ago, when the average home price was just £160,000, investors would have required a deposit of just £64,000.

However, if you are looking to get into the buy-to-let business, I shouldn’t let these figures put you off. Today, there are more ways to make money from property than ever before.

Buy-to-let with £1,000

My favourite way to invest in property is with listed real estate investment trusts or REITs. What I like about these instruments is that all it takes is the click of a button to buy into a diversified property portfolio managed by experienced property professionals.

You can also buy exposure to sectors you wouldn’t be able to access individually, like commercial or industrial property.

At the time of writing, some of the UK’s largest REITs support dividend yields of nearly 5%. British Land and LandSec yield 5.6% and 5.8% respectively, which is around the same as the average buy-to-let yield. The only difference is that when something goes wrong, you don’t have to sort out the problem or pay for it. To invest in a REIT you only need a few hundred pounds.

Peer-to-peer lending

Another way to profit from property without having to scrape together £140,000 is to use a peer-to-peer site such as LendInvest or Landbay.

Both of these platforms connect investors with borrowers looking for financing secured against UK property. Landbay specialises in connecting borrowers searching for a buy-to-let mortgage, whereas LendInvest offers buy-to-let funding as well as bridging and development finance.

Using these platforms, you can generate income from property with as little £100 a month, and yields of 6% are on offer.

As with all peer-to-peer lending, you could end up losing some of all of your investment if borrowers default — that’s the one drawback of using these platforms.

Buy-to-let share

If peer-to-peer investing is too risky for you, I reckon property crowdfunding might be a safer bet. Platforms such as Property Partner enable people to invest in individual residential properties, in a similar way to investing in a REIT.

Investors who contribute capital will receive a monthly rental income and benefit from any capital growth. The properties are all managed by the company, so once again, this is a hands-free way to profit from buy-to-let.


So all in all, if you want to get into buy-to-let but don’t have enough capital to buy a property outright, there are plenty of other options.

I believe some of these strategies could even be better than going down the direct route as they require much less effort on your part, and give you more scope for diversification.

Source: Yahoo Finance UK

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Bank Of England Reports Tax Changes Harming Buy To Let Investment

Tax and regulatory changes are negatively impacting the buy to let sector according to the new data from the Bank of England.

The value of mortgages taken out by landlords has fallen again during the second quarter of the year in comparison to the same period of 2017. Since 2016, buy to let lending has fallen dramatically. The introduction of the 3 per cent stamp duty surcharge, as well as the phasing out of mortgage interest relief and the 10 per cent wear and tear allowance has seriously impacted landlords.

The data released yesterday by the Bank of England noted a decline in both new buy to let lending as well as remortgaging by landlords. This is in spite of the fact that the outstanding value of all residential loans continued to grow, increasing in the second quarter of 2018 to £1,417.2 billion, which is up 3.8 per cent year-on-year.

New loan commitments that were agreed to advance in the coming months during Q2 this year reached a peak that had not been seen since Q1 2008, according to the figures from the Bank of England.

However, the overall proportion of remortgaging and buy to let loans in particular have fallen in recent times, according to statistics. Buy to let mortgages accounted for a mere 13.1 per cent of new lending. This change is largely down to recent regulatory and tax changes in the sector.

Founder of mortgage platform Dashly, Ross Boyd, spoke out about the results: ‘Where homeowners tread, landlords are continuing to choose not to follow. For investors it’s more of the same, with the decline in buy to let lending since the first quarter firmly against the run of play. It’s more evidence of a slowdown precipitated by hostile tax changes in recent years that have left landlords licking their wounds.’

Source: Residential Landlord