Pros and cons of buy-to-let property

Landlord Expert
By Landlord Expert March 4, 2014 10:34
But a property lawyer is advising would-be landlords to be aware of all the pros and cons before they take the plunge.
In an era of record low rates for buy-to-let mortgages, with some rates fixed as low as 2.4 per cent and continuing strong demand from tenants, many people prefer to put their money into bricks and mortar than other investments. Recent studies show that a majority of people who already let one or more properties plan to increase their portfolio to capitalise on the current climate.
Approximately 10 million people now live in homes rented from private landlords, double the number in 2000, but while becoming a landlord can seem an attractive option, Graham Elliott, conveyancing manager at Festival Park-based law firm Bowcock and Pursaill, advises potential landlords to do their homework and be aware of the pros and cons.
Graham said: "Now is a good time to get into the buy-to-let market before property prices escalate, as the whole purpose is to achieve a regular income stream at the best possible rate of return.
"With interest rates on bank and building society deposits remaining very low, an income of six to seven per cent can be achieved provided you don't pay too high a price for the investment property.
"However it is essential to keep your expenditure at a reasonable rate, which means choosing a property which is in a good state of repair so repair costs don't erode your rental income.
"It is also advisable to buy property within a reasonable distance of your home so you are aware of any problem with the tenant before the situation escalates.
"It's often worthwhile taking out maintenance contracts for heating boilers and kitchen appliances because without these you can spend a great deal of time trying to find tradesmen to undertake work at short notice.
"And it goes without saying that you should do your homework before buying to check there is a demand for rental property in that area and what type of property gives the best rental income."
Graham said that the pros of owning and renting a property include getting a better return on investment than from a bank or building society deposit. The rate of income from rent is a less volatile capital investment than stocks and shares, it provides a steady long-term income stream and you can build long-term wealth as the property value appreciates.
Against that, the cons include factors such as the fact that interest rates on mortgages may increase in the future, reducing the rate of income from rent. In times of recession the capital value of the property can fall and you need to put in personal time to managing the property.
Common pitfalls which amateur landlords can fall into include failing to vet potential tenants, because it is vital to check all references personally to reduce the risk of getting a problem tenant, not taking account of the cost of owning a rental property, such as insurance and maintenance costs, which will eat into the rental income, not planning for any void periods when the property isn't occupied as mortgages still have to be paid even if there isn't any rental income and paying to clear up the mess caused by problem tenants who fail to pay rent or even cause damage to the property.
Landlord Expert
By Landlord Expert March 4, 2014 10:34

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