Pros And Cons Of Investing In Buy To Let Property
Even though property prices and values have been wildly fluctuating in the recent past, HMO’s still form some of the most stable long-term investment opportunities for property investors. Yes, there is that whole issue of ‘occupancy rates’ being a problem should you find that your property is more vacant than it is occupied, but with proper management, this can be avoided.
Depending on who you talk to, you will find that buy-to-let properties are either quite lucrative or quite risky. It is all about the location of the property, the management, the rent rate and of course, the all-important occupancy rate. If you are still on the fence about investing in buy-to-let properties, here is a brief list of the associated pros and cons that should help you decide.
Pros of investing in a buy-to-let
The ROI is usually high
The one thing that HMOs have over typical property investments is that they actively bring in income every single month. Whereas you could be stuck on the ledge waiting for your property values to rise (which could take years) a buy-to-let property will be bringing in income in the form of rent every single month. In this aspect, it has a much better return on investment than any other form of property investment.
Brilliant investment security
The one thing that China cannot manufacture or make more of is land. What we have now is what we will always have. Which means that, if you have the patience and can ride out the ups and downs that the property market experiences, your property will always end up being a secure form of investment. Add to that fact that HMOs bring in a steady income, and you have the perfect investment security.
They offer wonderful collateral
We all face tough times and in many cases when these tough times come about, we do not always have the money to help weather them. If you own a buy-to-let property, however, you have a piece of property that can act as security for loans. In many cases, you can get mortgages or even short loans just by presenting your title deed.
Cons of investing in buy-to-let property
There will be less tenant demand
The Brexit vote means that there might be less tenant demand as tighter controls on immigration come into effect. Immigrants make the bulk of those who are most likely to live in an HMO as opposed to UK nationals. The new Right to Rent Rules also means that landlords may be forced to turn back willing renters if they do not meet the legal requirements to live and work in the UK.
Steeper stamp duty bills
Landlords now have to contend with the new 3% Stamp Duty bill that makes it more expensive to own more than one home in the UK and the world. This rule applies to all sales that closed after the 1st of April, 2016.
You could end up with an empty property
That all-important ‘occupancy rate’ is still a big issue when it comes to owning an HMO. Should you end up with an empty building, the upkeep and maintenance cost for that could very well render you broke in a very short while. So, it is imperative that you have a workable plan on how to fill your buy-to-let property before you actually buy it.
Owning a buy-to-let piece of property has become even easier and cheaper now with the Brexit vote going through. Not only are banks offering lower mortgage rates, but there are fewer EU hoops to jump through and most property prices are on a downward trend. This is the perfect time to invest in HMOs.
At the end of the day, a good investment will boil down to your return on investment. No matter how good a property you have, if you don’t have a sound plan on how to profit from it, your investment will be a poor investment. Before investing on property, I always keep Rick Otton’s words in mind: “It’s all about the cashflow!”